Understanding Market Structure for Better Entries

Market structure is the framework of the market. It tells us the current state of price delivery—whether we are trending up, trending down, or consolidating. Mastering market structure is the first step to becoming a profitable trader.

The Three Market States

1. Uptrend (Bullish): Characterized by Higher Highs (HH) and Higher Lows (HL).
2. Downtrend (Bearish): Characterized by Lower Lows (LL) and Lower Highs (LH).
3. Consolidation (Ranging): Price moves sideways between a defined high and low.

Identifying Break of Structure (BOS)

A Break of Structure (BOS) confirms the continuation of a trend.

• In an uptrend, a BOS occurs when price breaks above the previous Higher High.
• In a downtrend, a BOS occurs when price breaks below the previous Lower Low.

Pro Tip: Always wait for a candle body close to confirm a BOS. Wicks can often be "fakeouts" or liquidity grabs.

Change of Character (CHoCH)

A Change of Character (CHoCH) signals a potential trend reversal.

• Bullish to Bearish: Price breaks below the last Higher Low.
• Bearish to Bullish: Price breaks above the last Lower High.

Mapping Structure Correctly

To map structure effectively, you need to look at the right timeframe.

• Swing Structure: Daily/4H timeframes. Good for overall bias.
• Internal Structure: 15m/1H timeframes. Good for finding entries within the swing trend.

Trading with the Trend

"The trend is your friend until it bends."

By identifying the higher timeframe structure, you can align your lower timeframe entries. If the Daily chart is bullish, look for long setups on the 15m chart when price pulls back to a discount zone.

Conclusion

Market structure provides the context for your trades. Without it, you are trading blindly. Combine structure with liquidity concepts and order blocks for a powerful trading strategy.