How do you define a reaction H/L?

Discussion in 'Technical Analysis' started by golablue, Jan 6, 2006.

  1. One of the few things I debate in my trading on a regular basis is the criteria used to define a reaction H/L. After myriad discussions with many traders, there seems to be a mixed consensus. I am interested in how people here on ET define a reaction H/L.

    For the sake of this thread, we will consider an uptrending market.

    Do you consider the bar with the lowest low preceding a break of the highest high to be a reaction low?


    Do two bars with equal lows preceding a break of the highest high constitute a reaction low?


    Do both of the aforementioned situations constitute a reaction low?

    Any thoughts are appreciated.
  2. The answer to your 3 questions is "yes". A "significant" low would be defined by a low price that is preceded and followed by a higher low, depending on the time-frame you're using. More precisely, you can make distinctions between intra-day, daily, weekly and monthly lows based upon the length of the market trend and giving appropriate significance to each when then market turns the other way.
  3. price is not the variable to use to make this determination.
  4. Agreed; it's usually the pattern on the chart and the speed of the underlying's fall that determines the possibility of a recovery after the following bar makes higher lows and higher highs.
    Among these parameters, volumes, time frame and sentiment play a part as well.