Higher Highs Investing Strategy

What Are Higher Highs?

Higher highs occur when:

• Each successive peak (high) in an asset’s price is higher than the previous peak.
• This pattern indicates sustained upward momentum and strong buyer interest.

Key Features of a Higher Highs Pattern:

1. Higher Highs: Successive price peaks are increasing.
2. Higher Lows: Each trough (low) is higher than the previous one, confirming the uptrend.
3. Support and Resistance: The price consistently breaks past resistance levels and finds new support at higher levels.

How the Higher Highs Strategy Works

1. Identify an Uptrend:

   • Look for a series of higher highs and higher lows on the price chart.
   • Use timeframes that match your investment horizon (e.g., daily for swing trades, weekly for long-term investments).

2. Confirm the Trend:

   • Combine the higher highs pattern with other technical indicators to verify the strength of the trend:
     • Moving Averages: Ensure the price stays above key moving averages (e.g., 50-day and 200-day MAs).
     • Relative Strength Index (RSI): Check for momentum without overbought conditions (RSI < 70).

3. Enter the Trade:

   • Buy after the price breaks above a previous high, ideally on strong volume.
   • Example: If the last high was $100 and the price breaks to $105, consider entering the trade.

4. Set Risk Management Levels:

   • Place stop-loss orders below recent higher lows to protect against reversals.
   • Example: If the higher low is $95, set a stop-loss just below this level, such as $94.

5. Monitor Continuation or Reversal:

   • Continue holding as long as the pattern of higher highs and higher lows persists.
   • Exit if the price forms lower highs or breaks below key support levels.

Advantages of the Higher Highs Strategy

1. Simple and Effective:

   • Focuses on clear price patterns, making it accessible even for beginners.

2. Works in Bullish Markets:

   • Aligns with strong upward trends, minimizing the risk of betting against momentum.

3. Adaptable Across Assets:

   • Suitable for stocks, ETFs, cryptocurrencies, and even forex trading.

4. Combines Well with Other Tools:

   • Enhances accuracy when used alongside indicators like RSI, MACD, or Fibonacci retracements.

Example: Higher Highs in Practice

Stock Example: ABC Corp.

• Higher Highs Pattern:
  • Previous high: $50
  • Next high: $55
  • Current high: $60
• Higher Lows Pattern:
  • Previous low: $45
  • Next low: $50
  • Current low: $55

Action Plan:

1. Buy when the stock price breaks above $60 with strong volume.
2. Set a stop-loss at $55 (below the last higher low).
3. Hold the position as long as the price continues forming higher highs.

Higher Highs vs. Lower Lows