How To Understand Market Structure | FOREX | SMC (Part 1)

About this Video

• Video Title: How To Understand Market Structure | FOREX | SMC (Part 1)
• Channel: Matt Donlevey - Photon Trading
• Speakers: Matt Donlevey
• Duration: 00:39:19

Introduction

This video focuses on understanding and mechanically mapping market structure in forex trading. The speaker emphasizes that mastering market structure significantly improves trade success, increases reward-to-risk ratios, and boosts overall trading confidence. The video begins with theoretical explanations and then demonstrates practical application through chart analysis.

Key Takeaways

1. Importance of Market Structure: A strong understanding and consistent mapping of market structure are crucial for boosting strike rate, improving reward-to-risk, and enhancing trading clarity and confidence.
2. Basic Market Structure (Bullish/Bearish): Bullish markets are characterized by higher highs and higher lows, while bearish markets show lower highs and lower lows. "Breaks of structure" mark significant turning points.
3. Strong vs. Weak Highs/Lows: Strong highs/lows successfully create the opposite (lows make highs, highs make lows). Weak highs/lows fail to do so, creating trading opportunities.
4. Trend Changes: Trend changes are identified by breaks of structure—a lower low signals a bearish trend change from a bullish market, and vice versa. Some traders require both a lower low and lower high for confirmation.
5. Change of Character (CHoCH): CHoCH refers to changes in the internal structure within a swing high/low, indicating potential pullbacks or continuations, providing earlier signals than full trend changes.
6. Structure Mapping Types (Type 1 & Type 2): Type 1 mapping requires candle closure above/below a swing high/low for confirmation, while Type 2 uses wick breaks, offering more aggressive entries. The speaker uses both methods.