Market Structure
Last updated
Last updated
The concept of market structure is crucial in price action trading, offering insights into market behavior through key patterns and transitions.
Break of Structure (BOS): Occurs when price breaks a previous swing high in an uptrend or swing low in a downtrend, confirming trend continuation.
Change of Character (CHoCH): Happens when price breaks the opposite side of the current trend — for example, in an uptrend, breaking below a previous higher low — suggesting a potential trend reversal.
Delta Volume Calculation:
The latest enhancement to this feature adds a new layer of analysis through Delta Volume Calculation. When a BOS or CHOCH is detected, the toolkit calculates the delta volume within the range from the high or low point to the break point.
This analysis considers all the candles in this range and determines whether the volume is predominantly bullish, bearish, or neutral.
◆ Bullish Volume: If the delta volume is bullish, a green diamond is plotted at the high or low point, indicating potential upward momentum or trend continuation.
◆ Bearish Volume: If the delta volume is bearish, a red diamond is plotted, suggesting downward pressure.
◆ Neutral Volume: When the volume is neutral, a yellow diamond is displayed, indicating a balance in buying and selling forces, which can signal the exhaustion of the volume pressure and trend reversal.
This visual representation of volume dynamics provides an additional layer of insight, helping traders assess the strength and direction of price movements following a structure break. You can see an examples of this on the attached images, where the diamonds clearly indicate the type of volume driving the breakout.
Market Mapping is a zigzag that provides an overview of market structure by marking key levels and trends based on the internal and swing settings.
It visually maps out how the price moves within the defined structure, highlighting significant highs and lows to help traders see the market's flow and trend direction.
In the context of market structure trends, an indicator was developed to display the range of market swings, including equilibrium, high, and low points. Based on the direction of the market structure trend, the indicator highlights strong or weak highs and lows.
If the trend is upward, the low is considered strong, while the high is weak.
Conversely, if the trend is downward, the high is strong, and the low is weak.
This helps traders see if the price is likely to return to its equilibrium level, offering insight into potential reversal or continuation points within the trend.
Highlights candles that form internal market structure points using specific colors. Helps visually isolate candles forming key levels.
Equal Highs and Lows refer to price levels where multiple highs or lows occur at approximately the same level, forming a horizontal line on the chart. They are significant because they represent key areas of liquidity and often act as magnets for price action.
Double Tops (DT): When price creates two or more peaks at the same level, it indicates a strong resistance zone. Many traders place stop-loss orders above these highs, creating a pool of liquidity. Institutional traders or "smart money" may push the price above these highs to "grab liquidity" before reversing in the intended trend direction.
Double Bottom (DB): When price creates two or more lows at the same level, it forms a support zone. Traders often place stop-loss orders below these lows, creating liquidity. Smart money may drive the price below these lows to collect liquidity before a potential move upwards.
This refers to the overall pattern or trend in the market, shown by price highs and lows over time. Key types include:
Uptrend: Higher highs (HH) and higher lows (HL).
Downtrend: Lower highs (LH) and lower lows (LL).
Along with highs and lows it shows the price change from the previous points
The Market Structure settings allow traders to customize how price structure and trends are analyzed and displayed on the chart. Here’s a breakdown of each setting:
Internal Defines the sensitivity for detecting internal market structure points (minor highs/lows).
Lower value = more frequent detections (shorter-term structure).
You can set colors and choose whether to detect internal structure on all data or specific sides (e.g., bullish/bearish).
Swing Sets the lookback period for detecting major swing highs and lows (significant structure points).
Larger values = stronger, more confirmed swings.
Separate color settings for swing highs/lows and detection filters.
Mapping Connects swing points visually with lines, helping identify structure changes.
Line style, width, and color can be customized.
Useful for spotting BOS (Break of Structure) or CHoCH (Change of Character) visually.
Strong/Weak H&L Detects and marks strong vs. weak highs and lows based on how long price holds that level before breaking.
Input defines the strength threshold (e.g., price must stay above/below for X candles).
Strong = reliable level; Weak = likely to be broken.
Structure Candles Highlights candles that form internal market structure points using specific colors.
Helps visually isolate candles forming key levels.
Equal Highs/Lows Detects price levels where multiple highs or lows are nearly equal (within a user-defined threshold, like 0.3%).
Useful for spotting liquidity zones or potential breakout levels.
Swing Data (When enabled) Displays additional data about detected swings — such as strength, size, or time.
Useful for quantitative structure analysis.
