High low indicator: the high-low index explained
The high low indicator, usually called the high-low index, is a market-breadth measure built from the number of stocks making new highs versus new lows. This guide explains how the indicator is calculated, how some traders read the 50 line, and where its limitations sit.
Takeaways
- The high-low index is a breadth indicator based on new 52-week highs and lows.
- It is a 10-day simple moving average of 'record high percent'.
- Readings above 50 mean more new highs than new lows; below 50, the reverse.
- It gauges the breadth of a whole market or index, not a single instrument.
- New highs and lows are lagging, so the index confirms rather than leads.
- It is a context tool, best read with the index and other signals.
What is the high-low index?
The high-low index is a market-breadth indicator that tracks how many stocks in an index are reaching new 52-week highs compared with new 52-week lows. Rather than following price alone, it looks at participation. This can help traders see whether strength or weakness is broad-based across the market.
It is most often applied to a major index such as the NYSE, or to a national market index.
The idea is straightforward. In a broadly supported advance, more stocks are likely to make new highs and fewer are likely to make new lows. When new highs dominate, market internals are generally considered stronger. When new lows dominate, they are generally considered weaker.
By smoothing this relationship into a single line, the high-low index gives a clearer view of breadth. Traders can then compare it with the underlying index price to see whether the two are broadly aligned.
High-low index at a glance
| Element | What it means |
|---|---|
| Indicator type | Market-breadth indicator |
| Main inputs | New 52-week highs and new 52-week lows |
| Base measure | Record high percent |
| Smoothing | 10-day simple moving average |
| Main reference level | 50 |
| Best suited to | Reading breadth across a market or index |
| Key limitation | Lagging signal that can whipsaw in uncertain markets |
Record high percent: the basis of the index
The high-low index is built on a simpler measure called record high percent.
What is record high percent?
Record high percent expresses new highs as a share of all new extremes: new highs divided by the sum of new highs and new lows, as a percentage. A reading of 70 means 70% of the day's new extremes were new highs.
Why it is smoothed
Record high percent is volatile from day to day, so the high-low index smooths it, using a 10-day simple moving average, to give a steadier read of the underlying breadth trend.
How is the high-low index calculated?
The calculation runs in two steps.
The formula
- Step 1 Record high percent = new highs / (new highs + new lows) × 100
- Step 2 High-low index = 10-day simple moving average of record high percent
Worked example
If, on a given day, there are 150 new highs and 50 new lows, the calculation is:
So, record high percent is 75.
Averaging that value with the previous nine days’ readings gives the high-low index. Because it averages a percentage, the index moves between zero and 100, with 50 as the main reference level.
Past performance is not a reliable indicator of future results.
Reading it on a chart
The high-low index is usually plotted as a line below the index it measures. The 50 line acts as the central reference.
- Above 50: more new highs than new lows
- Below 50: more new lows than new highs
- Rising line: breadth may be improving
- Falling line: breadth may be weakening
- Around 50: market breadth may be mixed or shifting
Its level and slope can help traders assess whether breadth is strengthening, weakening or moving without a clear direction.
Past performance is not a reliable indicator of future results.
Reading the high-low index: the 50 level
The 50 line is the main pivot around which the high-low index is interpreted.
Above 50
Readings above 50 mean new highs have outnumbered new lows over the averaging period. This suggests broader participation on the upside. Some traders give more weight to bullish signals while the index remains above 50. However, a reading above 50 does not guarantee that the market will keep rising.
Below 50
Readings below 50 mean new lows have outnumbered new highs over the averaging period. This suggests broader participation on the downside. Some traders give more weight to bearish signals while the index remains below 50. However, a reading below 50 does not mean that further declines are certain. Crossings of the 50 line can mark a shift in breadth conditions, but the signal confirms participation rather than predicting the next move.
How to use the high-low index in trading
The high-low index is mainly used as context for an index or wider market. It can help traders assess whether a move has broad participation, but it is not a standalone timing tool.
Common uses include:
- Checking whether index price moves are supported by breadth.
- Identifying periods where new highs or new lows dominate.
- Watching for extremes that may suggest stretched conditions.
- Comparing breadth with other indicators and price action.
Confirming the trend
A rising index price backed by a high-low index above 50 is read by some traders as a broadly supported advance. A falling index price with a reading below 50 can, in turn, suggest broader participation in the decline. The high-low index is not designed to give entry or exit points on its own. New highs and lows are lagging, so the indicator confirms breadth rather than leading price.
Watching extremes
Readings consistently above 70 are commonly associated with a strong uptrend, while readings consistently below 30 are commonly associated with a strong downtrend. Very high readings reflect broad strength that may become stretched. Very low readings reflect broad weakness that can accompany capitulation-style selling. Some contrarian traders watch these areas for signs of exhaustion, but extremes can persist for some time.
High-low index extremes and divergence
Beyond the 50 level, extremes and divergence can add more nuance.
Extremes
- Readings near the top of the range show that most new extremes are new highs. This can point to broad participation, but it may also suggest stretched conditions.
- Readings near the bottom of the range show that most new extremes are new lows. This can point to broad weakness, but it may also appear near periods of heavy selling.
- Because of this, extremes are often watched more closely than middling values.
Divergence
Divergence happens when price and breadth move in different directions.
For example:
- If an index makes a new high but the high-low index makes a lower high, breadth may be narrowing.
- If an index makes a new low but the high-low index makes a higher low, downside participation may be easing.
Some traders treat these signals as a reason to look more carefully at the wider market picture. As with all breadth signals, divergence can persist and does not confirm a reversal on its own.
Combining the high-low index with other tools
As a breadth measure, the high-low index is usually read alongside the index itself and other indicators.
| Tool | How it may help |
|---|---|
| Index price chart | Shows whether breadth confirms or questions the price move |
| Advance/decline line | Adds another view of market participation |
| Moving averages | Helps frame the broader trend in breadth |
| RSI | Adds a momentum view when assessing extremes |
The index itself
The high-low index is most useful when read against the price chart of the market it measures. This comparison helps show whether breadth supports or questions the price move.
Advance/decline line
The advance/decline line is another breadth tool. It can help traders assess whether the high-low index matches the wider participation picture.
Moving averages
A moving average of the index, commonly a 20-day SMA in StockCharts’ methodology, can help define the broader trend. This may make individual high-low readings easier to interpret in context.
RSI
A momentum oscillator such as RSI can complement the breadth read when traders are judging whether conditions look stretched.
Using the high-low index when trading CFDs
For CFD traders, the high-low index can provide market context, especially when trading index CFDs or shares linked to a wider market theme. Because contracts for difference (CFDs) let traders speculate on rising or falling prices without owning the underlying asset, breadth tools can help show whether a move is supported by wider participation or driven by a narrower group of stocks.
However, the high-low index does not show where to open or close a CFD position. It tracks breadth across a market or index, not the price behaviour of an individual CFD market. Traders may therefore use it alongside price action, volatility, risk-management tools and the specific chart of the instrument they are trading.
This distinction matters because CFDs are leveraged products. Leverage can magnify both profits and losses, and trading CFDs involves the risk of losing your invested capital. The high-low index may help with context, but it cannot reduce that risk or replace a clear trading plan.
Limitations and risk management
The high-low index has clear limitations. Its signals are broad, lagging and market-wide, so traders need to treat it as context rather than a complete strategy.
When it is least reliable
Because new highs and lows are lagging, the high-low index tends to confirm moves rather than anticipate them, and it can whipsaw around 50 in indecisive markets. It is least reliable as a precise timing tool.
Stop-loss placement
Because it describes a market rather than an instrument, traders acting on it may set stops on the instrument they actually trade, using price structure, such as beyond a recent swing level.
Using it in context
The index trend, whether readings are extreme, and confirmation from other tools all affect reliability. Trading CFDs involves the risk of losing your invested capital, so position sizing and consistent monitoring remain important regardless of the breadth reading.
FAQ
What is the high low indicator?
The high low indicator, or high-low index, is a market-breadth measure that compares the number of stocks making new 52-week highs with those making new lows. It is a 10-day simple moving average of record high percent and moves between zero and 100 around a central 50 level. It gauges whether strength or weakness is broad-based across a market or index, rather than tracking a single instrument.
How is the high-low index calculated?
First, record high percent is found as new highs divided by the sum of new highs and new lows, times 100. The high-low index is then calculated as a 10-day simple moving average of that value. This smooths the daily noise and gives a steadier view of market breadth. Because it averages a percentage, the index oscillates between zero and 100, with 50 as the key dividing line between more new highs and more new lows.
What does a high-low index above 50 mean?
A reading above 50 means new highs have outnumbered new lows over the averaging period, suggesting broader participation on the upside. Some traders focus more on bullish signals while the index holds above 50, and do the reverse below 50. Crossings of the 50 line can mark a shift in breadth conditions, though the signal confirms rather than leads price.
Is the high-low index reliable?
No indicator is consistently reliable on its own. The high-low index is built on new highs and lows, which are lagging, so it confirms breadth rather than predicting turns. It can also whipsaw around 50 in uncertain markets and applies to a whole market, not a single instrument. It works best when read against the index, alongside other breadth tools, with risk management applied.