DEFINITION of 'Norton High/Low Indicator'

The Norton High/Low Indicator leverages the Demand Index and Stochastics​ to identify potential price reversals.

BREAKING DOWN 'Norton High/Low Indicator'

The Norton High/Low Indicator leverages the Demand Index and Stochastics to identify potential price reversals. The Demand Index is a complex oscillator that combines price and volume to provide traders with a leading indicator, while Stochastics are commonly used as a momentum indicator to assess the strength of a trend. The combination of these two methods aims to gauge both direction and momentum.

The Norton High/Low Indicator generates a high (NHP) line and a low (NLP) line that traders observe for movements above and below critical levels, as well as crossovers that could indicate a change in the prevailing trend. In general, a NLP line that crosses below -3.0 is a sign that a new bottom will occur over the next four to six periods, while a NHP line crossing above 3.0 signals that a new top may be forming over the same timeframe.

Traders should use the Norton High/Low Indicator in conjunction with other technical indicators and chart patterns to maximize their odds of success. For example, many traders will look at ancillary momentum oscillators or seek out reversal patterns on stock charts as a sign that a reversal is likely to occur in the near-term.

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