What is market structure?
Forex Market structure refers to the visible evolution of market movement and places where those movements stopped. The key elements of market structure are the peaks & troughs price has made over time, by moving up and down. We know that price creates patterns within the market and it is these patterns that can greatly help you to make better trading decisions.
As we know Price moves in trends.
• Trends move in waves.
• The impulse wave moves in the direction of the trend.
• Followed by countertrend moves termed as Corrections
What’s behind market structure?
So now we have all the key building blocks in place to understand the market structure:
- Continuation
- Swing highs & swing lows
- Weekly & daily opening levels
- Patterns
The Market is always in 1 of 3 Phases
- Trending
- Ranging
- Consolidating
These kinds of price levels or zones are usually associated with a relatively large number of transactions (from both buyers and sellers) and that makes them consistent focal points. Because these areas tend to promote more trading, these areas see even more trading volume and have a tendency to reinforce themselves. This is why areas of support and resistance usually repeat or stay in force.
Keep it simple and subtle
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By clearing your charts and paying attention to market structure, you will avoid confusion and always be preparing your trades using the same angle
- You will always know which way to be pointing
- You will always know how to discern a retracement from a reversal
- You will have the possibility to trade any asset, on any time frame.
Our Job as a Trader
Trading successfully in the forex market is a skill-oriented endeavor, and among the key elements that as a trader you must absolutely possess is the art of picking low-risk entries. Our job is to find the best possible entry and exits and by studying market structure we can use this knoweldge to our advantage whether you are using support and resistance levels, price patterns or trends.
We know that when the market is trending we are able to place our limit order on or near as possible to the previous swing high/low and or support/resistance level giving us the perfect continuation entry.
We know that when the market is ranging/consolidating we wait for the candlestick signal to continue back into the range or wait for the break out to enter on the retest of that level.
If you can learn to spot what the market is doing you are able to react in a better manner which will help you trading success.
