Distance To Highs
What Is the Distance To Highs Indicator?
The Distance To Highs indicator shows how much a security's price needs to increase in order to reach a recent significant high. Because previous highs often act as natural resistance lines, knowing whether or not price is close to a previous high during an uptrend can help chartists to identify potential changes in trend and set entry/exit points.
Calculating the Distance To Highs
The formula for this indicator is simple:
The Close value is subtracted from the High in order to determine the difference between the two values. The difference is divided by the Close value and multiplied by 100 in order to convert the raw value to a percentage.
Cool Tip: Expressing the value as a percentage makes it easier to compare Distance To Highs values over time or even between different securities.
The formula can be calculated using the 52-week, 9-month, 6-month, or 3-month high. In addition, the indicator can be calculated with either the intraday high or the closing high. Choose the type and length of high that best meet your technical analysis needs.
Interpreting the Distance To Highs
Recent highs often act as resistance during an uptrend, so it can be useful to see how far away the current price is from the high. The Distance To Highs indicator does this by determining how much the security's price would need to increase to reach the high. If the price increase needed is small, the stock is close to the resistance high and may be heading for a pullback or a change in trend. Chartists should assess momentum and other technicals to determine whether a pullback or reversal is more likely.
If you're a trader who likes to open a long position when price has broken above a significant high, then knowing how much price would need to increase to reach that high can also be useful for timing your trade entries.
In the chart above, Johnson & Johnson (JNJ) made new highs in January and February, touching the zero line of the Distance To Highs indicator several times, then drifted downward again over several weeks. In June, price turned sharply upward again, and is close to making a new 52-week high again. The Distance To Highs value for the latest bar on the chart is 2.60%, meaning it needs to increase in price by only 2.6% to reach its 52-week high.
Cool Tip: Another way to look at this same information is with the Distance From Highs indicator, which measures how far away price is from a previous high.
The Bottom Line
Plotting the historical Distance To Highs values on the chart allows chartists to see at a glance how much price must increase to reach a previous high, but also whether or not it's getting closer to that goal over time. Because previous highs often act as resistance, this valuable information can help traders to identify potential pullbacks and reversals, as well as time trade entries and exits.
As with all indicators, traders should use the Distance To Highs indicator in conjunction with other indicators and analysis techniques.
Charting with the Distance To Highs
The Distance To Highs indicator can be added to SharpCharts and ACP Charts.
Using with SharpCharts
Distance To Highs is available on SharpCharts in the “Indicators” section. The indicator can be positioned above, below, or behind the security's price plot. Once the indicator is chosen from the dropdown list, a Distance To Highs indicator is added to the chart with the default settings. The first parameter determines the length of the high: 52W (52 weeks, the default), 9M (9 months), 6M (six months), or 3M (three months). The second parameter indicates whether the closing high or the intraday high is used. To configure the indicator for intraday highs, replace the "CLOSE" with "INTRADAY".
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Learn More: For more details on the parameters used to configure Distance To Highs indicators, please see our SharpCharts Parameter Reference in the Support Center.
Using with StockChartsACP
The Distance To Highs indicator can be added from the Chart Settings panel for your StockChartsACP chart. The indicator can be positioned above, below, or behind the security's price plot.
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By default, the indicator uses the 52-week closing high, but the length and type of high can be adjusted to meet your technical analysis needs.
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