š„Guidance for Understanding Market Structure š
Market structure helps identify the trend direction of an asset.
ā”ļø Bullish Market Structure
Characterized by higher highs and higher lows. In the daily example, while you might find instances where price made a lower low compared to the previous week, the focus is on the broader upward movements.
ā”ļø Bearish Market Structure
Here, the price consistently forms lower highs and lower lows, a shift from the uptrend leading to $65K. Currently, the price is moving sideways but still needs a higher high on the daily chart to indicate a potential reversal.
Market structure can be observed across all timeframes. For instance, by examining January 2021ās consolidation on 4-hour candlesticks, you can identify more pivot points, revealing short-term trends. However, this can also lead to false signals, especially when price consolidates within a range. Zooming out often provides a clearer view of the longer-term trend.
ā”ļø For example, $BTC may show a bearish structure on the daily timeframe, while the monthly chart suggests a different trend.
Identifying an assetās market structure across multiple timeframes can help focus on trades with the highest probability. Reversals usually begin on lower timeframes before influencing higher timeframes.
