Market Structure

Market Structure is fundamental method for determining the direction of price movements. By identifying market structure correctly, we can avoid going against the market trend and also help us seize opportunities in the early stages of a market reversal.

Bullish Market Structure

A bullish market structure consists of higher highs (HH) and higher lows (HL). Price keeps breaking upward, showing that it has a intention to deliver higher.

Bullish Market Structure

  • The market is structured in an uptrend.
  • Price creates a series of higher highs (HH) and higher lows (HL).
  • Highs keep getting broken, while lows keep getting lifted.
  • This means buyers are in control, demand is strong, and price continues to rise.
  • When the market is in a bullish market structure, we should look for long opportunities that follow the direction of upward price delivery.

Bearish Market Structure

A bearish market structure consists of lower highs (LH) and lower lows (LL). Price keeps breaking downward, showing that it has a willingness to deliver lower.

Bearish Market Structure

  • The market is structured in a downtrend.
  • Price creates a series of lower highs (LH) and lower lows (LL).
  • Lows keep getting broken, while highs keep getting pushed lower.
  • This means sellers are in control, supply is strong, and demand is weakening, which leads to a continued decline in price.
  • When the market is in a bearish market structure, we should look for short opportunities that follow the direction of downward price delivery.

Market Structure Break

When a swing high or swing low is broken, we call it a Market Structure Break (MSB). This signals continuation in price delivery.

Also known as: Break of Structure / BOS

Market Structure Break

Market Structure Shift

When "the high before the lowest low is broken" or "the low before the highest high is broken," we call it a Market Structure Shift (MSS). This signals a change in the direction of price delivery.

Also known as: Change of Character / CHOCH

Market Structure Shift

  • A high-quality MSS should appear together with a Liquidity Sweep and Displacement, while also creating an Imbalance. These concepts will be explained in later chapters.

  • MSS can also be understood as a special form of MSB.

  • MSS is the typical structure ICT/SMC uses to identify trend reversals.