3 Ways to Use MT4 High Low indicator in Forex Trading

The High Low Indicator for MT4 shows the high and low of the price of the security during the specific time period. When it comes to Forex, there are countless tools and measures available, however, some of them are very complex and difficult to use, especially for beginners. The High Low indicator can be very helpful here in the sense that it is a very simple measurement and easy to utilize in the currency analysis.
On the charts, this indicator is represented with two horizontal lines. For example, the hourly chart below shows EUR/USD exchange rates during the previous week and two black flat lines denote weekly high and low during the same period:
MT4 candle high low indicatorUsing the MT4 high low indicator might be helpful in several ways.
Traders using a scalping or day trading style can use this information during their decision making. One strategy to do this is to buy near weekly lows for example and sell when the price is approaching the weekly high.
The second method would be to utilize a high low indicator for breakout strategy. For example, if the pair breaches the previous weeks high and overcomes the resistance in the process, then it might be a sign for a breakout and the trader might consider opening a long position. The opposite is also true if the pair breaks down below previous lows, then it might be interpreted as a good selling opportunity.
Finally, comparing the recent highs and lows to the previous periods can be helpful for trend analysis. For example, if the weekly or daily highs are constantly getting lower, then this might be a sign of the formation of the downward channel and potentially downtrend as well.


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How to Use the High Low indicator in MT4

The first simple way to use MT4 daily or weekly high low indicator is to identify the potential support and resistance levels.
So how can this be achieved? Well, as we can see from the chart above, during April 15th EUR/USD all the way up to the 1.0990 marks, however, the pair failed to rise any further and instead fell back after a brief period of consolidation. Therefore, it might happen that the Euro could have a difficult time overcoming that level, so 1.0990 can serve as a major cluster of resistance.
On the other hand, during the following sessions, the EUR/USD fell and at one by April 17th tested 1.0811, however, this level held out, and the pair eventually consolidated in the area between 1.0850 to 1.0900. Therefore the 1.0811 mark might serve as a major support point for the future.
So, it mostly boils down to a few parts:
  • Identify the short term support
  • Identify the short term resistance
  • Confirm the trend through market news 
Identifying the short term support and resistance level can be very helpful both for scalpers and day traders. The basic possible tactic here would be to buy the currency pair which is close to support level and sell the ones which are near the resistance. Obviously, most likely the market will eventually break out, but for such a short timeframe this might be helpful.
It might be also worthwhile to point out that here we are not talking about one MT4 candle high low indicator, so this indicator is measured by time frame, such as daily or weekly high and low and not by individual candlesticks.
However, individual candle MT4 highs and lows can still guide us in the analysis. For example, returning to our previous chart, both during April 16th and 17th we have solid hammer-shaped candlesticks just above the 1.0811 level. This suggests that this support level held out not only once, but twice, so the market might have a harder time falling below this mark, then it was originally anticipated.

Importance of high low indicator for breakout strategy

The high low indicator is also widely used to formulate breakout strategies. Let us take a look at this hourly USD/JPY chart:
High low Indicator for MT4
Two blue horizontal lines signify MT4 session high low indicator for April 14th, 2020. A set of two black lines represents the weekly high and low of this pair.
On that day, April 14th USD/JPY fluctuated significantly but remained within the range between 106.98 to 107.23. During the next session the pair tried to break the support levels below, however, as we can see spikes into the area below have been rejected several times. Eventually, the tide turned and as we can see the one large green line pierced the resistance level near 107.
So the pair broke out of the range and rallied all the way up to 108.08. Interestingly enough, that 107.23 mark which offered resistance during the 14th of April, later became a support level, rejecting several downward spikes into that level. If a trader opened a long USD/JPY position when the previous day’s high was breached, then he or she would have benefited from this upward trend and earned a nice payout.
Basically, this is the essence of this strategy. Using those two flat lines as well as individual MT4 candle highs and lows as guidelines for identifying support and resistance levels and also spot potential breakouts when the marker breaches those points.
This type of analysis is not only helpful for the day traders but can also be helpful with swing trade strategies.

Trend analysis with high low indicator for Forex trading

One interesting thing to notice about the high low indicator is that it is not only useful for the short term, range trading, but also for trend identification as well. This can be especially useful for long term analysis. To illustrate this let us take a look at this daily AUD/USD chart:
MT4 high-low indicator tutorial

As we can see from the above, this pair was engaged in a very clear downward trend for more than 20 months. Generally speaking during this period both weekly highs and lows were getting lower. So instead of drawing MT4 swing high low indicator, this chart has two blue lines which represent the downward channel, which remained unbroken for such a surprisingly long period of time.
The AUD/USD pair eventually broke down during February 2020, however, this was rather short-lived and by the beginning of April, it was back into the channel. The Australian dollar might continue its long term decline against the US dollar unless it breaks above the upper blue line and overcomes the resistance.
So as we can see traders can also utilize MT4 weekly or daily higher highs or lower lows as an indicator for the formation of an uptrend or downtrend respectively. This is well illustrated in the chart above: during the beginning of this period, the Australian dollar’s weekly highs have reached 0.77 level. However, as the trend progressed those highs were getting lower. Eventually, AUD/USD struggled to even overcome 0.6500 marks, and even nowadays the pair has a hard time reaching that level.
So how can a trader conduct analysis by how low an indicator is? Well, essentially he or she can compare daily or weekly highs and lows to previous periods and if there is a clear upward or downward bias, then there might be a reasonable chance of trend formation.

Limitations of high low indicator

As we have seen, the high low indicator can be very handy at least for three types of analysis. However, just like any other measure, it does not have a 100% accurate predicting power on its own. There are many scenarios where using only this indicator can be very misleading and can eventually lead to wrong conclusions and some losses.
Returning to our last chart, as we can see from February 2020, AUD/USD broke down, in fact, this move was so strong that it overcame all previous lows and consequently pierced all possible support levels.
So if a trader only used a high low indicator for analysis and ignored all other technical and fundamental indicators, he or she might have concluded that downtrend was just getting stronger and possibly would have opened a short AUD/USD position. As we can see from this chart, this would not be the best idea, since, during March 2020, the Australian Dollar recovered from the recent collapse and nowadays it trades well above 0.63 level.
Relying on only high low indicators can be dangerous on scalpers and day traders as well. Buying daily lows and selling daily highs might work for them several times, however, it is far from guaranteed. Returning to our second, USD/JPY chart, we can see that if a trader used blue lines (high and low of April 14th) he or she might have succeeded for several hours, however eventually the pair broke out of this range and have pierced the resistance level, rising significantly. So if a trader only focused on this indicator, this might have ended with serious losses.
Therefore we might conclude that for a trader to be successful, he or she must use the high low indicator with caution and in conjunction with other technical and fundamental indicators.


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MT4 High Low Indicator Tutorial - Key Takeaways

  • Many beginners might choose to stay away from some of the more complex methods of Forex analysis. However, a high low indicator might be a good choice for them, since it is a very simple tool and therefore easy to digest and use.
 Importance of the high-low indicator
  • Despite its simplicity, the high low indicator can be used for multiple purposes, such as identifying support and resistance levels, trend analysis, and also for spotting possible breakout points.
  • Just like it is the case with other Forex analysis tools, using the only high low indicator can be misleading and lead to wrong conclusions. Therefore it might be best to use it with other indicators.

FAQ: Forex High-Low Indicator for MT4

Which time frames are used for High Low indicator charts?

The high low indicator itself does not have a fixed timeframe and it can be used with several charts. Regardless of the short or long term analysis, the basic underlying principles remain the same.
Daily high and low is the smallest timeframe for the use of this indicator. This might be most helpful when analyzing 5 minute, 15 minute, 30 minute, 1-hour charts. 
A weekly high and low indicator might be more suitable for 4-hour and daily charts. Finally monthly and yearly indicators can be used in conjunction with weekly charts.

Which are some of the examples of the largest variations from daily high and low in Forex?

There are many cases of large daily fluctuations. For example, on January 15th, 2015 the Swiss National Bank in a surprise move, removed the EUR/CHF floor at 1.20 level, after more than 3 years of maintaining this policy. In a bid to suppress Franc appreciation, the SNB cut the interest rates to -0.75. However, this was to no avail, as CHF has risen sharply. EUR/CHF collapsed from the daily high of 1.2392 to all the way down to an all-time low of 0.7713 mark. Before the end of the trading session, the pair recovered some ground and closed at 0.9742 level.
As a result, because of this very unexpected move, not only many traders, but also several brokerage companies suffered serious losses. There were also a number of people who lived outside Switzerland, who were attracted by SNB’s low rate policies and took out mortgages in Swiss Francs. After this sharp appreciation of Franc, those individuals have been hit hard, with their monthly payments rising considerably in terms of their domestic currencies. Nowadays EUR/CHF pair trades near 1.05 level, so the Swiss currency is not very far from once more reaching parity with the single currency.
There is another case with GBP/USD. June 24th, 2016 was an EU referendum day in the UK. The initial market expectation was that the UK might vote to remain in the EU, as a result, Pound surged to 1.5017 level. However, as Sunderland and other results started to come in, it became more and more clear that the United Kingdom was leaving the European Union.
Consequently, GBP/USD collapsed, breaking down all the way to 1.3227. The pair eventually slightly recovered and closed at 1.3659 mark. However, so far Pound has never reached 1.50 level again.
One of the more recent examples is GBP/JPY. On March 18th, 2020, the pair fell from a daily high of 132.32 to 7 month low of 124.05. After several days of high volatility, the pair eventually recovered and returned to previous levels, however, such a large move in a single day was still surprising for many traders.

Can the high low indicator be used for long term trading?

High low indicator can be used for both short and long term analysis. A trader interested in observing large timeframes can take a weekly chart and draw monthly or yearly high and low lines. In fact, the potential support and resistance levels on those charts might be stronger than on hourly charts. If a particular cluster of support or resistance held out for many months or years, then it might be more difficult for the market to overcome that.

What are some other simple Forex indicators which beginner traders can use?

Traders can use Simple Moving Averages, which basically shows the average closing price of the number of trades. 5-day, 14-day, and 20-day SMA are used for short term analysis. 50-day and 200-day Simple Moving Averages are believed to be more suitable for long term research.
Using the Purchasing Power Parity levels for guidance is another simple option. Basically, PPP shows the exchange rate at which the prices of goods and services will be equalized between the two countries. It is widely believed that in the long term market rates tend to gravitate towards those levels. The Organization for Economic Cooperation and Development is one institution that tracks this indicator and publishes the latest data on its website.

What are ascending and descending channels and what do they signify in Forex analysis?

Basically, an ascending channel represents a price action that is contained between two upward-moving parallel lines. In Forex, the ascending channel is signifying an uptrend. Many professional traders believe that the pair will most likely continue its long term appreciation, until the price breaks below this channel, which could be a sign of reversal.
On the other hand, the price action in the descending channel is limited within two downward-moving parallel lines. This usually represents a downtrend, which might remain in force, until the given currency pair manages to overcome the upper line.

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