Adapting the New Highs–New Lows Index to Forex

Summary

This short description adapts the New Highs–New Lows Index, a market breadth measure, to foreign exchange. It counts currency pairs reaching new highs and pairs reaching new lows over a selected period, then takes the difference between those counts. A strong peak in the indicator is described as a possible sign that the market may be approaching a reversal.

The note attributes the indicator’s broader discussion to Alexander Elder’s trading book and says an MQL4 version was published in 2011. It supplies no chart values, calculation period, trading rules, backtest, or evidence that peaks reliably precede turning points. The index is presented as an indicator concept rather than a complete strategy; its usefulness depends on the chosen lookback period, the currency universe, and validation against market data. The reversal interpretation should therefore be treated as a hypothesis, not a guaranteed signal.

Key ideas

• The indicator subtracts the number of pairs making new lows from the number making new highs over a period.
• The described version applies this market breadth measure to currency pairs.
• A peak is presented as a possible warning of a coming reversal.
• The note gives no performance evidence or detailed trading rules.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.