Module 2 · Lesson 3 of 10

Lower Highs and Lower Lows

By the end, you can identify a downtrend and resist the urge to 'catch the bottom'.

Mental model

Walking down stairs. Each step down (lower low) is followed by a bounce that stops lower than the last (lower high). The falling landings mean you're descending.

Core explanation

A downtrend is a sequence of lower highs (LH) and lower lows (LL). Sellers keep accepting lower prices and every rally fails below the previous one.

Remember Module 1's survival rules: the market owes no bounce. In a downtrend, shorting with the trend is trading the market you have. 'It's too low' is anchoring, not evidence.

Money can be made in both directions.

Beginner vs professional

Beginner thought

“It can't go lower, I'll buy the bottom.”

Professional thought

“Lower highs and lower lows — sellers are in control. With-trend, that's a short until structure changes.”

Mastery check

Mastery check · 1 of 2

What defines a downtrend?

Takeaways

Downtrend = lower highs + lower lows.
With-trend shorts are trading the market you have.
'Too low' is anchoring, not evidence.

Up next — Not every move against a trend is a reversal. Next: pullbacks vs reversals.