Market structure

Family VI · Charts & indicators

Not to be confused with forex market structure, break of structure.

Market structure is the descriptive framework traders use to label the shape a price series takes: a sequence of higher highs and higher lows, lower highs and lower lows, or swings that overlap without net progress. It is read from the chart alone, not from order flow, volume or news, and it changes only when the sequence of confirmed swings changes.

How swings are classified

A swing high is a peak with lower highs on both sides; a swing low is a trough with higher lows on both sides. The number of bars required on each side is a setting, so the same chart can yield different swing counts at different sensitivities.

• Uptrend: successive swing highs and swing lows both rise.
• Downtrend: successive swing highs and swing lows both fall.
• Range: highs and lows alternate around a roughly stable band, with no consistent extension.

Structure is confirmed retrospectively. A swing is only a swing once the bars on its right side have closed, so the most recent swing is provisional until then.

Worked example

The label applies to the sequence as a whole. A single higher high inside a falling sequence does not convert a downtrend into an uptrend.

Timeframe dependence

Structure is defined relative to the timeframe being read. A five-minute chart can show a clean downtrend while the daily chart of the same instrument shows a range, because the swings being compared are drawn from different bar sizes. Statements about structure are therefore incomplete without the timeframe, and a lower-timeframe sequence that contradicts a higher-timeframe one is a normal condition rather than an error.

Often confused with

forex market structure

Market structure is the general chart-reading concept and applies to any instrument, whereas forex market structure is the same analysis applied specifically to currency pairs, where session overlaps and the absence of a central exchange shape when swings form; the visible sign is whether the chart is a currency pair.

break of structure

Market structure is the ongoing sequence of swings, while a break of structure is the single event in which price closes beyond a prior swing point and the sequence is reclassified; the visible sign is a specific swing level being exceeded rather than the pattern of swings as a whole.

See also

• forex technical analysis indicators
• price action
• fundamental analysis
• support and resistance
• technical analysis
• fibonacci