Understanding The Market Structure

In this section, we will understand the market structure and how to identify that. Then we will identify the market structure shift.

The Market Usually follows a pattern which is a series of lows and highs; the market never goes up and down in a straight line.

As you can see from the image, the market creates a series of lows and highs while moving from one price point to another price point.

Uptrend (Bullish Structure): When the market creates a series of higher highs and higher lows, the trend is called uptrend.

Downtrend (Bearish Structure): When the market creates a series of lower highs and lower lows, the structure is called the downtrend or Bearish Structure.

Sideways or Consolidation Structure: When we can see that the market is moving in a range and bouncing between support and resistance, it is called a consolidation market structure.

Break of Market Structure (BOS) - In an uptrend, the market creates HL and HH, called the market structure. When the market breaks through the HH and creates new HH and HL, it is called that the market has broken the old structure and created a new structure.

Market Structure Shift (MSS) or Change of Character(Choch) - When market structure changes from one type to another, it is called a market structure. If the previous low is broken in a bullish market structure, we can assume that the market structure is changing from bullish to bearish. If the previous high is broken in a bearish market structure, then we can assume that the market is changing from bearish to bullish.

In a Consolidated market structure, when the market creates HH and HL or Lh and LL, we can assume the market structure shift(MSS).

MSS from Bullish to Bearish

MSS from Bearish to Bullish