Teaching sketch. It shows the shape, not a live quote and not a trade signal.
Definition
A lower high is a rally that fails to reach the prior rally. Sellers arrived earlier. A series of lower highs is half of a downtrend. The other half is lower lows.
How to identify it
Compare completed swing highs. A lower high can be far below the prior one or only a little below. The fact of the failure matters more than the distance, but a tiny failure inside noise may not be a swing at all.
Bullish reading
A close above the last lower high breaks the sequence of failing rallies. It is the first half of a change out of a downtrend. It is not yet a series of higher lows.
Bearish reading
In a downtrend, the last lower high is the structural stop for shorts. Rallies that stay under it keep the offer in control.
Common mistakes
Ignoring a lower high because an indicator is oversold. The swing is the price fact. The oscillator is a calculation on top of it.
Limitations
Strong trends produce lower highs that are shallow pauses. Shorting every lower high without a larger location is how traders fight an uptrend one small pullback at a time.
This note explains the term. A sketch shows the shape of the idea. Neither is a recommendation, a signal, or a comment on any security. Indicator settings and exchange conventions differ. Check the live chart and the contract specification before you use a number.