Advanced Market Structure Course (Full Tutorial)

Summary

This insightful video delves into the critical aspects of market structure for traders, emphasizing the importance of identifying trends and consolidation phases. It outlines the dynamics behind market movements, distinguishing between uptrends, downtrends, and consolidation phases. The video provides a basic introduction to market structures and then explores advanced concepts, focusing on the identification of major highs and lows to detect trend reversals or continuations. It explains the significance of breaks of structure (BOS) and the rules for determining valid breaks, which are crucial for avoiding trading pitfalls. The video also highlights the concept of 'change of character' in market behavior, differentiating between minor and major changes and their implications for trading strategies. By the end, viewers are encouraged to backtest strategies and provided with a platform for doing so. The presenter stresses the need for patience and accurate market structure identification to avoid entering trades on the wrong side of the market.

Takeaways

• 📈 **Market Structure Identification**: Understanding market structure is crucial for traders to succeed, as it helps identify trends and consolidation phases.
• 🔄 **General Market Behavior**: Market movements are influenced by trending (uptrends and downtrends) and consolidation phases, which are essential for price direction.
• 🔺 **Uptrend Dynamics**: In an uptrend, prices form higher highs and lows, and a break of a major low signals the end of the uptrend.
• 🔻 **Downtrend Dynamics**: In a downtrend, prices form lower lows and highs, and a break of a major high signals the end of the downtrend.
• 📊 **Major Highs and Lows**: Identifying valid major highs and lows is key to detecting trend reversals or continuations in the market.
• 🛠️ **Break of Structure (BOS)**: A valid BOS occurs when the price breaks and closes above (in an uptrend) or below (in a downtrend) the most recent higher high or lower low.
• 🚫 **Invalid BOS Scenarios**: A break with a long shadow or wick that closes within the high's range does not constitute a valid BOS.
• 🔄 **Internal vs. External Structures**: Internal structures are price actions within the range of external structures and do not affect the market's primary direction unless a major low or high is broken.
• ⏳ **Patience for Market Shifts**: Traders should wait for a major change of character, confirmed by the price breaking and closing beyond the last major low or high, before considering a market structure shift.
• ⚠️ **Risk of Falling into Traps**: Not properly identifying pivotal points can lead to trading on the wrong side of the market and falling into traps.
• 📚 **Backtesting Importance**: Before using a strategy in a live account, it should be backtested at least 100 times to ensure its validity and effectiveness.
• 📉 **Bearish Market Structure**: The principles of market structure, BOS, and change of character apply similarly to bearish scenarios, with attention to breaking major highs and lows.

Q & A

What is the initial key step that every trader must take on their trading journey?

The initial key step for every trader is to accurately identify and understand the market structure along with its crucial elements.

What are the two key factors that consistently influence price direction in the market?

The two key factors that consistently influence price direction are trending, which includes uptrend and downtrend, and the consolidation phase, like a choppy or ranging market.

What is the significance of identifying valid major highs and lows in the market structure?

Identifying valid major highs and lows is critical as it enables traders to detect signals for a trend reversal or continuation in the market. Without proper identification, there is a risk of falling into traps and trading on the wrong side of the market.

What is an ideal uptrend market structure characterized by?

An ideal uptrend market structure is characterized by prices consistently forming higher highs and higher lows, where the price typically breaks the previous highs while holding the lows.

What is a break of structure (BOS) and how is it identified in a valid manner?

A break of structure (BOS) is a situation where the price breaks a high to the upside or a low to the downside, indicating a potential trend reversal or continuation. A valid BOS occurs when the price breaks and closes above (in an uptrend) or below (in a downtrend) the most recent higher high or lower low with the body of a candle.

What is considered when determining a valid change of character in the market structure?

To determine a valid change of character, one must first determine the general market direction, highlight the valid break of structures on the price chart, and then look for the price to break and close below the last major low (in a bullish scenario) or above the recent major high (in a bearish scenario) with the body of a candle.

Why is it important to wait for a major change of character before entering a short position in a bullish market?

It is important to wait for a major change of character because a minor change of character alone cannot be regarded as a sign of a shift in the market structure. Entering a short position prematurely may result in a stop loss being triggered as the market continues its primary direction.

What is the recommended practice before using a strategy or setup in a real trading account?

The recommended practice is to backtest the strategy or setup at least 100 times to ensure its effectiveness and reliability in real market conditions.

What tool is mentioned in the script for backtesting trading strategies and setups?

The Trader Edge platform is mentioned as a tool for backtesting trading strategies and setups.

What is the implication of the price breaking the recent higher high with a long shadow or wick in a bullish scenario?

If the price breaks the recent higher high with a long shadow or wick and the body of the candle promptly closes below the range of the high, with the subsequent candle's wick not surpassing the first candle's wick, it is not considered a valid break of structure. The low in this case is regarded as an internal structure within the trading range.

How does the consolidation phase in the market contribute to the accumulation of liquidity and institutional orders?

The consolidation phase is a period where price typically does not move in a clear uptrend or downtrend, creating a range or choppy market conditions. During this phase, liquidity accumulates as traders and investors wait for clearer direction, and institutional orders may also be placed in anticipation of the next major market move.

What is the role of internal structures in defining the current area of interest and trading range in the market?

Internal structures are the price movements that occur between the major external structures (major highs and lows). They define the current area of interest and trading range as long as the price remains within the bounds of the most recent major low (in a bullish state) or major high (in a bearish state), indicating the ongoing market trend.

Outlines

00:00

📈 Understanding Market Structure for Successful Trading

The first paragraph emphasizes the importance of identifying and mapping market structure for traders to achieve success and profitability. It outlines the reasons why traders might face losses, such as failing to understand market dynamics. The video promises to cover both basic and advanced concepts of market structure, providing keys and tips for mapping it. It introduces the general behavior behind market movements, focusing on trending and consolidation phases. The concept of uptrends and downtrends is explained, where in an uptrend, prices form higher highs and lows, and in a downtrend, they form lower lows and highs. The paragraph also discusses the importance of identifying valid major highs and lows to detect trend reversal or continuation signals.

05:00

📉 Validating Break of Structure (BOS) and Market Dynamics

The second paragraph delves into the specifics of identifying valid major highs and lows in the market structure. It explains the process of recognizing a realistic uptrend structure and the significance of internal and external structures. The paragraph clarifies the conditions under which a break of structure (BOS) is considered valid, such as when the price breaks and closes above the most recent higher high with the body of a candle. It also addresses scenarios where a BOS is not valid and the importance of waiting for a major low or high break to signal a trend reversal. The concept of backtesting trading strategies is introduced, with a recommendation to use the Trader Edge platform for this purpose.

10:00

🔄 Market Structure Shifts and Change of Character

The third paragraph discusses the concept of a change of character in market structure, which is crucial for identifying valid trend shifts. It differentiates between minor and major changes of character, noting that a minor change alone is not indicative of a market structure shift. The paragraph warns against the common mistake of novice traders who misinterpret minor changes as signals for market reversal. It stresses the importance of waiting for a major change of character, which is confirmed when the price breaks and closes below the last major low in a bullish scenario or above the recent major high in a bearish scenario. The video concludes by encouraging viewers to subscribe and provide feedback for future content.

Keywords

💡Market Structure

Market Structure refers to the pattern of price movements in the financial markets, which can be categorized into trends and consolidation phases. It is essential for traders to understand and map this structure to identify opportunities and manage risk effectively. In the video, the concept is explored in detail to help traders distinguish between uptrends, downtrends, and consolidation phases, which are crucial for making informed trading decisions.

💡Trend

A trend in trading denotes the general direction in which prices are moving. It can be either an uptrend, where prices are consistently making higher highs and higher lows, or a downtrend, characterized by lower highs and lower lows. The video emphasizes the importance of identifying the trend to predict future price movements and to trade in the direction of the prevailing trend.

💡Consolidation Phase

The consolidation phase is a period during which an asset's price remains relatively stable and ranges within a certain price level. It is often seen as a time when the market accumulates liquidity and institutional orders before the next significant price movement. In the context of the video, consolidation is portrayed as an essential part of the market cycle, alternating with trending phases.

💡Break of Structure (BOS)

A Break of Structure (BOS) occurs when the price of an asset moves beyond a previously established high or low, indicating a potential shift in the market trend. The video outlines specific criteria for a valid BOS, such as the price breaking and closing above the most recent higher high with the body of a candle, which signifies a continuation or reversal of the trend.

💡Major Highs and Lows

Major highs and lows are pivotal points in the market structure that represent significant resistance or support levels. They are crucial for identifying trend reversals or continuations. The video explains how to identify valid major highs and lows, which are used to define the external structures that bound the current area of interest and trading range.

💡Internal Structures

Internal structures are price movements that occur within the range of major highs and lows, which are the external structures. The video discusses how internal structures are not as significant as external ones unless they lead to a break of the major low or high, which could indicate a trend reversal or continuation.

💡Change of Character

Change of character in the context of market structure refers to a significant shift in the nature of the market's movement, such as transitioning from a trending phase to a consolidation phase or vice versa. The video explains that a valid change of character requires the price to break and close beyond the last major low or high, which confirms a shift in the market structure.

💡Backtesting

Backtesting is the process of testing a trading strategy using historical market data to see how it would have performed in the past. The video recommends backtesting a strategy at least 100 times before using it in a live trading environment. Backtesting helps traders to refine their strategies and understand their potential performance and risk.

💡Trader Edge Platform

The Trader Edge Platform is mentioned in the video as a tool for backtesting trading strategies and setups. It is presented as a resource that traders can use to validate their strategies by simulating them against past market conditions, which is a critical step in ensuring the robustness of a trading approach.

💡Stop Loss

A stop loss is an order placed by a trader to limit their potential loss on a trade. In the context of the video, it is discussed how improperly identifying market structure can lead traders to place stop losses that get triggered by retracements rather than true trend reversals. The video advises traders to set stop losses carefully, considering the major lows or highs of the market structure.

💡Liquidity

Liquidity in financial markets refers to the ease with which an asset can be bought or sold without affecting its price. The video mentions that during consolidation phases, the market accumulates liquidity, which is important for institutional orders and can precede significant price movements.

Highlights

Understanding market structure is crucial for traders to achieve success and profitability in their trading journey.

Market movements can be categorized into trending (uptrend and downtrend) and consolidation phases.

An uptrend is characterized by higher highs and higher lows, while a downtrend shows lower lows and lower highs.

Identifying valid major highs and lows is essential for detecting trend reversal or continuation signals.

The consolidation phase is a period where price action is choppy or ranging, accumulating liquidity and institutional orders.

A realistic market structure involves internal structures formed between major external structures.

A break of structure (BOS) occurs when the price breaks and closes above the most recent higher high or below the most recent lower low.

A valid BOS is identified by specific rules, such as the candle's body closing above the high or below the low.

A long shadow or wick on a candle does not constitute a valid break of structure if it closes within the high's range.

A change of character in the market is indicated by a major change in the price action, such as breaking the last major low in a bullish scenario.

Traders often face losses due to misinterpreting minor changes of character as market structure shifts.

Backtesting trading strategies is recommended to ensure their effectiveness before using them in a live trading account.

The Trader Edge platform is used for backtesting exclusive trading strategies and setups.

A valid change of character requires the price to break and close with the body of a candle, not just a wick or shadow penetration.

In a bearish market structure, a valid break of structure is identified by the price breaking and closing below the most recent lower low.

Internal price action within the range of external structures is irrelevant as long as the price remains within the defined trading range.

The video emphasizes the importance of patience and correct identification of market structures to avoid entering trades on the wrong side of the market.

For a comprehensive understanding, traders are encouraged to watch the entire video, take notes, and subscribe to the channel for updates.

Transcripts

hello Traders and welcome back to

another episode of smart

risk accurately identifying and mapping

the market structure along with its

crucial elements is the initial key step

that every Trader must take on their

trading Journey for success and

profitability one of the primary reasons

many Traders face losses is their

failure to properly identify and

understand the market structure in this

episode we explained both Advanced and

basic concepts of Market structure that

are essential for every Trader to

understand and apply in their trading

Journey additionally we will unveil the

keys and tips for Market structure

mapping propelling you one step ahead in

the market be sure to watch the entire

video slowly until the end and take

notes for a better and more

comprehensive understanding so Traders

if that's something you're interested in

please give this video a thumbs up to

show your support and subscribe to our

Channel if you are new see you after

intro

[Music]

[Music]

welcome back Traders so let's get

started with the market structure

General Behavior the Dynamics behind

Market movements can be boiled down to

two key factors that consistently

influence price Direction trending which

includes uptrend and downtrend and the

second factor is the consolidation phase

like a choppy or ranging Market imagine

it like a continuous Circle where price

always moves between downtrends uptrends

and also consolidations that accumulate

liquidity and institutional orders price

usually needs to consolidate between

uptrends and downtrends and vice versa

the first question to consider when

opening charts on your screen is whether

the market is in an uptrend downtrend or

consolidating phase to gain a solid

understanding let's begin with a basic

introduction to Market structures and

then delve into the key points of

advanced Market

structures consider a market structure

that represents an ideal uptrend I refer

to this type of Market structure as

ideal because it is rare to find an

uptrend in the market that exactly

mirrors this pattern prices typically do

not behave with such Simplicity

nonetheless for a clearer understanding

of an uptrend let's briefly take a look

at this ideal structure before moving on

to a more realistic uptrend structure

that frequently emerges in the market in

an uptrend prices consistently form

higher highs and higher lows the price

typically breaks the previous highs

while holding the lows an uptrend ends

when the price breaks one of the major

lows to the downside for example to

maintain the uptrend it's crucial that

price does not break this major low

whenever the price breaks a major High

to the upside it forms a break of

structure and establishes a demand Zone

associated with the BOS

wave identifying valid major highs and

lows is critical as it enables us to

detect signals for a trend reversal or

continuation in the market without

proper identification of these pivotal

points there is a risk of falling into

traps and trading on the wrong side of

the market the same Concepts apply to

the bearish

scenario in a downtrend prices

consistently create a series of lower

lows and lower highs in this scenario

the price has a tendency to break the

previous lows while maintaining the

highs now let's delve into the details

of the realistic Market

structure this represents the realistic

uptrend structure that is more commonly

observed in the market market now let's

consider a scenario where the price

breaks the previous highs to the upside

at this point a crucial question arises

how do we identify valid major highs and

lows to address this if we look at the

left side of the structure it is clear

that price experienced an upward

movement until it started to retrace the

highest point reached by the price

before the retracement movement began is

considered the major High additionally

the lowest point of the bullish wave

that in initiated the upward movement

leading to the formation of a break of

structure and a new high is recognized

as the major

low these two points constitute the

major external structures and every

structure formed between them is

regarded as an internal

structure if the price breaks the major

High to the upside creating a break of

structure BOS it signals a continuation

of the

trend however if the price Falls below

the major low we should consider it as a

trend reversal signal signal the

specific internal price action within

the range of external structures doesn't

matter as long as the price remains

above the most recent major low as long

as this condition is met we consider the

market to be in a bullish State now that

we've identified the recent major

external structures these structures

Define the current area of interest and

the current trading range as we see the

price has entered the retracement phase

generating a series of internal

structures particularly bearish

ones subsequently after forming a

bullish internal realignment the price

breaks the recent major High to the

upside establishing a fresh major high

and low the newly generated major low is

this internal low situated at the

extreme this low is considered major

because it is the last low created

before the price initiated an upward

movement leading to the break of

structure you might be wondering why we

don't regard this low structure as the

major low the rationale behind this is

that the low located at the extreme is

the ultimate and lowest point before the

price initiates an upward movement this

particular low is crucial as it is the

key low that triggered the upward

movement and subsequently the break of

structure moving on to the bearish

scenario which is simply just the same

as the bullish scenario initiating the

bearish wave leading to a break of

structure additionally we have a major

low marking the lowest point the price

reached after the break of structure

these two structures the major high and

low constitute our external structures

while everything formed between them is

considered internal

structures if the price breaks the major

lows to the downside creating a break of

structure it signals a continuation

Trend like what we see here however if

the price rises above the major High we

should consider it as a trend reversal

signal in simpler terms the nature of

internal price action within the

external structures doesn't matter as

long as as the price remains below the

most recent major High indicating a

bearish market as the price retraced

upward it formed a series of internal

highs and lows within our trading range

however it eventually went back down and

broke the recent major low to the

downside this internal High located at

the extreme becomes our newly generated

major high this is because it represents

the highest internal High created before

the price initiated a strong bearish

push resulting in a new break of

structure following this the price

retraced once more forming another major

low subsequently after creating various

internal structures the price continued

its downward momentum establishing a

sequence of lower lows and lower

highs now we will delve into another

crucial aspect of Market structure the

break of structure

BOS you've likely encountered BOS in

various trading tutorials Market

structure videos and trading handbooks

for example in a bullet structure is

often defined simply as a situation

where the price breaks a high to the

upside however in reality there are

specific rules and key points that we

must consider to identify a valid break

of structure now let's move on to the

specifics of those key points and

rules a valid break of structure occurs

when the price breaks and closes above

the most recent higher high with the

body of a candle this holds true even if

the price immediately moves downward

after breaking the structure in this

scenario the price generates a new major

low and major High and establishes a new

trading range if the price subsequently

breaks this newly regenerated major low

to the downside it indicates a potential

Trend reversal this shift signals that

the price is no longer bullish marking a

change of

character however if price breaks the

recent higher high with a long Shadow or

Wick and the body of the candle promptly

closes below the range of the high with

the subsequent candle's Wick not

surpassing the first candle's Wick we do

not consider this scenario a valid break

of

structure in this case we regard this

low as an internal structure formed

inside our trading range to identify a

trend reversal signal or a valid change

of character we should wait for the

price to break the major low located at

the extreme rather than Breaking the

upper internal

high now consider another scenario if

the price breaks the recent higher high

with a wick and then the body body of

the first candle closes below the range

of the high with the subsequent candle's

Wick exceeding the first candle's Wick

we can consider it a valid bullish break

of structure in this case we have a

newly formed major High and a major low

defining our updated trading range the

nature of internal price action within

the range of this high and low doesn't

matter as long as the price remains

above our newly generated major low

indicating a bullish Market only if the

price breaks the newly formed low to the

downside we can consider it a valid

Trend reversal signal or a valid change

of character pattern now let's briefly

break down the bearish scenario which is

essentially the same as the bullish one

before using a strategy or setup in a

real account it's recommended to back

test it at least 100 times to help you

with this critical step we use the

trader Edge platform for back testing

our exclusive trading strategies and

setups if you're interested in using

Trader Edge as your back testing tool be

sure to check out the link in the

description

below consider a bearish market

structure to have a valid break of

structure we require the price to break

and close below the most recent lower

low with the body of a candle therefore

if the price breaks the newly generated

major High to the upside we consider it

as a trend reversal signal indicating

that sellers have lost

control conversely if the price breaks

the recent lower low with a long Shadow

or a wick and the body of the candle

promptly closes above its range with the

subsequent candle's Shadow not

surpassing the first candle's Wick we

should not regard it as a valid break of

structure to establish a genuine bearish

break of structure we should wait for

the price to close below the lows range

with the body of a

candle on the other hand if the

subsequent candle's Wick exceeds the

first candle's Wick and closes above the

low's range then we have a valid break

of structure additionally we need to

update our major low and major high as

long as the price remains below our

newly generated major High we consider

the Market's direction is bearish only

if the price breaks the newly formed

High to the upside we are allowed to

consider it a valid Trend reversal

signal or a major change of character

having explored various types and

scenarios of break of structure patterns

and now possessing a solid understanding

of a valid BOS let's delve into another

key factor of Market structure mapping

change of character to identify a valid

change of character the first step

involves determining the General market

Direction whether it's in an uptrend or

downtrend subsequently you must

highlight the valid break of structures

on your price

chart in the bullish scenario imagine

the price creating a series of valid

break of structures this low and high

represent our major structures

associated with the first valid bullish

BOS as previously mentioned any price

action C forming between these two

structures is considered

internal change of character patterns

can be categorized into two types minor

and major for example each time the

price breaks any internal low it

signifies a minor change of character

it's important to note that a minor

change of character alone cannot be

regarded as a sign of a shift in the

market

structure here we facing a common

scenario that frequently occurs in the

market many novice traders who haven't

correctly identified the market

structure often consider this minor

change of character a signal of a

reversal in Market Direction They

believe that the bullish phase has ended

and it's an ideal time to go

short they typically Place their stop

loss just above this internal High

however contrary to their expectations

price after making a brief retracement

went back up and continued its bullish

movement this resulted in hitting the

stop loss of traders who had taken short

positions they often failed to realize

why their stop loss was triggered by the

price and unfortunately they repeat

these actions

repeatedly what they missed here is a

crucial point the price didn't break

this major low over here to confirm a

market structure shift they shouldn't

have entered a short position until the

price broke the last major low to the

downside their identified change of

character was invalid and the price only

was in its retracement phase before

continuing to its primary direction to

obtain a valid Market structure shift

signal one one should patiently wait for

the price to establish a major change of

character by breaking and closing below

the last major low that initiated the

upward movement leading to the bullish

break of

structure furthermore it's crucial to

always remember that in a bullish

scenario a change of character pattern

is considered valid only when the price

breaks and closes below the last major

low with the body of a

candle if the price breaks the most

recent structure with a long Wick or

Shadow and closes within the high's

range then the change of character is

invalid and we cannot consider it a

market structure

shift the same concept applies to the

bearish scenario for a valid change of

character that provides a high

probability we need the price to break

and close above the recent major high

with the body of a candle a penetration

with a shadow or Wick is not

acceptable that's it Traders thank you

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