MARKET STRUCTURE

Understanding and application

Market Structure is one of the most important aspects of trading, as it gives you
strong indications of where the price is likely to head to next and what the intentions
of price are. Failing to acknowledge and identify the correct market structure can
lead to you being caught on the wrong side of the market. Order flow is typically used
to describe the general direction of price i.e. bearish order flow is when price is
taking liquidity from intermediate highs, forming new lows and strong highs (we will
cover this later in this section)

There are two different main types of structure, Major and internal

Major structure is where the key swing points that form and create fresh highs/lows. I
high or low is only considered major structure if it creates a new high or low. This is
easier to understand when looking at a chart example (Breaks of structure +
Continuation of structure will be talked about more shortly)
Often, internal structure points are just used as liquidity to move to the major areas in
price

Break of structure (BOS or MSB) - shifting structure shows that order flow is changing
and we can start to take positions in the opposing direction of the preceding
trend/movements. For optimal usage, you want to look for this to occur within your
POIs.
REQUIREMENTS FOR VALID BREAKS OF STRUCTURE:

must have a strong candle close through high/low you are watching.
must break the most recent swing high that created the lowest low (in the case of
a bullish BOS) and vice versa for bearish scenarios.
must show strength, if a candle closes and breaks structure but retraces
immediately, should be more cautious in your entries.

Invalid BOS:
How BOS occurs is also important, notes on chart.
EXPECTATIONAL ORDERFLOW - using market structure, we can take a probabilistic
approach in whether highs/lows will be taken out/broken. In downtrends, LLs etc, we
can EXPECT that the highs that form will be protected/strong. Furthermore, we can
target the most recent low in any shorts we take, as the expected order flow is that
we continue to make new lows.

Made on Ti l d a