Previous Day High and Low Strategy

The Previous Day High and Low Strategy uses yesterday’s highest and lowest prices as reference lines for today’s intraday trading.

Traders watch whether price breaks above the high (PDH), drops below the low (PDL), or bounces off them.

These levels can hint at possible breakouts and reversals, but they never guarantee a result.

Why does Yesterday’s Price Matter Today?

Ever watched Nifty 50 or an NSE stock stall at the same price again and again, as if it hit an invisible wall? Very often, that wall is a price from the previous trading day.

PDH and PDL are among the easiest levels to mark. Traders use them to think about support, resistance, breakouts and session liquidity.

What is Previous Day High (PDH)?

Previous Day High (PDH) is the highest price a stock or index touched during the last completed trading session, wick included.

A candle is the bar on a chart showing a period’s open, high, low and close. The wick is the thin line showing the extreme prices.

Say a stock touched ₹1,050 yesterday before slipping back. That ₹1,050 is your PDH. Many traders treat PDH like a ceiling.

If price climbs back to it, sellers may step in. That makes PDH a possible resistance, meaning a price area where rises often struggle. If buyers push through, it may become a breakout level.

What is Previous Day Low (PDL)?

Previous Day Low (PDL) is the lowest price traded during the last completed trading session, wick included.

It is PDH’s mirror image. When price falls toward PDL, buyers may step in, so it works as possible support, a price area where falls often pause or bounce.

If price slips below it with force, traders may call it a breakdown.

Why do Traders Watch PDH and PDL?

Because plenty of other traders are watching them too, and crowds move prices.Here is the simple version of liquidity: pools of waiting buy and sell orders.

Around PDH and PDL, many traders place orders and stop-losses. A stop-loss is an automatic exit order that limits your loss if a trade goes wrong.

When price reaches these crowded zones, many orders can trigger at once, causing sudden spikes or sharp U-turns.

Previous Day High and Low Strategy: The Basic Idea

The strategy is about reacting to what price does around PDH and PDL, instead of guessing in advance. There are two broad scenarios:

• Price breaks above PDH: this may signal bullish continuation, meaning buyers staying in control.
• Price breaks below PDL: this may signal bearish continuation, meaning sellers staying in control.

How do you Confirm a Breakout?

A breakout is better confirmed when a candle closes beyond the level, not when a wick merely touches it.

Wicks can reverse in seconds. A close shows where buyers and sellers settled.

What is a False Breakout?

A false breakout happens when price crosses PDH or PDL, tempts traders in, then snaps back into yesterday’s range.

It is a common beginner trap. Waiting for confirmation may help you dodge some, though never all.

How to Identify PDH and PDL on a Chart

You can mark both levels in about a minute. Here’s how:

1. Open the daily chart of your stock or index.
2. Find the previous completed trading day. Skip today’s running candle.
3. Note the highest price, including the upper wick.
4. Note the lowest price, including the lower wick.
5. Draw horizontal lines at those prices and label them PDH and PDL.
6. Switch to a 5-minute or 15-minute chart to watch today’s price action (how price moves) near those lines.

A Simple Framework for the Previous Day High and Low Strategy

Treat this as a learning checklist, not a magic formula.

1. Notice the open. Is price above PDH, below PDL, or inside the range?
2. Watch the reaction. Does price push through cleanly, or get rejected?
3. Wait for a candle close beyond the level.
4. Consider an entry only after confirmation, never on the first touch.
5. Fix your stop-loss before you enter.
6. Don’t chase. If price has already sprinted away, skipping the trade is a fine decision.

This is a learning framework, not personal trading advice.

Common Mistakes Beginners Make

• Treating every touch as a signal. Watch what price does next.
• Entering on a wick. It can reverse before you blink.
• Ignoring false breakouts. They happen often, so plan for them.
• Trading without a stop-loss. One bad trade can erase many good ones.
• Using PDH/PDL alone. Also check the trend, volume (how many shares change hands) and market news.
• Overtrading right after 9:15 AM. The opening minutes are fast and noisy. Watching first is often wiser.

Previous Day High and Low Strategy in Action: A Worked Example

This is a made-up example for learning. It is not a recommendation to buy or sell anything.Imagine an NSE-listed stock with a PDH of ₹1,050 and a PDL of ₹1,020.

Today it opens near ₹1,038, inside yesterday’s range.Over the first hour, price tests ₹1,050 twice but fails to close above it. Then a 5-minute candle closes at ₹1,054.

Price dips back to ₹1,050 and holds, with the next candles closing above. This pullback to the broken level is called a retest.

As a beginner, you might read this as a potential bullish breakout scenario – resistance broke, and the old ceiling held as a floor. A cautious trader, on the other hand, might keep a stop-loss just below ₹1,050.

But it can fail. Price could slide back into the range, which is exactly why the stop-loss exists.

PDH/PDL vs Regular Support and Resistance

They work well together: a PDH that lines up with a major resistance zone may deserve extra attention.

Risk Management Tips

Always use a stop-loss, decided before you enter.Risk only a small, predefined portion of capital per trade.

Avoid revenge trading. Chasing a loss usually makes it bigger.

Never increase position size after losses.

Practise first on a demo account or with paper trading (simulated trades with no real money).