CHAPTER 2

Market Structure

Structure is the grammar of the market. Without it you cannot read liquidity either, because liquidity is always born at structural swing points.

2.1Swing Points in Candle Language

A swing high is a candle with lower highs on both sides; a swing low has higher lows. Practically, traders use a three-candle fractal.

**Fig. 2.1** HH, HL, LH, LL - the four letters of trend

Uptrend = HH + HL. Downtrend = LH + LL. A range mixes HH with LH: neither side is consistent. Recognising that third state matters most, because ranges destroy the most traders.

2.2BOS - Break of Structure

A BOS is a body close beyond the previous swing high (in an uptrend) or swing low (in a downtrend). It proves the current delivery is still in force.

**Fig. 2.2** A body close above the swing high is a BOS

A wick-only break is a sweep, not a BOS.
After a BOS trade with the trend, but never enter on the BOS candle itself.
A retracement follows a BOS almost always, because displacement leaves a gap.
A higher-timeframe BOS is a bigger move. A 1-minute BOS does not flip a daily bias.

2.3CHoCH - Change of Character

A CHoCH is the first break against the trend: in an uptrend, the last higher low fails. It is a hint that the trend is over, not proof.

**Fig. 2.3** When the last higher low breaks, the character changes

2.4MSS - Market Structure Shift

MSS = CHoCH + displacement + FVG. This is where a complete entry model appears for the first time: price returns to the FVG, stop goes above the raid high, target is the opposite pool.

**Fig. 2.4** MSS: sweep, displacement, FVG - three steps

Sweep: liquidity above or below has been taken.
Displacement: big bodies break the structure.
The gap: that displacement left an FVG.
Return: price comes back to the FVG - that is your order.

2.5Internal Versus External Structure

Every large range contains a smaller one. The outer boundary (range high/low) is external; the swings inside are internal. Price usually takes internal liquidity first, then delivers to the external pool.

**Fig. 2.5** A range inside a range - which boundary breaks first

Situation	What to do
Buy bias, price in discount	Look for a long on the FVG after an internal low sweep
Buy bias, price in premium	Be patient; longs from premium offer poor R
External high already taken	Bias neutral; find a new DOL

2.6Mapping Structure By Hand

The correct order for marking structure: daily swings first, then 4H, then 1H. Each timeframe needs at least three swings - two highs and two lows.

Timestamp every swing - structure without time is meaningless.
Write the direction of the most recent BOS in the corner of the chart.
Never mark more than three timeframes on one chart.

2.7Common Mistakes

Mistake	Fix
Treating every micro swing as structure	Only swings that hold liquidity matter
Calling a wick break a BOS	Read the close, not the wick
Flipping daily bias on the 1-minute	Bias changes only on daily or 4H
Entering on the BOS candle	Wait for the retracement

Educational material only · not financial advice.