Master Market Structure in 68 Minutes (Step-by-Step Course)

[00:00:00] Speaker 1: Mastering market structure is one of the best things that you can do for your technical analysis. When you're moving with the trend, it's easy to make money. When you're moving against it, you will be consistently killed by the market. Now, I've used market structure as the core concept of my trading systems since I first found profitability about six years ago now. And it's awesome, but it's pretty easy to get wrong. So in this class, I'm going to teach you everything you need to know about market structure so that you can trade it successfully and you don't end up catching falling knives, fighting the market, and getting killed by moving against the trend. So let's get into the basics. Markets move in three main phases: uptrends, downtrends, and consolidations. An uptrend is simply a phase where the market is moving up, downtrend where the market is moving down, prices are getting lower, and a consolidation is where the market moves sideways. And if we averaged it out, basically price wouldn't have made any movement to the upside or the downside. Now, these three phases are going to be the phases of which we are trading. We are going to buy during uptrends and we are not going to sell. We are going to sell during downtrends and we are not going to buy. And when it comes to consolidations, we are pretty much just going to avoid these. We don't really want to trade consolidations because there's no clear direction as to whether the market is likely to go up or go down. And the idea is we just want to move with an uptrend for the duration of the trend. And eventually the market will give us signals that it is moving back. And when it starts to show us that it might be moving down, we stop buying and we actually start to sell instead. So these are the three core phases that you need to understand: uptrends, consolidations, and downtrends. Uptrends are for buying, downtrends are for selling, and consolidation is for sitting out of the market or finding opportunities somewhere else. When it comes to identifying whether a market is in an uptrend or a downtrend, there is, in my opinion, a clear cut and correct way to do this. Now we don't want to use things like trend lines. I know a lot of traders believe a trend line indicates the direction of the market, but the problem with trend lines is actually what you can see just here. Where sometimes a trend line will break, indicating to trend line traders or trend traders as a whole that the market is likely to move down, but then it actually just continues moving up. Now when you think about it realistically, a trend line is just an arbitrary line that you've drawn on the charts and it's not really giving you any clear insight into real price action. So instead of using tools like trend lines, we're actually going to look at the real price structure, which means when we're looking at a market, we want to view the highs and the lows and they indicate which way the market is going. So it's the most realistic, the most raw way of looking at which way the market is heading. To do this, we use concepts we call high and low structure, which is essentially what you can see on the chart here, higher highs and higher lows indicate an uptrend. So where you can see I've written HH, this is a higher high, and this is simply a high that is higher than the previous one. Okay. So as you can see, we are continually forming higher highs in the price structure here. Obviously this is an example, but you'll see this on a real chart in a moment, which tells us that this market is endlessly moving to the upside. It keeps going higher, therefore indicating an uptrend. Now, in order to maintain the uptrend, we also have higher lows, and this is showing that price structure, each low like this one is higher than the previous one. And this one here again is higher than the previous one. Now this is how we validate the continuation of the trend, because the higher highs are obviously what leads us into profitable moves if we're buying the uptrend, but the higher lows essentially protect the integrity of the trend. Providing the market continues to make higher lows, then this market should indeed continue moving higher. And the idea for us as traders, which we're going to get into soon is to buy around these higher low points to catch these larger moves. The reason higher lows are important to kind of protect the integrity of the trend is because what can happen is that the market can come down like this and push through a higher low. Now this would then create a lower low, okay, because this low that we've just formulated at this level is now lower than the previous low, which was indeed a higher low over the previous lows, right? So keeping it simple there, essentially this low is lower than the last one, which tells us that the integrity of this uptrend is now broken because the market is showing willingness to push lower than previous lows that were printed in the market. So what would this lead into then? Well, generally what we see after the formation of a lower low is the start of a downtrend. So this lower low might then be followed and often will be followed with a lower high, okay? So we can mark that as an LH. This lower high is simply a high that is of course lower than the previous one, which is this one just here. This tells us that the market is actually now starting to trend downwards and instead of moving up and instead of looking to buy because we're expecting it to move up, we would now shift the narrative and what we would hope to do is see a pullback or retracement as that's also called to sell in and around the next lower high. We're expecting from this point onwards for new lower highs to fall and for the market to continue moving down. So that is kind of how we see trends using highs and lows and the simple price action way to view the changes in the trend. Now let's lock in on this phase of price action on euro swiss franc. This works on all markets on all time frames. We're going to go through that high-low structure and mark out this trend. So from where we are going to begin, we're looking at pretty much this high and then our swing low of the entire movement is going to be down here and then our swing high of where price currently is is up here. So we're going to work out the trending direction between this area of price action. So the first thing we can do is just use this path tool to start plotting the trend. We have our high, here we have a low, however one thing I want to draw your attention to is this low did not push beneath the previous higher low. So this phase of price action following to this move and then down to here is actually just consolidation. Okay, because we didn't break through a higher low, the higher low being this one just here initially, we haven't yet validated or changed the trend at all. So this would be a consolidation. Now we can then see there was a push down here. This pushed us through into a lower low. So this is actually the beginning of a downtrending phase of price action here. Okay, now from this lower low, the market comes up and creates a high. Guess what? This high is lower than the previous high. So this would be a lower high. The market then comes all the way down very quickly to this level and prints a lower low. Okay, so now let's mark those on. We have a lower high, which is lower than the previous. Now we do also have a lower high just here, which was then validated with the breaking structure that appeared. And then we have a lower low once again. So we can see that each of these lows and each of these highs is lower than the previous ones that the market printed. So we can remove this for now and just focus on that structure. Okay, I'm going to mark this as well. We have a high. Then we have a lower high, lower low, lower high. Note how we didn't mark this low. It's because it's not a lower low. This low was lower. So this is actually still a higher low until we break this point, which creates the downtrend. So following on from this lower low, what we actually see from the market is a push to the upside just here where this high is actually higher than the previous. So this is a higher high or once again, a kind of transformation point for the market where we're shifting from moving down to now potentially moving up. So in real time, this would be your validation or your kind of confirming factor to tell you instead of looking to sell this market, you might now want to start looking to buy. We can then see from that point on using the path tool. So our new trend looks like this low to high. Then we come in and we create a low here. We don't actually make a break all the way through until this point. Then we come back down and we create a low around these points, which is then followed by a pushup, which pretty much takes us to where we are now. So to plot this trend out, we can see there is now a higher low, which is higher than the previous low. We then see there is another higher low printed around here. And we can see that there is a higher high printed at just this level when the market made its drive through the highs, just that creating a high that was higher than the previous one. So now let's take a look at what this looks like on the chart. We're going to run through it with the path tool. So you see the full explanation from the high down to the low is essentially the major first move. This is where we created our first downtrending price action. But to really refine it in, we have this consolidation followed by this push down, which creates a lower high and validates it with a lower low. The market then comes and creates a lower high, pushes down, validates it with a lower low. The market then pushes up to create a higher high, pulls back down to validate it with a higher low. Then we have this run to create a higher high, which is higher than this previous one. Then we come in to create a higher low and push up to create a new higher high as well. Okay. So that is the overall refined view of the trending market. And this is a market that's shifted from downtrend into uptrend. And you can see both of the directions there and both of the trends laid on that. Now, one question you might have, of course, because you can see I've averaged out the price action here, is why aren't we accounting for this area, for example, as lows? And that is because, of course, this did not create a new higher high. So essentially, any price action that takes place underneath this high is then just consolidation again. We've created our low at this point. We created our high at this point. So anywhere between these two red lines is sideways price action. It's only when the market breaks out above this high that we actually validate this higher low and can then start looking at new higher lows and higher highs. Okay. So if we don't create a new higher high, then the higher low is not going to be valid. Meaning basically this is the lowest point we reached before we broke through here. Therefore, this is going to be our higher low. If the market had pushed up like this and then pulled back and then pushed to this level, then this would indeed be our higher low. But for the given example we're looking at, we like to average out and see things for just the simple individual highs and lows, which in this case is going to look like this. Okay. And then on the down trending move, we have consolidation move. But then this is where our trend begins with our high down to our lower low, then to our lower high, then to our lower low. So that's an idea of structure mapped on a real chart. Obviously, as you can see, it's not as clean as a diagram, but this is what you're going to be working with. So we are going to look at a fair few chart examples throughout this class. So you can see this in real markets as well as, of course, the diagrams and explanations we give. So let's move on. All right. So the next thing to talk about is impulses versus corrections. Impulses and corrections are the two phases of which markets trade in when they are in a trend. So during an uptrend, which is going to be pretty much all of the price action from the low here up to the very high in the trend, there are going to be two types of move in each of these little pushes we get. Impulse moves and correction moves. An impulse move is the pro trend move, which essentially means it's the move that creates a higher high or in a downtrending scenario, it's the move that creates a lower low. So the impulse moves actually decide the trend direction, right? If we get a push from here down to here and it pushes through a higher low, creating a lower low, that's actually an impulsive move, which is now deciding the direction of the trend. Now with this next move again as well, we have this lower high down to our lower low. And as you can see, this move pushed us through a previous low. So that makes it an impulse move, right? So the impulsive moves are essentially the movements that push price over highs or beneath lows. We can see here, we have a high, then the pullback, then the impulse move is the one that pushes us to a new high. So an impulse move will push us past this level, and that's going to create the new pro trend movement essentially. So the impulses mapped out on this chart are pretty much all of the the ones we have now marked along with this one here. These ones, so one, two, three, four, are bullish impulses, and they are pushing us into new highs, confirming the existence of an uptrend. For the bearish impulses, we are looking at this one and this one, because this one here pushes us from a high down to a low, which is lower than the previous low, crafting that lower low, therefore breaking us through a low, becoming an impulsive move. So the impulsive move basically determined the downtrend here, and then following the impulsive moves will continue the downtrend. Now if the market created this low, and then had a push all the way back up like this, which pushed us over this lower high once again, and actually created a higher high, then this move would be the impulse move to a new uptrend. Okay, so that's impulses. The second type of movement is corrections or corrective moves. Corrections are the pullback moves. So a pullback is essentially where the market is slowing down temporarily, and making a movement kind of against the overall trend. Now this happens because of course, buying is very strong in these impulsive moves, but people are going to take profits, some people are going to sell. So we get this kind of alleviation for the market where weakness comes in for the short term, until we see a price where traders are happy to buy in mass again, then we get that new impulse. So corrective moves are basically contained within the high and the low of each of the impulsive moves. You can see the low of the impulsive move is there, the high is there. The corrective move does not break above a high, and it does not break beneath the low. All it does is pulls back inside of the range of the larger impulsive move. So you can see that's what's happening with every single one of these corrective moves. Okay, so a corrective move is basically counter trend. If we are in an uptrend here, overall, so this averaged out is going to be a pretty clear uptrend. Let me mark that on. We know the impulsive moves are therefore going to be up or pro trend moves, and the corrections are actually going to be going down. So they counter the overall idea. Okay, they are essentially retracements or pullbacks or phases where the market is going in the opposite direction to the overall bigger trend. Now in the downtrend where we have bearish impulses or downtrending impulses which are continuing to push the market lower, the corrective moves are going to be pulls back to the upside. So any short sellers who are profiting from sell moves are going to buy back their contracts, which is how they close them to take a profit. That's going to inject small amounts of buying pusher into markets around new lows, which will create these corrective moves, pulling back. So we call it a correction, a pullback, or a retracement, either or any of those. And then when we reach our new lower high point, then we will follow through with a new impulsive move. Okay, so impulse moves are pro trend and corrective moves are counter trend. Okay, and it's important to understand these phases because we are always going to be looking as to whether the market is continuing to make bullish impulses or whether it breaks into bearish impulses. Now if we track the impulse moves, that is how we determine whether the market's making new highs in an uptrend or whether it's breaking down into new lows in a downtrend or once again whether it's going to be breaking from a downtrend into an uptrend by making a new bullish impulse. So it's important to understand the concept of impulse and corrections. Now another use case of these impulse corrective moves is these corrections which in the uptrend are going to be pulls to the downside are actually where we want to buy. Now if we want to buy a market that is continually moving up, it's ideal for us to be able to buy as low as possible because of course the lower price we can get in at, the more profit we can make when the market moves to higher prices. So what we don't really want to do in an uptrend is end up buying up here. Okay, we don't want to buy at these levels. We want to buy as low as physically possible in each of the moves. So if we see the market push up like this and it creates a new high rather than buying here we want to ideally be able to buy somewhere in the corrective move. That way not only do we profit on all of the movement that happens above this level but we can actually profit on all of the price movement that happens as price re-approaches a previous higher high. Okay, so we get the biggest profit potential by buying from the corrective points or the corrective moves in an uptrend and the same goes for a downtrend. If we can sell around the high of the corrective move then we get the biggest profit on a short trade which is basically where you profit when the market falls by getting in here and managing to catch the entirety or the majority of the downward impulsive moves that then occur. So now we've popped back over to our euro swiss franc example and we're going to mark the impulses and corrections on this chart. We're going to start with the impulsive movements on this phase of price action from the very beginning. So we have a low here which is then pushed up and it's pushed us over the previous structural highs. So from here to here is our first impulse. Okay, then we can see the market pulled back however it failed to break through the low. So therefore this is going to be a corrective move. So let's mark them different colors based on the trend. Green, that's going to be our impulse. Red, that's our correction. Then we have another push to the upside here creating a new high ever so slightly. That is going to be our impulsive move and then the market comes back and creates a bearish corrective move. Why is this a correction? Again, because it didn't break us through any significant lows. In order to change the trend we would have needed to see a break of this low here. Okay, so then we get another impulse to the upside from this low to this high. That's going to be an impulsive move or a pro trend move. Now, this is where things get a little bit messier and this is good to show you. This move here although it did eventually follow through into a lower low in real time would have been seen as a corrective move because of course we can't see that the market was going to move into a downtrend. So we would essentially be looking at buying this level in anticipation of the market then moving higher. Then what we actually saw from that point was that the market didn't push higher. It ended up pulling back here. So this move realistically is just going to be seen as a consolidation move and that goes for basically both of those pushes there. From this point to around here the market didn't get anywhere. It just failed to make a new low, failed to make a new high. So this is a consolidation or a phase of price action that we would generally want to not trade. Now we then do get however from this high down to this low an impulsive move and this one can be classified as an impulsive move because it broke through a previous low, right? We see that we had this low marked up just here. This low was broken with this move down. So that creates a new bearish impulse or basically makes this push down a bearish impulsive move or a downtrend impulse. So that would then lead us to kind of shift the narrative. We're not looking at bullish impulses and bearish corrections anymore. We're looking at the impulses to be the large down moves and the corrections now become the shorter pullback moves. So this would be our corrective move. So what we can do is make this one green so you can see this is an impulse. Our next correction would then be up to this point. Our next impulse would be down to the low just here. But then we have a pretty immediate market shift. So from this low up to this high is also an impulse. And the reason that this one is an impulse is because it has created a high which is higher than the previous high, okay? So we have impulse, correction, impulse, correction, impulse. That's an uptrend. We move into a bit of a messy phase of consolidation but then we make an impulse starting a downtrend. Correction, impulse, continuing the downtrend but then we are immediately followed by another impulse which pushes us back into new highs therefore validating a new uptrend. So the next corrective move is going to be a bearish corrective move which is the pull down from the high that we've just marked down into this low. This is our correction because the market is now actually moving to the upside. It's bullish, okay? So our next impulse will then be from this low to the formation of a new high which is going to be this piece of price action here. So that's going to be our impulse. Then we have a correction, corrective move down to this low, followed once again by an impulse which pushes us higher, okay? So that's a view of the impulses and corrections on a real chart. You can see that the market is initially bullish so the impulses are making new highs. Then we have an impulse move that makes a new low which makes the market bearish or downtrend. Then we have an impulse pretty quickly that pushes us back into the uptrend and the market phase continues from there of continually making higher highs and higher lows. So let's plot this on real quick. We have pretty much from this point onwards that is an uptrend, okay? So this phase is uptrend. We then have from this low up to this high which is also going to be an uptrend. So let's make these green as well just so that we are very clear on that. Then we have the consolidation which is pretty much nothing happens at this phase. We're going to leave that grey to indicate no direction and then from the high that we print pretty much there down to the low just there. We're going to mark that out as a downtrend because that is where the market was shifting to the downside. So now you can see how we've formulated the market direction by using high low structure and then we've also plotted them as impulse corrections so you can see what that would look like. Now I know this is rather messy. Don't worry, your analysis is not going to be this messy. I'm plotting this on to show you the theory, okay? We'll keep it simplified when we get down to some chart examples in a bit. Okay, so we've been through high low structure. We've been through uptrends, downtrends, consolidations. We've talked about impulses and corrections. Now let's talk about break of structure or BOS. Now a break of structure is simply a tool or pretty much a markup that we use to determine where the trend has broken. So a break of structure is pretty much every time a new high or low is broken we envision that as a BOS or a break of structure. It's simply because the structure has now broken in one direction or the other, okay? So we have the high printed here. When the market comes up and prints a new high that creates a break of structure and the break of structure takes place at the previous high, pretty much at this point here where the market pushes through, okay? So that would be a break of structure. We also see another break of structure here when the market pushes through the previous high. Why do we call it a break of structure? Well because the existing structure is breaking into a new high or a new low, right? Now we use this BOS tool to kind of simplify and envision where the breaks are happening to keep us in line with the trend. You'll see later in the video how we use this to create confirmations and formulate real trades. Now I indicate breaks of structure both ways. There's also something that people use called a change of character. So it's actually called a chalk or a chart or something like that. In my eyes, this is nonsense terminology and I'm not going to use that. So if you've used that before, I just call it a break of structure just so you don't get confused through the video. If you haven't, you can use it if you want, but I just prefer to view things as what they are. So I mark then the level here where the market pushes from higher highs and higher lows into its first lower low as again a break of structure. What we've actually seen now though is a reversal break where the market initially these breaks of structural BOSs were bullish. We were seeing bullish breaks into new highs. Now we've seen a bearish break of the structure into a new low. So this BOS here indicates a trend reversal. Now as you can see this high where our break of structure could potentially take place if the market pushed higher, it doesn't take place. Okay, we don't get a break of structure there. Instead what we get is a push through the next low, which then again creates the next break of structure or in this term creates a bearish impulse and validates continuation of the downward trend. So breaks of structure are essentially taking place at the points where highs are breaking into new highs or where lows are breaking into new lows. And these things are going to be pretty much how we indicate which direction the market is going. We're going to use them for trade confirmations and just making the analysis clearer. You're going to see these a lot more, but that is what a break of structure is. And some people will call this one a choc, choc, change of character, whatever. I don't do that. If you do, you can continue to. But throughout this video, you're going to see this indicated as breaks of structure instead of that. Okay, so let's move on. So in a simplified manner now, we're going to run through this little phase of price action on Australia dollar, Japanese yen and mark out these breaks of structure. So we're going to begin around here. We have a high pushed down to create a low, a lower high, and now we've pushed down to create a lower low. Now, until we break this high, we are not really changing the trend direction because of course the market could pull up to pretty much here, but still keep moving down. The reason for this is the market here did not make a new low. So this is still a valid low and anything that happens between basically this level and these levels here is just consolidation. So this entire move becomes a consolidative move. So what we would do to approach this is mark a BOS line on around this height. We can just put it there just to keep it nice and simple. And then we would have a BOS line that we could mark out here. If the market was to push through this low, that would create a break of structure upon the push through, which would continue the bearish move. But what we did instead in this example was push to the upside, which at this level where we start to close above the previous high creates our first BOS. So the valid break of structure or BOS is this one here. There's no break here, so there is no BOS there. From that point onwards we created a new high, we then came down created a new low, and we pushed up to this point which created once again a new high. So at that point we see a clear BOS. We see our high printed there, we can drag that across and you can see the structure being this high has broken into a new high. Okay, so that's going to be our next BOS. Now at this point our valid low is this level. So we've got two opportunities from pretty much this point onwards in price action. Either number one, we create a new low, push higher, indicating a break of structure and continuation of the uptrend. Obviously you can see that is what happened, but the alternative would have been if the market had pushed down, crossing through this level would have created a BOS here, and that would have indicated further downside or the start of potentially a downtrend, which could push us into bearish impulses. Okay, now obviously as you can see with the benefit of hindsight here, this market pushed into a new high, creating a break of structure at this level here as the market pushed its way into a new high. So what this does again is now creates a valid low. This is our higher low, we know that because the market's gone and closed higher, so this would be our BOS point, right? If the market was able to push through this level, that would indicate a downward trend. What we see happened is we pushed up, we pushed down, we stopped there, we pushed up and created a new high. So what we've got now is a new higher low, which we can pretty much put in around this point just here. So from this point up to here, that's going to be our break of structure at this level. And now again, we've created two levels to work with either we push up, pull back and then push up again, creating a new high, or we come and push down and break through this low, which would indicate a downtrend beginning. Okay. So from where we are, which is here, we now see the markets pushed up. It did come down to break through this low, but it only broke with a wick. And we're going to get into this very soon. I want to just briefly mention it now, but if you see a wick like this, we don't really use this as a valid closure or a valid change in the trend. Now, a wick, the little sticks coming off the candles, what that indicates is rejection of price action. It's the candle bodies or the big blue and gray blocks that you're seeing that indicate confirmation. So if we wick under a level like this, that's not necessarily telling us that this market is going to be moving to the downside immediately. Sure, the fact the market got down here could be indication that maybe the trend changes soon, but it's not really going to validate a change in the trend until we see confirmation with closures. So following this push lower, we then have a push higher, which pushes us over our previous high. However, once again, these are just wicks. So pretty much from this low all the way up to this high, we now have a little phase of kind of no man's land where we haven't closed above. We haven't closed below. What we've just done is create a wick beneath and a wick above. So that actually puts this bit of phase of price action from here through to here into what we call a consolidation. And until the market made a closure one way or the other, we wouldn't have validation as to whether the market is going to continue moving up or whether it's going to start moving down. Now at this point, obviously here we created a break and close and that went underneath our previous low. So just clean this up a little bit. Our previous low that we had marked was pretty much these levels here. And as you can see, this push created closures beneath that level. So therefore, this would become a BOS or break of structure because we've seen closures underneath the level. And this is maybe first indication that the market is now moving in a downtrend, which as we can see, it's kind of what it's doing because it's pushed us through to the next lows as well. So by marking the BOSs and marking the swing highs and lows and waiting for a break of structure either way, we basically get validation of whether a trend is going to continue going up, continue going down or reverse to the other direction. Here we had our first break, which came in at this level here. That indicated an uptrend where we had bullish impulse, bearish correction, bullish impulse, bearish correction, bullish impulse, bearish correction, bullish impulse, bearish correction. Then we shifted into consolidation. The market did nothing, but eventually it broke through. What's this break? Well, this, considering it's now broken through a lower low, has become a bearish impulse. So now we could look for bullish correction, bearish impulse, and so on and so on and so on. That would be the first indication that this trend could potentially be changing direction. So that is how we plot BOS on the chart. And really, it's just for number one, confirming trend directions. Number two, keeping our structure analysis pretty neat. As you can see, this compared to what we did before with drawing the impulses and drawing the HHHL structure on the charts, it was a bit of a mess. But this is very simple and easy to work with. We can see from this point onwards, if the structure breaks here, we go up. If it breaks here, we go down. If it breaks here, we go up. If it breaks here, we go down, et cetera, et cetera. And it gives us a clear way to understand which way the market is going and a clear way to react to the breaks in structure that we may see, whether they are up pro trend or down counter trend and the start of a new trend. So now we've taken you from no understanding of structure through to understanding impulses, corrections, how to determine uptrends and downtrends by using high and low price structure and how to identify and indicate breaks of structure, which will either continue moving the market higher or lower or indicate reversals as we see here. From this point, you've pretty much got everything you need to build the foundation of a profitable market structure trading strategy. Now we're going to talk about some traps and nuances and mistakes that people make before going on to showing you how to profitably trade using the structure theories we've discussed so far. So the first big mistake that a lot of traders make with structure is getting the internal structure wrong, right? Now internal structure is anything that takes place inside of basically one of these impulsive moves. So our impulse in this example is from this low up to this high. Anything that takes place under this high and above this low is called internal structure. So the market can do whatever it wants unless it breaks out one side or the other. There is no real shift or no real urgency for us to start looking for positions and any trades we do take are going to be kind of lower probability because they're not moving with the larger trend. Now the mistake that people make in regards to internal structure is they will see a high forms and then we get a little low which is internal. We get a new lower high also internal and then when the market breaks through this low for example traders will then see this here as a break of structure and a confirmation of this market going lower. So they will start looking for selling opportunities thinking because the structure is broken here we've actually seen a change in this upward trend. Now you may already be able to see the problem with this and that is because with it being internal structure we still have a clearly intact uptrend. We had an impulse, we had a correction, we had an impulse and now anything that happens here whether it does all of this crazy price action on a lower time frame is still just a corrective move and the market can then still and probably will still go and push up in line with the larger uptrend. So if you start selling after an internal break here, let's say you sell from this high when the market pulls back, well what can easily happen is that the market just pushes through into its next impulsive move and you end up getting killed on the sell because you've sold into a market that hasn't actually indicated a break in structure at all. Now what we could see which would make this better would be if the market had pushed up like this and created a new higher high okay at this level well then that would have number one created a break of structure here indicating a new impulsive move which would then have created this price action of impulse correction impulse and then if the market had pushed down through this low that would be indeed a break of structure which would be a bearish impulse so we would be well within our right mind to sell from here on out because we would have actually seen a clear break of structure where bullish impulses are breaking into bearish impulses but when you start to see the market like this and you treat this as a valid breaking structure well now you've got a problem because this here is not a higher high all it is is a piece of internal structure that really doesn't tell us much of the story and if you start selling into that well then when the market breaks up to make a new impulse you're going to lose and you're going to be confused of why it happened but hopefully not now that i've explained that so making sure you don't get caught up in the internal structure and make sure you're only working off of the clear high-low structure of the market is a very simple way to avoid one of the biggest traps and biggest mistakes people make with structure right now i want to show you that on a chart because i think this is going to resonate with a lot of people who have been into structure trading before or currently and are struggling so if you take a look at this chart here we've seen a break of structure which has taken place over the previous highs this being the break and this being what some people will see as a higher high so seeing this price action on the chart a lot of people are going to look for buys when the market pulls back so they might look for the retracement with the expectation to then continue buying this because they see well this is broken structure which has pushed us into an uptrend okay you can see that there is on the surface a break of structure here over this high and over this high now the problem with this is there is actually no clear break of structure here although it looks like there is it's a bit of an illusion because if we look at the low that's been printed by price which has taken place down here we can now see that realistically everything that happens above this low is just internal structure if we look at our impulsive move it begins here and it runs all the way down to here there is then nothing which has indicated a new break and change in the structure so until we push over this high there is no change in the trend and all this is is a corrective move that is likely to then follow through with a new impulse so although it looks like when you look at the structure we see okay we've had a break of structure we're happy to start buying realistically there is no reason to do that in fact if anything you should continue selling because there's been no change in the structure other than this small kind of internal structure meaningless pullback move so if you were tricked by this and i know a lot of traders are this is one of the biggest problems with structure then you're going to be drawn into buying when in reality what happens is the market just makes its next impulsive move and pushes into new lows so what would have fixed this well rather than creating our low and then just trending up like this if we had instead created the low here pulled back to these highs then created a new low and then pushed up above the structural highs that would be a valid break because we'd have actually seen the impulses changing direction but because we didn't get that this is indeed still just a corrective move and is unlikely to lead into a large reversal so therefore should be approached as just a correction to sell from into further bearish impulses the next big mistake that people make with structure and this one's a really easy fix is failing to differentiate liquidity sweeps to breaks of structure now a liquidity sweep we're not going to go massively in depth on the topic of liquidity in this video but there are many classes on my channel but a liquidity sweep is basically where the market will push above or below a swing high or low take out liquidity which is essentially orders and then reverse sharply in the opposite direction as we can see when we look at of course the low we just drew on here and the high that we have up here so we see a push beneath the swing low and then a sharp reversal we see a push above the swing high and then a sharp reversal so although on the surface these may look like breaks of structure because the market has pushed through this level it's actually not it's actually pretty much the opposite and is very likely to move against you so the way you can differentiate between actual breaks of structure which are going to lead into you know new moves and the liquidity sweeps that are going to lead into sharp reversals which will kill you is to look for closures above or below structure so we can see at this low we had no candle closure and the candle closure by the way is simply when we see a large candle body like this close through a high or low so if we look at this previous break of structure we have a high low and then the break of structure which takes place here is a closure we see a candle close higher than the previous high that is going to indicate continuation of the trend when we look at this potential reversal though we actually see no closure under this low we see a wick instead wicks indicate rejections or rejected and attempted price action bodies indicate confirmed and closed price action so if we see the selling rejected at this level what's that telling us that's telling us buyers are too strong for sellers to get down there so the next likely move is we go all the way back up and carry on in the uptrend so by seeing a wick here you know do not treat this as a break of structure this is instead a liquidity sweep the simple rule you can follow is if there is no candle closure above the level don't buy if there's no candle closure beneath the level don't sell don't expect that to lead into a new trend you have to see closures such as we validated the breaks here when we started to see candle closures at this area over here okay that would be fine but until we get a closure as long as it's just wicks treat it as either consolidation or no confirmation of reversal so we can see again after we pushed above this high no closure no closure and then the market went for a sharp reversal if we'd have seen a candle body close above this level that would have then indicated that we can start buying pullbacks but because we didn't get the closure because we only got the wick we see this as a sweep of liquidity or a sweep of the high and low instead of a closure and confirmation of continued trend so make sure you're waiting for candle closures and not trusting wicks because if you trust a wick as a break of structure you're going to get killed a lot of the time so we've discussed pretty much everything there is to talk about in regards to structure and now we're going to learn how to trade it and the most simplistic way to trade with market structure is by introducing a concept called supply and demand okay so what we have here is a diagram of an uptrending market we have higher highs and higher lows the market is impulsing to the upside and then there are bearish corrective moves now when the bearish corrective move bottoms out we create here what we call a demand zone the demand zone is basically an area where significant demand has come into a market or in other words where significant buying has taken place now when we see a large impulse like this this is driven by institutional buying okay the big push that breaks us into new highs is basically banks and trading firms placing significant orders which is big enough essentially to drive the market okay the more people that want to buy the higher prices go because the more sellers can demand for the asset that's why they go high so more people that want to buy is pretty much equivalent to the demand to buy so another way of saying more people want to buy is saying there's high demand okay there's a lot of demand for buying this asset when we see a corrective move bottom out we then see what we call a demand zone a lot of the time which is basically a area where the market has very temporarily gone sideways or consolidated before a large impulse to the upside this tells us that this is a good place to buy and basically the concept will then be if this is seen as a good place good price level to buy at when the market returns to this level again we are likely to see more buying taking place okay if there's a discount and then things get expensive and then it comes back down to the discount and you want it well you're probably going to buy it down there so that is what supply and demand is now this is demand the buy side on the sell side it works the exact same way except what's happening here is the institutions are injecting significant amounts of supply into the market so that is why we call it supply instead of demand obviously this is then seen as a premium price to sell if the market retraces to it and you want to sell your assets well the more you sell it for number one the more profit you make if you are in a buy trade number two the better price you are in at if you are looking to short the market okay so that's the supply version let's focus on demand for the moment then so what we often see within the market when we're looking at candlesticks is we have our demand zone push away and then the market pulls back retests the demand zone and then makes its next push away now it's not always going to come back sometimes it's just going to come to there and then run away and you'll miss that trade but it's the most simplistic and effective way to trade the trend using market structure by just looking to buy demand zones and sell supply zones so in this example then following on we had a demand zone impulse correction retest of demand zone this is where we want to buy then following that point we have had a demand zone impulse we would now look for a correction and our demand zone is where we would want to buy again okay so we would essentially approach this market by buying this level stop loss beneath the low of the zone and then we can look to continue the market higher because we know with an uptrend intact it's likely that we're going to get new highs once again right so that is the simple supply and demand way to trade that's demand for uptrends you only want to trade demand and uptrends and you only want to trade supply in downtrends okay and this is simply going to be the same but you're looking to sell the market instead of buy all right so this supply and this supply become good selling points right let's take a look at this on a real chart so we're doing a bit of replay and we're looking at nzdjpy 15 minute time frame but for reference this will work on any time frame you want to approach the market from so at this point in time we are looking at a downtrend we've seen the market here create a high then we've pushed into a lower low then we've created a lower high we've pushed again into a lower low and a lower high and now we push lower once again so we are now in a downtrending move right just to draw that out for you we have this kind of price action and we are currently trading down here now we can see this downward move this break of structure was created by a supply zone here and to show you how i plot supply i simply use the last candle before the impulse that has imbalance so don't get confused i'll break it down for you now we see this candle here this gray candle this is the last candle before the impulse to the downside okay so that is why that will be the supply zone simply the last candle essentially before the push begins so to show you a couple more examples we would have this gray candle here this is the last candle before an impulse to the downside that broke structure therefore that is going to be the supply zone as you can see if you'd have sold that supply you'd have caught a very nice entry to that move okay now the imbalance point i just made an imbalance is simply an open candle range so when we look at for example the supply zone we're currently focusing in on we can see the wicks of these candles here go up to this point but don't go into the supply zone so that creates basically in this area here what we call imbalance right there is no wick filling this zone so if this wick had traded in that would have created efficiency or balance therefore we wouldn't have any imbalance therefore this supply wouldn't be of interest to us but because there is still this open price range between these wicks and the wick of the supply zone there is basically a draw this is going to act as a magnet that pulls price towards that level so this is therefore a level of interest now that is why we are not going to be interested in for example this which is a last candle before an impulse why is that well because this one has already been hit so this could have provided its own trade but we are kind of past that point now there is no gap between this week and the candle that we're looking at as our supply therefore there's no real reason to focus on that level okay again here we have supply but there is no imbalance there was initially between this candle and this candle but the market's filled this now so there is no imbalance there for us to focus on therefore making this one irrelevant as well so the zone that we're looking at here is basically the last imbalance point in this leg of downward price action right nowhere in balance down here anymore the only imbalance left is up at this point so with this being the last candle before the impulse and with it being an imbalanced supply zone we know the market is trending down we have that clearly mapped down correction impulse correction impulse we would then want to look at this supply zone as our selling move okay so providing we don't push above the high around here or even in this scenario around these points we should remain bearish therefore we could confidently sell this supply with stop losses above those highs and expect the market to at least come down towards this low again right so a simple way to approach is simply to target the low that's been printed in the market now you can actually extend trades further because you're pro trend trading so if you wanted to and you expected the market to keep going you could extend the target further but for simplicity's sake we're going to look at it like this and actually map just a target down into the low all right so generally then what we would expect to see is for the market to return to the supply zone and then lead down in an impulsive move to create a new low which would then open the doors to the next opportunity right again with this push down that we've now seen we could look at the last candle before the impulse down that's going to be up here for this example so this would be where we would look to sell the market all right so if you were following this simple trend trading system you would have your entry around the supply your target would go down into the swing low here and then you would just look to sell that market when the market returns to it now obviously there are nuances you can use confirmations and things like that but we're keeping this lesson on track on topic to market structure so we're going to just follow this simplistic approach market returns to that we are then hoping to see the market sell off and as you see in this instance it didn't happen so what we get here instead is number one a losing trade so that's going to be minus one percent when we factor that up though we have a minus one percent trade here and we have a plus 3.94 percent trade there so in total over these two trades you've made 2.94 percent even though you've only won one and you've lost one okay 50 win rate you're still up three percent just over two positions now this is where the real beauty of trend trading kicks in let's think about what this has actually told us although we've just lost a trade the market has broken structure we've seen a push which has created a bos over a previous structural height so let's map that we're up 2.94 so far and what we've actually done at this point in time is reshift the structure from down to up so if we continue this structure mapping we've got one impulse correction impulse correction impulse correction impulse now we've had another impulse okay so we had some internal structure mess around and then we had a big push to the upside which has created an impulse what has this impulse done this has given us a higher high a higher high indicates the market is likely changing direction so what do we do from this point on well first of all that's going to be the low that we're focused on if the market pushes under this low that would actually shift us back into downtrend but providing we stay above that low we can actually now look for buying moves so what i'm going to do here is mark out the demand zone which is the last candle before the impulse which has created this break of structure so what we would now want to do is place our buy orders here stop loss under the low and then we could target the newly formed high or we could extend that target even further because we now have a good idea and a good understanding that it's quite likely the market will retake this high given that it follows the standard trend structure of let me just map it out low lower low lower high higher high confirming trend reversal we're now looking for a higher low to take us into higher highs so the no-brainer trade is the one we have mapped here now let's give this a moment and see how this goes so we see internal structure market's not really doing too much at the moment then we come down into this area of demand so the trade is then going to be triggered at this point now you're in a position where number one the market goes up and you win number two the market goes down and that's going to reshift the trend and provide you with a new opportunity to go the other way and sell okay so the goal with trend trading is not to be right all of the time nothing in trading is going to make you right all of the time the goal here and with pretty much every form of trading is just to have positive risk reward and positive expectancy meaning we can be wrong on 50 or even 60 percent of trades but the ones that win are considerably larger so if we take a look at this we've had a 5.42 percent win there at one percent risk we have 2.94 percent 5.42 percent we're looking at around an 8.3 ish percent return over these positions so we have one loss two wins decent win rate but nothing crazy 66 percent and we've actually made 8.3 percent in just three positions by using this simple supply and demand method in line with market structure so it's incredibly simple but this is how we start to turn market structure theories into actual trades now there is an extra way that you can double confirm trades if you feel a little bit nervous placing sell orders and buy orders on these supply and demand zones this is what we call a standard confirmation entry now in this market we can see there is a clear downtrend at the moment we created our low lower high now we've pushed down with a massive impulse into a new lower low so if this high around here breaks that would push us back into an uptrend because that would create a impulse which was bullish but providing we stay underneath this high we would be creating a lower high therefore we'd have good odds to sell this market down back towards the lows okay so an immediate trade you could do following the method we just discussed would be a short position or a sell trade you'd sell supply with a stop loss over the high and your target would go down into this low now this of course is what we just discussed this would be a fine way to approach the trade however psychology plays an important role in trading and some people are going to be a bit too scared to go placing buy and sell orders on supply and demand zones like this and sometimes you might have a couple of zones that you work with and you're not sure which one's going to be the one that's going to create the good move so this is where that standard confirmation comes in okay now a standard confirmation is simply a price structure reversal that happens on a smaller time frame to the one that we've prepared our idea on and what it looks like is this that i'm drawing on the chart right now we have an area where the market is going from higher highs and higher lows breaks down into a lower low and then we just simply look to use a supply zone up here to sell the market when it returns to this level we would generally look for these patterns inside of supply and demand zones that we're interested in buying or selling from so in a sell scenario we have our supply zone we know if the market gets into here we've got good odds of selling so we would then look for this pattern on a lower time frame once the market has hit this supply zone and if we see that so essentially what we're looking for is a movement like this that's going to give us the indication and the confirmation that we need to basically double confirm the trade and give us maximum confidence on this position which gives us the benefit of being able to execute it without worrying and essentially then you will look to get in at this point at the top of the smaller corrective move after this lower time frame has also created a break of structure now this market did provide this opportunity so let's take a look at that now we're going to drop down to the five minute for this one we are now looking for that standard confirmation that we just discussed once the market has hit this level of supply okay so here you can see we've had a push up high pull back higher low push up higher high pull back lower low so here we've had a break of structure on a lower time frame okay the break came in here when this candle closed beneath this previous higher low so you can see that kind of we get a trend inside of a trend right although we're looking at an overall downtrend we can see that there is kind of its own uptrend on this lower time frame so what we're looking for is this uptrend to also shift into a downtrend because then we have high time frame and low time frame agreement right when you get high time frame and low time frame agreement you have the best odds of success in a trade now what we're looking for is a supply zone with imbalance we can see here this blue candle which is the last candle before the impulse the last candle that goes sideways before the push down right still has some imbalance in it between this wick just here okay so therefore that's going to be our area of interest we can sell there stop above the high now realistically you can put your stop loss above the swing high if you want to be safe though you can still keep it over the higher time frame structure and then targets wise we are just going to go down and target the low that we were looking at before so if we go back up to the 10 minute time frame you can see that we also have that confirmation here high higher low higher high lower low okay we've had a break underneath now we'd be looking to sell upon the return to this level so this will be a five percent return trade if you went for the refined one you're looking at ten percent plus which is a massive position and here's what it looks like in the real market so you see a drive down from that level and slowly slowly surely eventually the market gets its way down to the target so that is how you use confirmation entries to get safer opportunities because number one you've got high time frame agreement large bearish impulse corrective move supply zone to sell now number two you've got low time frame agreement we have the impulse on the low time frame shifting us into a bearish market we can look for a pullback and then we can sell from there we can target this level and we have many opportunities to take partial profits or go break even or stop trail along the way now we're going to talk about substructure and swing structure because this is where a lot of different opportunities come in so remember we discussed the impulse correction format of a market well depending on what time frame we're looking at we're going to have kind of trends inside of trends so if your high time frame analysis and your high time frame trend is on say the four hour time frame on the 30 minute time frame the hourly time frame the 15 minute time frame the five minute time frame there are going to be these smaller trends inside of trends you're going to see smaller trends taking place as you zoom in because there are more candlesticks available so we can section the analysis into two types number one is the swing structure and that is the clear directional bias of the higher time frame that you've analyzed so if we analyzed an uptrend on the four hour the four hour structure is going to be the swing structure and the uptrend that we found there is going to be again the swing structure but this is where the magic happens because inside of the corrective moves or the pullback moves that we see we get substructure which is kind of that internal structure that we discussed this is going to be just the corrective pullback move but when we look at this on a time frame lower than the one we analyzed on so in this example if we have a four hour as our swing structure and it's an uptrend then anything beneath the four hour so perhaps a 30 minute could be a substructure and what we're going to see on the 30 minute that is inside of the corrective moves we're going to see smaller trends and what we're going to see there on the 30 minute is inside of these corrective moves we're going to see smaller down trends okay whereas these might not be so visible on the four hour it might just look like a couple of candles pulling back there's going to be actual obvious trends when we scale in creating that trends inside of trends format that we've just discussed now why is this beneficial why am i telling you because this provides us with new trades we don't just have to stay isolated to buying the higher lows but what we can also do is look at opportunities in the corrective moves to sell down through the corrective move inside of these lower time frame downtrends now there are some nuances around this and we need to be careful that we don't try to extend markets too far so what we're going to do is go to the real charts and i'll show you some examples of how we can trade this substructure let's go now all right so for this example we're going to look at xau usd which is gold and we're going to the four hour we're going to do that four hour 30 minute format so we can see the structure here has just shifted from bearish with these lower lows and lower highs into bullish with this break of structure which pushed us over the previous lower high okay again all of this down here is internal structure so the break doesn't take place until this high goes now with the market pushing into an uptrend our obvious next move is going to be looking for a buy on this market when we pull back to an imbalanced demand zone our imbalanced demand zone the lowest possible one is going to be here so we would look for a position that looks something like this waiting for a pull back down to then buy higher this is the swing structure okay the four hour is now officially in an uptrend this is the first impulse we are going to be looking for on the four hour time frame correction impulse correction impulse and so on and so on and so on however of course if we are expecting this market to get lower well then isn't there opportunity for us to sell through this range surely there is a trade somewhere for us in there that we can take on a lower time frame and that is what this substructure trading is all about so if we go down to the 30 minute time frame now what we're going to be looking for here is a shift in the 30 minute structure because as we can see at the moment along with the four hour the 30 minute structure is also up we're creating higher highs and higher lows continuously and that is still pretty much exactly what we're doing right now but if there was to be a break of structure like this well that would change the narrative here on this lower time frame we would have seen a higher low break and that would then lead us into the possibility of selling on this 30 minute trend and there's nothing that really makes this 30 minute trend less valuable than the four hour okay so what we can do here is look for opportunity to sell the 30 minute as if it's its isolated pair and then when we start to reach more significant swing structure areas we should look to get out now what we don't want to do is try to push a substructure trade too far we should always understand if we're trading this substructure format we only want to trade it down towards previous areas of demand because we expect the market is likely to trust the four hour more than the 30 minute meaning the market is more likely to go higher once again rather than turning into a new downtrend okay on the higher time frame so any substructure trades we take essentially should take place within the confines of the last swing structure move if the swing structure move is going up we don't want to try and trade past that low but we just want to see if we can push this market down into an area of demand before we then start buying once again so essentially we create what we call a sell to buy scenario we are looking to sell here and then we are looking to buy from there onwards okay but it provides us with new fresh opportunity on kind of trends inside of trends we have our big picture narrative now we can look for an opportunity inside of that so here is a quick rundown of what this might look like in a real market we've seen the market push down under this level we've then seen a pull back up we didn't get a closure so we probably wouldn't want to immediately look for a trade just there although had we got in there that would have been a very nice place to do so okay so if we'd have seen a candle closure under this low this would have been the ideal location for us to then sell from but what we would really want to do is see a more significant breakdown from there we need to see closures under this level essentially to validate that we are ready to go lower now yes we did have a break here but with substructure trades it's always nice to see us pushing more significantly into the range so that we're not getting into positions too soon because of course what we don't want to do is dive into a cell and then just get killed by the impulse continuing we want clear indication that the impulsive move of the market being this move here is over for now and that the corrective move is beginning okay so there's a couple ways we could approach this number one we saw a closure under this level so you could realistically enter there you could put your stop losses above the next high and you could look to take the market down towards that target where you would then look for buyers number two we can wait for the formation of a new demand zone or supply zone and then sell from there so we have a supply zone just here the market went and pushed down and closed so you could look at selling from this level and you could look to take that down towards your target now this one's a little bit messy i'd prefer to go for the first opportunity of closing into the low and then selling into it but this one is okay as well and as you can see the markets then pull back and tapped it and now we're looking essentially for a continuation lower which is what we want to see to provide opportunity for us to be you know in this position safely now at this point we'd have gotten pretty much on that first wick the market came back tapped entry one more time and has now pushed down to create more significant lows so what you could do at this point is just hold this trade out and see if this is going to be the trade that gets down towards your demand zone on a higher time frame so this area from this high down to this low becomes your sub structure area and it provides trades essentially trends inside of trends and trades inside of trades you have your big picture narrative of waiting for a corrective move to then buy the impulsive move and continue the swing structure but it actually allows you to take these smaller trades because what we've done here is confirm change in the trend that then can be sold into to bring this market lower so that's the general idea of how we would trade swing and substructure and then of course after the substructure move is completed your buy limit on the demand zone to get you into the impulsive swing structure move is going to be triggered leading you then back into new highs higher prices and another profitable trade so as you can see this is why we don't want to try and take substructure trades too far because as soon as the demand zone was hit we just created a big move to the upside so any substructure trade we take should look to pretty much just fill some of the range then we want to get out and move into the overall substructure idea because that's the one that's going to be the highest confidence and the highest probability so there are oftentimes opportunities to do this not every piece of substructure is going to give you a chance to get in i'm saying based on the price action we saw up here there wouldn't have been much opportunity for me to sell this movement back down but a lot of the time you are going to get opportunity to sell down with the substructure on the way into larger trades inside of the swing structure move okay so you look for your short-term sales there long-term buys there short-term sales there long-term buys there all right and as you can see we never really want to push the market past an area of demand you're good to just run it down to where you think it's going to buy from and then you can buy and you might find yourself a little sell on the way into it if you enjoyed that video hit the link in the description at the top there is a free course which is going to help you to build a trading strategy second link goes to my academy if you really want to master this fast and with that said that is it for this class so thank you for watching if you don't want to do either of those things then watch this video next thank you i'll see you in the next one