High Minus Low indicator can help an investor or trader to identify the range of the security or stock. It actually plots the difference between the stock’s high of the day and low of the day and plots the range of the day. the indicator looks like a zigzag line with sudden spikes. Those sudden spikes represent all those high range days when the difference between the high of the day and low of the day is huge. Zerodha Kite has added this indicator in their STUDIES section in the charts.
How To Attach The High Minus Low Indicator In Zerodha Kite?
First, open a chart in Zerodha Kite and go to the STUDIES section. In the drop-down select “HIGH-LOW” and the indicator can be added to the chart with default settings. See the image below where I have added this technical indicator in to Reliance Industries share price daily chart.
Investopedia says, this indicator is used to evaluate profit margins for a security over the short-term and long-term. The High Minus Low Indicator provides an indication of the anticipated performance of the security in the future. The formula of high minus low is used to calculate the associated range. This is one of the three factors in the original Fama and French’s Three-Factor model. This model builds off of the one-factor model associated with the Capital Asset Pricing Model (CAPM), with a factor referred to as beta, by adding the factors of size, also referred to as small minus big (SMB), and value as defined by HML.
Overall High Minus Low indicator is very helpful for the traders to also judge the volatility of a scrip. A low value of HML denotes range-bound price movement while a sudden spike in the indicator denotes range expansion in the scrip. This indicator is best to use on higher timeframes like daily, weekly or monthly.