Market Structure: Reading Price
Market structure is the skeleton of price movement. Understanding it tells you whether to look for buys, sells, or stay out. It's the foundation of Smart Money trading.
The Four Key Points
Uptrend Structure
An uptrend makes:
- Higher Highs (HH): Each peak is above the previous
- Higher Lows (HL): Each pullback is above the previous low
In uptrends, look for buy opportunities at Higher Lows — that's where smart money adds positions.
Downtrend Structure
A downtrend makes:
- Lower Highs (LH): Each bounce is below the previous
- Lower Lows (LL): Each drop is below the previous
In downtrends, look for sell opportunities at Lower Highs.
Structure Shifts (CHoCH)
Change of Character (CHoCH) signals potential trend reversal:
- In uptrend: first Lower Low suggests shift to bearish
- In downtrend: first Higher High suggests shift to bullish
Important: One CHoCH isn't confirmation. Wait for structure to actually shift with follow-through.
Break of Structure (BOS)
BOS confirms trend continuation:
- In uptrend: breaking above previous HH = BOS bullish
- In downtrend: breaking below previous LL = BOS bearish
BOS tells you the trend is still alive and to continue trading in that direction.
Multi-Timeframe Analysis
Structure works on all timeframes. Smart approach:
- Check 1H or 4H for overall bias
- Check 15M for local structure
- Enter on 5M in direction of higher TF structure
Never fight the higher timeframe structure. If 1H is bearish, don't take long trades on 5M.