Market Structure Mastery-2
Market Structure Mastery-2
Market Structure Mastery-2
STRUCTURE
MASTERY
FINANCIAL HIDEOUT
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IMPORTANT NOTE:
Disclaimer:
The contents of this ebook are for informational purposes only
and are not intended to be used as financial or investment
advice. The information provided is based on my own personal
research and experiences. Before making any financial decisions,
seeking advice from a qualified and registered financial or
investment adviser and conducting thorough research is
important.
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discussed in this ebook. These positions are based on my
research and analysis and are intended for educational and
informational purposes only. Any trading decisions you make
should be based on your independent research and analysis, and
should not be influenced by my positions or opinions. I encourage
you to always conduct your due diligence before making any
investment decisions.
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It doesn’t matter what market you’re trading or what strategy you're using if
you do not understand market structure you’re basically trading blind.
By mastering market structure, you’ll be able to map out the story of the
market to determine: Who’s in control (Buyers or Sellers), gain clarity over
where price is currently trading, whether the trend is likely to continue or
reverse and gain more confidence in your entry & exits.
In addition to all of that, Market Structure Mastery will help you align
yourself with the right side of the market to increase the risk/reward of your
trades and the probability of a trade playing out successfully.
Profit
Everything
Else
Market Structure
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Put simply ‘buyers market’ is just another way of saying ‘bull market’ a
market run buy ‘bulls’ (buyers). Where a ‘sellers market’ is just another way
of saying ‘bear market’ a market that is run by ‘bears’ (sellers). I’ll start by
showing you a buyers market.
Buyers Markets:
Buyers markets can be defined by positive sentiment from optimistic
investors/traders alike. During a buyer's market, the bulls are firmly in
control of price.
Price will be making higher highs a higher lows, trading from the bottom left
of the screen to the top right. During these markets we’ll want to position
ourselves with the buyers and look for long trades, we’ll talk more on that
later, for now here’s an example.
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Sellers Markets:
Seller's markets can be defined by negative sentiment from cautious
investors/traders alike. During a seller's market, the bears are firmly in
control of the price.
Price will be making lower lows and lower highs, trading from the top left of
the screen to the bottom right. During sellers markets, we’ll want to look for
opportunities to short the market. Here's an example of what a sellers
market looks like:
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Ranging Markets:
In ranging markets, neither buyers nor sellers are in control, resulting in
balanced sentiment among investors/traders.
During this phase prices move within a defined range, fluctuating between
two price points, reflecting indecision. Traders may capitalise on short-term
price movements within the range.
Personally, I tend to avoid trading ranging markets until the next directional
move is visible. Due to the lack of momentum and low-risk rewards.
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Swing Highs:
Swing highs are areas in the market where the price reaches a peak to create
a higher high than any surrounding price in the timeframe. These highs are
only created when price breaks the prior high to make a new high.
Swing High (The highest high in the timeframe)
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Swing Lows:
Swing lows are areas in the market where the price creates a trough in the
market that is lower than any surrounding price. These lows are only created
when price breaks the most recent lower low.
A swing highs goal is to create a lower low in the market as the momentum
from the high was strong enough to take out the most recent higher low.
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Making the high strong. Whereas a weak swing high is one that failed to
push price lower resulting in the formation of a higher low, i’ll get to why this
is important to understand in just a moment.
First here’s an example of strong swing highs and weak swing highs:
Strong Swing High
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The goal of a swing low is to create a higher high in the market as the
momentum from that area was strong enough to take out the most recent
lower high.
Whereas a weak swing low is one that lacks the momentum to push the
price higher which results in the formation of a Lower high,
Higher lows are formed when the price pulls back after the impulsive move
higher that created the higher high.
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A Higher low is considered strong when the move from that area was strong
enough to take out the most recent higher high, this is considered a break of
structure. We’ll cover that more in part 3.
Higher highs and higher lows are considered bullish structure and the faster
the move from the low the stronger we can consider it. Let’s take a look.
Higher High
Recent higher
high broken
BOS
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Higher Low
Lower lows are formed in strong trending markets when the price trades
lower after the initial swing low. The initial lower low after a swing low
confirms a shift in trend and a likely continuation to the downside.
Lower highs are formed when the price retraces upward after the move
lower that created the lower low. A lower high is considered strong when
the move from that area was strong enough to take out the most recent
lower low, this is considered a break of structure. Again we'll cover that
more in part 3, where I’ll show you how to put it all together for trend
identification.
Lower highs and lower lows are considered bearish structure, and the faster
the move from the high, the stronger we can consider it. Let's take a look.
Strong Lower High
Lower High
BOS
Recent lower
low broken
Lower Low
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Target
Weak higher high
Target
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In a sellers market, I like to target weak lows from strong highs. What this
means is building my entry based off of a strong lower high and then
targeting a take profit around the most recent lower low.
Here’s an example:
Strong lower high
to build entries
Target
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If you need a repeatable and proven strategy to profit from moves like this
check out my snipers' strategy at the end of this guide.
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Part 3 will show you how to put it all together in one value-packed section,
here’s what we’ll cover.
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1) Identifying Trends.
2) Drawing Trends.
3) Break of structure (BOS).
4) Change of Character (Choch).
5) Trend Changes.
Identifying Trends:
Whether you’re trading crypto, stocks, futures, options, commodities or
forex you're always going to find price in 1 of 3 periods: Uptrend (Buyers
markets), Downtrend (Sellers Markets), or Ranging (Neutral Markets).
Ranging
Downtrends
Uptrends
HH Financial Hideout © LH
HH HL Identifying Ranges: LL LH
Equal Highs
Equal Lows
HL LL
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Identifying uptrends:
Uptrends (Bullish market structure) are categorised by a series of higher
highs and higher lows. During strong uptrends price rallies from higher lows
will take out the most recent higher high to create new highs, this is deemed
a break of structure. During uptrends, traders often look for opportunities to
align ourselves with the trend by identifying entries into long trades.
Price continues
to the upside
Higher High
BOS
Higher High
BOS
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Higher Low
Higher Low
Higher High
Higher High
Higher Low
Higher Low
Higher Low
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Identifying downtrends:
Downtrends (Bearish market structure) are characterised by a series of
lower highs and lower lows. During strong downtrends, price declines from
lower highs will penetrate the most recent lower low to establish new lows,
signaling a break of structure. In downtrends, traders frequently seek
opportunities to align ourselves with the downward trend, identifying entry
points for short trades.
Lower High
Lower High
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BOS
Lower Low
BOS
Lower Low
Price continues
to the downside
Lower High
Lower High
Lower High
Lower Low
Lower Low
Lower Low
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Swing High
Price breaks above Bullish structure
Equal Highs Equal Highs forming (Next
directional move)
HL
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Equal Lows Equal Lows
Bearish structure
Price breaks below forming (Next
Swing Low directional move)
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To mark downtrends, simply use your line tool to connect 2 or more lower
highs on your price chart, always taking the high of the wick as the point to
draw the trendline. This signifies the highest point price can trade before
breaking the trend. Once you have the trendline drawn out, you can use it to
forecast future price movements.
Example:
Lower Highs Connected
using a line tool
Lower Low
Lower Low
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This means a strong trend can be categorised into two stages. The first stage is known
as the impulsive move this is the initial run in price. The second stage is a short corrective
phase where the price will cool off before continuing the next leg of the trend.
The corrective phase in trends is caused by either buyers or sellers entering the markets
and even traders taking profits. Let’s look at a few examples.
Corrective move
HH
Corrective move
Impulsive move up
HH
Impulsive move up HL
Impulsive move up
HL
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Corrective move
LL LH
Impulsive move down
Corrective move
LL
These corrective phases are a great time to look for entries into trades that align with
trend. This can be done through a number of methods like: Price patterns, Supply &
Demand, or Reversal candlesticks. All strategies that are covered in my ‘Complete Trader
Bundle’, for now, let’s take a look at fakeouts.
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What this means is during an uptrend where price is making higher highs and higher lows, the
price may break below the most recent higher low to grab liquidity then trade back in the
direction of the original trend. This initial move lower to the untrained eye may cause traders to
look for shorts at the next opportunity under the assumption the uptrend has reversed after the
formation of the lower low but end up getting stopped out. The opposite can be said in
downtrends.
Example: HH
HH
Strong Trend
HH
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HL
Lures traders into thinking the
HL trend has change. [ Also known
as a liquidity grab, i’ll cover this
Trader may choose to get short here Expecting
in another guide ]
HL price to make another lower low but instead
they get stopped out as price trades higher.
This is what we would call a bear trap (In a downtrend it would be called a bull trap) It occurs
during strong trending markets where price will lure sellers into thinking the trend is exhausted
and about to change given the lower low formed so they enter short trades but ultimately get
stopped out when price reverses back in the direction of the prior trend (Trapping traders in a
trade on the wrong side of the market.). This is what we can deem a false trend or fakeout.
A simple fix to avoid this is waiting for a trend change by confirming 2 factors. In an uptrend, a
downtrend forms when price takes out a strong higher low from a higher high to form a new
swing low followed by a strong lower high. In a downtrend, a shift to an uptrend occurs when
price takes out a strong lower high to create a new swing high followed by a higher low.
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BOS
HL
Strong HL because
it broke structure BOS
HL Valid Shift from
to the upside. downtrend to
Swing Low BOS
uptrend
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Break of Structure:
During this guide I’ve mentioned this term quite a lot ‘BOS’ so let me take a moment to break it
down in detail how to use them to correctly identify continuations in trend as well as strong and
weak lows & highs.
Firstly what is a break of structure? A break of structure in an uptrend occurs when price moves
higher from a higher low to take out the most recent high. What this indicates is the trend is
strong and likely to continue to the upside making the low a strong low.
HH
BOS
HH
BOS
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Strong HL
Strong HL
( For a bullish BOS a candle MUST close above most recent high. )
A break of structure in a downtrend is a price move from a lower high that trades down to take
out the most recent lower low to form new lows. This indicates a strong downtrend and likely
continuation of the trend to the downside making the high a strong high.
Strong LH
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Strong LH
BOS
LL
BOS
LL
( For a bearish BOS a candle MUST close below most recent low. )
What defines a break of structure? A valid break of structure occurs when a candle breaks and
closes above (In an uptrend) or below (in a downtrend) the most recent higher high or lower low.
A wick above or below is not a valid break of structure. Here’s what that looks like:
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After a break of structure occurs price is likely to pull back to an area of support (in an uptrend)
or resistance level (in a downtrend) before continuing on its respective trend. This is deemed a
short corrective move after price makes its impulsive move up. Think of it as a little cool-off
period where traders take profits and re-position themselves before the next leg in the trend. To
find entries during these corrective phases I like to look for entries from supply & demand zones
that align with the trend.
I’ve compiled a complete guide on the supply and demand strategy I used to achieve a 67% win
and the trading plan that helped me 10x a small trading account within just 2 months. stick around
till the end to find out more.
For now let’s take a look at change of characters and how to correctly identify them.
Change of Character:
A Choch acts as the first sign of weakness in structure, signalling either the early signs of bullish
structure shifting to bearish structure or bearish structure shifting to bullish structure.
A choch from bullish to bearish can be identified when price trades below the most recent higher
low. This would tell us to stop looking for longs as the bullish move may have finished. We can
confirm this when price make a new lower high to form bearish structure.
HH
LH
HH
Example =
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CHOC
HL H
A choch from bearish to bullish can be identified when price trades above the most recent lower
high. This would tell us to stop looking for shorts as the bearish move could be over. We can
confirm this when price makes a new higher low to form bullish structure.
HH
BOS
LH First sign of weakness
in bearish structure
LH
Example = CHOC
H
LL
HL
LL
Bearish structure Bullish structure
LL
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The concept of change of character itself is very similar to a change of trend but there’s one
small differentiation you can use. Imagine a change in trend as a change of the overall market
structure where price takes out swing structure in a higher timeframe. Making a choch a change
of the internal structure.
To put this in perspective think back to the impulsive and corrective moves that are used to
define trends. A choch can be used to anticipate the end of the corrective move (Internal
structure) inside of the larger trend and the continuation of the prior trend.
Continuation of prior trend
Corrective move
Bullish BOS
(Internal structure = minor
confirming the move
moves in strong trends)
HH HH
BOS
LH
LH
CHOCH
Strong
End of corrective move signalled
swing low
by a choch from bearish structure
back to bullish
Part 3 Summary:
Uptrends are characterised by higher highs and higher lows, they tell us that the market is
currently run by buyers.
Downtrends are characterised by lower lows and lower highs, they tell us that the markets
are currently run by sellers.
Sideways structure develops when the price trades between equal highs and equal lows.
To draw descending trendlines connect a series of lower highs.
To draw ascending trendlines connect a series of higher lows.
Trends are created by impulsive and corrective moves in the markets.
Entries into trades can be found during corrective phases.
To identify a change in trend wait for the price to put in a lower high and lower low (Uptrend
to downtrend) or wait for the price to put in a higher high and higher low (Downtrends to
uptrends).
A break of structure occurs when price takes out the most recent higher high (Uptrends) or
Price takes out the most recent lower low (Downtrends)
Change of charater can signal then end of a corrective move or the early signs of a reversal.
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Example =
Key:
= Strong high (Did it’s job to take out higher low)
= Weak low (Didn't do it’s job to take out lower high) BOS
BOS LH BOS HL
HH
Choc
BOS h
Choc t)
ke
ar
h BOS s
M
HL er
uy
(B
LL nd
BOS HL re
et) pt
U
ark
HL sM
yer
(Bu
nd LL
tre
Up
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Key considerations:
Price will not always follow the story you map out: When it comes to marking market structure,
it is important to understand that just because you’ve drawn something on a chart it doesn’t
mean price has to follow it. Market structure can only offer us clues to what might happen it is
up to us to build the trade around the market and tilt the odds in our favour as much as
possible.
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Always trade what you see: Always trade what you see and not what you hope will happen. For
example, if the market is trading up, the logical thing to do would be to look for trade entries to
trade with the market higher
Keep a trading journal: When mapping market structure you may see something interesting or a
trade developing. To stay on top of this grab a journal to start building a watchlist. After a trade
always log the details of the trade from the set up to the take profit to see if you can identify
anything that can be improved. ‘The Complete Trader Bundle’ includes a cutting edge trading
journal you can use to stay ontop all the data.
If you’re looking for long trades in a buyers' market but the structure signals a change, avoid
entering the market until the new structure is clear.
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