The Ultimate guide to Market structure with 30+ Charts!

31 Mar 2023

Hey everyone!👋

In this post, we'll delve deep into market structure, presenting insightful examples to enhance your understanding of this concept.

Introduction:
✅ Market structure is a framework for comprehending the movements and behaviour of markets. In layman's terms, it is a basic form of understanding how markets move.
✅ It can be seen as the flow of the price between a series of swing highs and swing lows.
✅ The market moves in trends, which are the result of various patterns and structures that form and evolve over time.

Exhibit: Various structures and patterns evolving over time into different trends


The market structure allows you to be in sync with the market and avoid counter-trend trading, which enhances the probability of your setups.

Exhibit: Market structure favouring longs


There are broadly 3 types of structures:
1. Bullish (Uptrend)
2. Bearish (Downtrend)
3. Ranging (Sideways)

Illustration: Bullish market structure



Illustration: Bearish market structure



Illustration: Range market structure



📈 What is an uptrend?



✅ Characterised by a bullish market structure.
✅ Formation of higher highs followed by higher lows.
✅ For an uptrend to stay intact, it must preserve its ascending structure - higher highs must follow higher lows.

📉 What is a downtrend?



✅ Characterised by a bearish market structure.
✅ Formation of lower highs followed by lower lows.
✅ For a downtrend to stay intact, it must preserve its descending structure - lower highs must follow lower lows.
✅ Lower highs are allowed if the price goes into compression or re-distribution.

⚡ What is a range?



✅ A range is a zone where the price finds itself bouncing between two levels.
✅ These levels are - range high and range low.
✅ The size of the range is dependent on different factors such as asset class, demand-supply, volatility, etc.

A lot of times, the structure won’t be as clear as you want it to be. Conversely, sometimes the structure will replicate the textbook. Hence, you need to be flexible in your approach.

Sometimes, trading in range-bound markets can be challenging due to the choppiness in price movements. However, when the price action is more defined, some traders may prefer to trade the range by executing breakout trades or mean reversion trades from the range high to the range low or vice versa.

It is better to combine market structure with other concepts/indicators for better results.

Exhibits: Bullish market structure

ATUL Industries


Tata Consultancy Services


Rain Industries


Indian Hotels


Navin Fluorine


Delta Corporation


Gujarat Gas


Page Industries


Titan Company


ITC


Exhibits: Bearish market structure

Birla Soft


Tech Mahindra


Indiabulls Housing


L&T Housing


Grasim Industries


Biocon


Tata Power


Canara Bank


NMDC


Bharat Petrol


Exhibits: Ranging market structure

Granules


ITC


Syngene


Hindustan Copper


Thank you for taking the time to read this. I hope you found it to be informative and useful.

Much love, ❤
Rajat Kumar Singh (johntradingwick)
Community Manager (India), TradingView