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Highest High / Lowest Low

The mathematics defines an envelope of values by using the Highest High or the Lowest Low of the Last ‘n’ Periods.

Properties

Period1:  The number of bars in a chart.  If the chart displays daily data, then period denotes days; in weekly charts, the period will stand for weeks, and so on.  If the default length of the study is chosen (the software uses a period of 10), the study will return the highest of the high price values over the previous 10 bars.

Period2:  The number of bars in a chart.  If the chart displays daily data, then period denotes days; in weekly charts, the period will stand for weeks, and so on.  If the default length of the study is chosen (the software uses a period of 10), the study will return the lowest of the low price values over the previous 10 bars.

Interpretation

The rules generally followed for this study are:
  • Enter the market when one of the bands is penetrated.  This indicates a possible start of a trend.
  • Exit and reverse the position when the opposite band is penetrated.
Another rule you may want to apply is the Donchion’s rule:
  • Cover short positions and go long whenever the price exceeds the high of the previous four weeks.
  • Reverse long positions and go short whenever the price exceeds the low of the previous four weeks.

Back to:  Technical Analysis Learning Center | Futures Quotes + Charts

Content Source:  FutureSource