Lower Low

Lower Low

A lower low is when the price of a cryptocurrency closes lower than the previous day, which itself closed at a low.

What Is a Lower Low?

A lower low is when the price of a cryptocurrency closes lower than the previous day, which itself closed at a low. For example, a cryptocurrency may close with a 2% loss on one day and a 3% loss on the next day. This would be considered a lower low since one losing day is followed by another losing day. A lower low can be indicative of a falling trend and gives traders a reason to enter selling positions.

Is a Lower Low Bearish?

A lower low can be bullish but is not a definite bearish signal. For instance, a bullish divergence is when the price makes a lower low while the technical indicator (RSI) makes a higher low. This shows a bearish move on the market, but the momentum is slowing, and a rise in the price may soon follow.

If, on the other hand, a lower low in prices is accompanied by lower lows on technical indicators, this can be considered a bearish sign.

How Do You Trade a Lower Low?

A lower low can be traded in different ways, depending on the underlying trend.

For example, if the price is in a downtrend, and a first low is followed by another low, this is a fairly good sign that the price action is bearish. In that case, traders would sell on the next lower high. If the price posts a higher high, it could mean that the downtrend has exhausted its supply and a period of consolidation is to follow.

If the price is in an uptrend, a lower low could indicate the end of the uptrend. In that case, traders would consider going short if another move confirms the bearish indicator. Depending on a trader’s risk preference, they may want to enter the position immediately or wait for a bearish confirmation.

Other trading strategies involving lower lows can be more advanced. Experienced traders use technical indicators, like moving averages, to get a better understanding of how the price action will develop, and where to set their take-profit and stop-loss targets.

Furthermore, they adjust their trading strategy according to non-technical factors like macroeconomic news or token-specific information.

Generally, a lower low is considered to be fairly simple to trade since it gives traders a good opportunity to invalidate their bearish thesis if the price does not confirm the downtrend or the break of an uptrend.

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