What Is a Lower Low?
A lower low refers to a situation in which the price of a cryptocurrency closes at a lower level than the previous day, which itself closed at a low point.
This signifies a continuation of a downward trend, as consecutive days of losses indicate a declining market.
Traders often view a lower low as an opportunity to enter selling positions.
Is a Lower Low Bearish?
A lower low can be a bearish signal, but it is not always definitive. In certain cases, a lower low can be a bullish indication. However, if lower lows accompany lower prices on technical indicators, it is typically considered a bearish sign, reinforcing the downward trend.
How Do You Trade a Lower Low?
Trading a lower low can be approached in different ways, depending on the prevailing trend.
If the price is in a downtrend and a lower low occurs, it indicates continued bearish sentiment.
In this case, traders may choose to sell when a subsequent lower high is formed.
If the price subsequently forms a higher high, it could suggest a potential exhaustion of the downtrend and the beginning of a consolidation phase.
Timing Entry on Lower Lows in a Downtrend
If the price is in an uptrend, a lower low could signal the end of the upward trend.
Traders may consider entering short positions if further movements confirm the bearish indicator.
The timing of entering the position can vary depending on a trader’s risk preference, with some opting for immediate entry and others waiting for bearish confirmation.
More advanced trading strategies involving lower lows incorporate the use of technical indicators such as moving averages to gain a deeper understanding of price action and to determine optimal take-profit and stop-loss levels.
Experienced traders also consider non-technical factors such as macroeconomic news and token-specific information to adapt their trading strategies.