Advanced Market Structure Course (Full Tutorial)
Summary
TLDRThis 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
📈 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.
📉 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.
🔄 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.
Mindmap
Keywords
💡Market Structure
💡Trend
💡Consolidation Phase
💡Break of Structure (BOS)
💡Major Highs and Lows
💡Internal Structures
💡Change of Character
💡Backtesting
💡Trader Edge Platform
💡Stop Loss
💡Liquidity
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
for watching this video I hope you found
it in formative and useful don't forget
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future videos we appreciate your support
and look forward to seeing you in the
next episode
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