Market Structure Basics
Market structure (MS) is a key fundamental concept in understanding price action/behaviors and is primarily used to help identify trends (Trend is your friend-- both up and down) and shifts in the market.
Usually people define it as a series of highs/lows to gauge local trends (bearish/bullish MS). Market structures appear on all time frames and may overlap or contradict with another another.
Bullish market structures consist of higher highs and higher lows.
Bearish market stuctures consist of lower highs and lower lows.
Market structure breaks (MSB) occur when the trend of highs/lows change in the opposite direction. (i.e. Consecutive higher highs and higher lows meet a lower low followed by a lower high = market structure break).
MSB may be used as an entry for some depending on variables such as levels and area of significance or it can be used as possible signals for future positions.
(i.e. Bearish Market Structure Breaks would favor short-term short sided trades)
Now generally speaking, there are always trends within trends dependent on what timeframe you use you analyze a coin. For instance, there are times when the D1+ signify an uptrend yet H1 (example) might be shifting towards a down trend.
This is a general rule of thumb on how I navigate this situation
- 1HTF dictates trade management [Example: If HTF is uptrend, but you go short because LTFs starting down trend, I might not have a full size OR might be taking profit more aggressively as this is a "counter (htf) trend setup".]
Things to note
- 1Horizontal levels/supply & demand may increase confluence and probability to scenarios playing out.
- 2Prefer to pay attention more towards price action in important areas (Highs for bullish market structure/lows for bearish market structure) and allows to spot potential shift or continuation.
- 3Trends are great for bias but should not independently be used as an end-all be-all when it comes to LTF trading. If you are a HTF long-term investor, this does not apply to you.