Price Peaks and Bottoms

Price peaks and bottoms refer to turning points in a price chart where the market shifts direction.

They help traders identify trends, reversals, and potential entry/exit points.

🔺 1. Price Peaks (Highs)

A price peak (also called a swing high, local high, or top) is a point on the chart where:

  • The price moves upward

  • Reaches a temporary highest point

  • Then begins to reverse downward

✔ Characteristics of a Peak:

  • It is higher than the prices immediately before and after it

  • Often formed during uptrends, but can also occur during corrections

  • Indicates weakening buying pressure

📌 Example (simplified):

     Peak
      ▲
     / \
    /   \
---       ---

Why Peaks Matter:

  • They help identify resistance levels

  • Can signal trend reversal or topping patterns

  • Used in tools like trendlines, Fibonacci retracements, and market structure analysis

🔻 2. Price Bottoms (Lows)

A price bottom (also called a swing low, local low, or bottom) is the opposite of a peak.

It is a point where:

  • The price moves downward

  • Reaches a temporary lowest point

  • Then starts to move upward

✔ Characteristics of a Bottom:

  • It is lower than prices immediately before and after it

  • Often shows sellers are exhausted

  • Buying pressure may be returning

📌 Example:

---       ---
    \     /
     \   /
      ▼
    Bottom

Why Bottoms Matter:

  • Help identify support levels

  • Can indicate reversal to the upside

  • Useful for recognizing buying opportunities

💡 3. How Traders Use Peaks and Bottoms

A. Identifying Trends

  • A series of higher highs (peaks) and higher lows (bottoms) = uptrend

  • A series of lower highs and lower lows = downtrend

B. Understanding Market Structure

Price structure is built from peaks (swing highs) and bottoms (swing lows).
Traders use these to judge market strength.

C. Drawing Trendlines

  • Uptrend → connect bottoms

  • Downtrend → connect peaks

D. Spotting Reversals

A break in the pattern can signal a trend change:

  • Uptrend breaks when a lower high or lower low forms

  • Downtrend breaks when a higher low or higher high forms

📘 4. Simple Real Example

Imagine a crypto or stock price moves like this:

$100 → $120 → $110 → $130 → $115

  • Peaks: $120 and $130

  • Bottoms: $110 and $115

These points tell you where price hesitated and reversed direction.

🧠 Summary (Easy to Remember)

Term Meaning What It Shows
Peak Short-term high before price reverses down Resistance, weakness in buyers
Bottom Short-term low before price reverses up Support, weakness in sellers
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