What is a Lower Low?
A Lower Low is a trading term in which an asset, such as cryptocurrency, reaches a new minimum price point lower than the low set on the previous day.
Let’s use Bitcoin as an example. Bitcoin dropped from $60,000 to $58,000 and then bounced back up to $63000 within the same trading day (24h). The next day, it dropped from $63,000 to $56,000, creating a “lower low” than the previous day’s low of $58,000.
This metric can be used by traders to adjust their open positions on the market.
Lower lows often indicate a shift in the overall price trend, marking the start of a downtrend.
How Can You Trade a Lower Low?
Depending on the overall situation in the market, a lower-low pattern can be traded in the following ways.
Downtrend Lower Low
If the price of the traded cryptocurrency is in a downtrend, and the trader observes a lower low, there’s a big chance that the price action is bearish.
In that case, traders have the option to start a short position or sell the cryptocurrency at the next lower high and wait for another good entry to buy.
If the price posts a higher high, the downtrend may end, and a period of consolidation may follow. The trader should then hold the asset.
Uptrend Lower Low
A lower low could indicate the end of the uptrend. If that’s the case, many traders would consider going short, especially when other technical metrics indicate a bearish segment.
In this case, a trader would use moving averages to get additional info on how the price action will develop. Based on that, traders sed take-profit and stop-loss targets and enter the short position.
Conclusion
A lower low is a term that describes the price of a cryptocurrency that closed on a loss two days in a row. Together with other metrics, traders use the lower low to set trades and navigate the market.
