About this Video

• Video Title: Advanced Market Structure Course (Full Tutorial)
• Channel: Smart Risk
• Speakers: The transcript doesn't name the speaker(s).
• Duration: 14:27

Introduction

This video provides a comprehensive tutorial on advanced market structure, explaining basic and advanced concepts crucial for traders. It focuses on identifying and mapping market structures, including uptrends, downtrends, and consolidations, to improve trading success and profitability. The video also details key tips for market structure mapping and identifying signals for trend reversals or continuations.

Key Takeaways

• Market Structure Dynamics: Market movements are driven by trends (uptrends and downtrends) and consolidation phases (ranging markets). Understanding these phases is key.
• Ideal vs. Realistic Market Structure: While an ideal uptrend shows consistent higher highs and higher lows, realistic uptrends involve more complex price action. The same applies to downtrends.
• Break of Structure (BOS): A valid BOS occurs when the price breaks and closes above (bullish) or below (bearish) the most recent significant high or low, respectively, with the body of a candle. Wicks alone don't constitute a valid BOS.
• Change of Character (CHOCH): Identifying CHOCH involves determining the overall market direction and highlighting valid BOS. Minor CHOCHs are not reliable reversal signals; only major CHOCHs (breaking and closing below the last major low in an uptrend or above the last major high in a downtrend) are significant.
• Importance of Major Highs and Lows: Identifying the major highs and lows, which define the external market structure, is critical for distinguishing between valid and invalid BOS and CHOCH signals. Internal structures within the major highs and lows are less important for determining overall trend direction.

Advanced Market Structure: My Study Notes

I. Market Behavior Basics:

• Two Main Movements: The market constantly cycles between trends (uptrends & downtrends) and consolidation (ranging/choppy sideways movement). Think of it like a circle: uptrend -> consolidation -> downtrend -> consolidation -> repeat. Consolidations often accumulate liquidity and institutional orders.

• Identifying the Phase: The first thing to look at when analyzing a chart is whether the market is trending up, trending down, or consolidating. This sets the stage for everything else.

II. Market Structure:

• Ideal Structure (Rare): In an ideal uptrend, prices make consistently higher highs and higher lows. A downtrend is the opposite – lower lows and lower highs. This is a simplification; real-world markets are rarely this neat.

• Realistic Structure (Common): Real market trends are messier. Uptrends still have higher highs and higher lows overall, but there will be retraces and internal fluctuations. Downtrends are similar, with the overall trend down despite temporary bounces.

• Major vs. Minor Structures: We need to identify major highs and lows. These define the overall trend. Smaller highs and lows within the larger trend are internal structures and less important for the big picture.

III. Break of Structure (BOS):

• Bullish BOS: The price breaks and closes above the most recent significant high. The body of the candle must close above, not just the wick. A subsequent drop doesn't invalidate a bullish BOS if it stays above the newly formed low.

• Bearish BOS: The price breaks and closes below the most recent significant low. Again, the body of the candle must close below the low; wicks aren't enough.

• Invalid BOS Patterns: A break above a high with a long upper wick that closes back inside the high's range is not a valid BOS. The same applies to lows with long lower wicks. We need a decisive close beyond the significant high or low.

IV. Change of Character (CHOCH):

• Identifying CHOCH: First, determine the overall trend (up or down). Then, look for valid BOS. In an uptrend, a CHOCH (potential trend change) needs to break and close below the last major low that started the uptrend. In a downtrend, a CHOCH requires a break and close above the last major high. A break of internal highs/lows isn't sufficient.

• Minor vs. Major CHOCH: Small "changes of character" within the bigger trend are normal fluctuations and should be ignored unless they develop into a major break of structure.

V. Putting it all together:

• Patience is Key: Don't jump the gun! False signals are common. Wait for confirmation (a decisive close beyond a major high or low) before acting on a potential trend reversal or continuation. Focus on major structures, not the noise of internal price action. Be patient, and you'll improve your trading.

VI. Important Note: This is based on the video's explanation of market structure. Other methods and indicators exist for market analysis. This is just one approach.