TIMESTAMPS
00:01 – INTRO
00:33 – UTILITY
Understanding Market Structure is the foundation for successful trading.
Utilized effectively, it can help assess the markets’ direction, empowering traders to make informed decisions about entering and exiting trades, as well as risk management.
Identifying Market Structure increases the odds of being on the right side of the market.
It can increase your risk-to-reward ratio by applying better trade management.
Market Structure is pivotal to understanding the context of any underlying asset and is a crucial tool for building a bias.
Having an awareness of the Market Structure ultimately increases confidence and clarity for trade execution.
Any trading strategy should always depend on the context of Market Structure.
Question to ask: Where is the market trying to go?
01:48 – IMPLEMENTATION
The market has three potential Market Structures:
Uptrend: characterized by higher highs and higher lows.
Downtrend: characterized by lower highs and lower lows.
Range/Consolidation: characterized by price moving in a narrow, horizontal boundary.
Distinguishing whether a market is trending or running is a crucial aspect of a holistic market understanding.
It is essential for formulating, developing and implementing your own trading strategy.
According to estimates, markets are trending for only 20-30% of the time.
Failing to acknowledge this reality and become acquainted with trading ranges is a primary reason why many traders do not achieve profitability.
🔎 03:32 Uptrend visual aid.
To confirm an Uptrend, you need three pivots:
> A higher high.
> Followed by a higher low.
> Confirmed via a break of a previous high.
Reality shows that internal market structure changes may occur while the overall structure remains unchanged.
Hence, it is crucial to pinpoint the accurate reference points.
Looking at Swing Highs and Swing Lows helps to choose the correct reference point.
To identify Swing Highs and Swing Lows one can use the Fractal Indicator.
You can use Igor's Fractal Indicator in Tradingview:
https://www.tradingview.com/u/Igor-T/#published-script.
★ Important: The swing high/low that started the impulse of the move that breaks the previous higher high/lower low must stay intact for the trend change to be valid.
🔎 07:34 Uptrend visual examples.
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🔎 09:16 Downtrend visual aid.
To confirm a Downtrend, you need three pivots:
> A lower low.
> Followed by a lower high.
> Confirmed via a break of the previous lower low.
🔎 11:01 Downtrend visual examples.
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🔎 13:01 Range/Consolidation visual aid.
Reminder: A range or consolidation range, is characterised by an asset moving within a narrow, horizontal boundary.
We can draw a horizontal channel to identify the upper and lower boundary as well as the midline of the channel.
Reality shows that a range does not channel perfectly and we might see partial rises as well as partial declines during consolidation.
🔎 14:57 Practical examples of consolidation ranges.
🔎 16:07 Trend change visual aid.
A trend generally aims for continuation.
The key to capitalizing on a trend lies in the trader's ability to determine if a trend is continuing and identify trend changes.
Once a trend change is identified a trader must react and adapt accordingly.
★ Reminder: Ask: Where is the market trying to go? Is it doing a good job in its attempt to go that way?
A swing low/swing high aims for a new higher high/lower low and with that continuation of the trend.
Should price fail to accomplish this, it could indicate the first sign of weakness for trend continuation (i.e., Price is not doing a good job in its attempt to go higher/lower).
21:40 – TIPS & TRICKS
★ Remember: While Market Structure analysis can provide valuable insights to where price may be headed next, no tool or method should be used in isolation.
★ It is crucial to use Market Structure analysis in conjunction with other forms of TA and to adapt as MS conditions change.
★ Combining Market Structure analysis with orderflow analysis can enhance one’s understanding of market direction.
★ High volume during a break of a previous swing high/low can confirm the validity of a move, while low volume during the same scenario may suggest a lack of conviction.
★ Practice and experience play a significant role in improving your ability to interpret Market Structure and ultimately make informed trading decisions.
★ Only when all technical tools are interpreted together, a comprehensive understanding develops and successful trading occurs.
★ Last but not least: it is always best to TRADE WITH THE TREND.
22:58 – FINAL THOUGHTS