Examples and Trade Setups Using Market Structure

Market structure is not a trading strategy or specific setup. It’s more of a high-level concept that allows you to identify and understand overall market conditions.

It can be used to help with trade entries or more importantly, set invalidation levels and know when you’re wrong. You can also manage trades and babysit positions using market structure principles.

Here are some market structure examples:

Pullback or Retracement: When the market is in an up or downtrend, this pattern indicates that the price will push back and collect orders (producing a candle in the opposite direction) before continuing the trend.

Structure Hold: This is essentially a return to a previous pullback, then the continuation of the prevailing trend. It can result in trapped traders that expect the market to reverse but note how the trend remains intact. No lower lows (in the bullish example) or higher highs (in the bearish example) are created.

Continuation: This is a bullish or bearish structure where price forms a short consolidation or base before pushing higher. During the base period, traders reaccumulate or redistribute their position in anticipation of the next rally or drop. This can form a triangle or pennant pattern.