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Using Zig Zag To Scan For Market Structure Setups
The Zig Zag indicator can draw horizontal levels from the five most recent pivots. They’re labeled a, b, c, d, and e, in order from the most recent pivot, and each pivot can be defined uniquely in the scanner.
All traders on TrendSpider have access to several market structure scans, so let’s briefly look at what’s available.
Basic Uptrend and Downtrend
Pullbacks and Bounces
If you’d like to find pullbacks or bounces within an uptrend or downtrend, respectively, use the ‘Simple Uptrend Pullbac
All traders on TrendSpider have access to several market structure scans, so let’s briefly look at what’s available.
Basic Uptrend and Downtrend
Pullbacks and Bounces
If you’d like to find pullbacks or bounces within an uptrend or downtrend, respectively, use the ‘Simple Uptrend Pullbac
Breaks Of Structure
In the ICT philosophy, this weakening of trend can lead to what’s called a ‘break of structure’. In an uptrend, a break of structure is visualized as a lower low being made, and in downtrends, it’s visualized as a higher high being made. These are the first signs that the trend is changing, but often, they do not represent the best times to take trades b/c they can lead to reversals in which the previous high or low is tested before the new trend officially takes hold.
Now that we know what to
Now that we know what to
How To Spot A Weakening Trend
In a strong trend, the price will respect these basics of higher highs and higher lows or lower highs and lower lows, but what happens when a trend is weakening?
In a weakening trend, cracks will begin to form by way of failures at new highs and lows. In some cases, these failures can appear as wicks through previous highs or lows that never materialize into the next proper leg higher or low.
In a weakening trend, cracks will begin to form by way of failures at new highs and lows. In some cases, these failures can appear as wicks through previous highs or lows that never materialize into the next proper leg higher or low.
Using Fair Value Gaps and Order Blocks
If a fair value gap, order block, or a previously untested point of control is present near this low, these can be both powerful magnets for the price as well as low-risk places to enter long positions.
The same concepts are true in downtrends. Measure a fib sequence from the high to low of the previous swing and find where the price is relative to the fib levels. If the price has overshot the .50-.618 Fib levels, look for FVGs, Order Blocks, or untested points of control above the current pric
The same concepts are true in downtrends. Measure a fib sequence from the high to low of the previous swing and find where the price is relative to the fib levels. If the price has overshot the .50-.618 Fib levels, look for FVGs, Order Blocks, or untested points of control above the current pric
Using Fibonacci Sequences
One way is with Fibonacci sequences. Using the Auto Fib tool, if you measure a fib sequence of the previous swing, you’ll want to look for where the price is relative to the levels contained within that fib sequence.
Is the price in the upper or lower half of the fib sequence? In strong trends where buyers are in full control, the price has a tendency to pull back less than in weaker trends. If the price pulls back to this middle area, between the .50 – .618 retracement line, and immediately bo
Is the price in the upper or lower half of the fib sequence? In strong trends where buyers are in full control, the price has a tendency to pull back less than in weaker trends. If the price pulls back to this middle area, between the .50 – .618 retracement line, and immediately bo
Gauging Expectations
Now that we understand the very basics of how to identify the current trend, next, let’s talk about gauging expectations for where the price might be headed next.
Generally speaking, price is like a ball rolling downhill. It likes to continue in the direction that it’s going in, and as time frames increase, it takes greater and greater effort to reverse the price from its current direction.
Let’s look at an uptrend example first. If the price was previously in an uptrend and is now trading w
Generally speaking, price is like a ball rolling downhill. It likes to continue in the direction that it’s going in, and as time frames increase, it takes greater and greater effort to reverse the price from its current direction.
Let’s look at an uptrend example first. If the price was previously in an uptrend and is now trading w
Trend Alignment
As simple as it seems, identifying trend direction can be quite difficult and this is mainly due to the fact that the underlying trend of an asset can vary across time frames.
In this example, we see that the price is in a uptrend on the 15-minute, an downtrend on the 1hr, and mostly going sideways on the daily. Pretty confusing right?
Due to this confusion, it’s advisable to start your trend analysis with a top-down approach; first identifying the trend on a high time frame (like the daily o
In this example, we see that the price is in a uptrend on the 15-minute, an downtrend on the 1hr, and mostly going sideways on the daily. Pretty confusing right?
Due to this confusion, it’s advisable to start your trend analysis with a top-down approach; first identifying the trend on a high time frame (like the daily o
Understanding Trend
The first, and arguably most important market structure concept to understand is the idea of trend, and there really are only three things that the price can do as it relates to trend.
Price can move in an uptrend, meaning higher highs and higher lows are being made. Price can move in a downtrend, meaning lower highs and lower lows are being made, and price can move sideways. Sideways price action represents periods of either accumulation or distribution.
Accumulation refers to the process o
Price can move in an uptrend, meaning higher highs and higher lows are being made. Price can move in a downtrend, meaning lower highs and lower lows are being made, and price can move sideways. Sideways price action represents periods of either accumulation or distribution.
Accumulation refers to the process o
Understand Market Sentiment
Another benefit of using market structure in trading is that the market brings together the collective wisdom of multiple participants, weights it according to the size of the trades they make, and allows analysts to understand the collective sentiment.
Market structure has the advantage of defining when and at what price to buy and sell through trendlines and price goal targets, which has a significant benefit. After deciding on and marking out the borders of a possible formation, these bounda
Market structure has the advantage of defining when and at what price to buy and sell through trendlines and price goal targets, which has a significant benefit. After deciding on and marking out the borders of a possible formation, these bounda
Advantages
Not only does market structure provide you with a clear overview of current market conditions and trends, but it can also help you identify support and resistance levels.
When using market structure to find support and resistance, look left and try to identify areas that have been consistently respected over time. If multiple tests have been performed at the same level there is a higher chance the level will be respected again.
Looking at the historical order book and identifying persistent re
When using market structure to find support and resistance, look left and try to identify areas that have been consistently respected over time. If multiple tests have been performed at the same level there is a higher chance the level will be respected again.
Looking at the historical order book and identifying persistent re
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.
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.
What is the Best Time Frame to Identify Market Structure?
Market structure appears across all time frames and different time frames often display different market structures.
For example, while the overall market structure on the higher time frame may be trending up, the lower time frame structure may be in a current downtrend as the market pulls back, awaiting the influx of buyers to continue the higher time frame move.
Higher volume is represented on higher time frames, which means more market participants and more reliable sentiment. This generall
For example, while the overall market structure on the higher time frame may be trending up, the lower time frame structure may be in a current downtrend as the market pulls back, awaiting the influx of buyers to continue the higher time frame move.
Higher volume is represented on higher time frames, which means more market participants and more reliable sentiment. This generall
Which Assets Work Best with Market Structure?
Assets and trading instruments that have high liquidity, a high number of participants, and a high volume have a smoother and more obvious market structure. Forex, futures, bonds, and stocks are ideally suited to market structure analysis.
The following market structure example is taken from the EURUSD forex market and has a well-defined bullish structure:
However, smaller stocks and some low-cap cryptocurrencies may lack enough liquidity to form a clean market structure, especially on low tim
The following market structure example is taken from the EURUSD forex market and has a well-defined bullish structure:
However, smaller stocks and some low-cap cryptocurrencies may lack enough liquidity to form a clean market structure, especially on low tim
How to Use Market Structure
Market structure can help you define if-then scenarios. For example, if a structure break occurs then look to get short on a pullback.
The Trend Is Your Friend
One of the most popular expressions in the trading world, and for good reason. If you can use market structure to identify a trend, more often than not, the price will continue in the same direction going forward.
Momentum
This is due to the simple fact that buyers (in a bullish trend) are already present. To reverse the trend, aggressi
The Trend Is Your Friend
One of the most popular expressions in the trading world, and for good reason. If you can use market structure to identify a trend, more often than not, the price will continue in the same direction going forward.
Momentum
This is due to the simple fact that buyers (in a bullish trend) are already present. To reverse the trend, aggressi
Support and Resistance in Market Structure
Price movement is often restricted within the limits of support and resistance levels. Price can cross these levels and shift to other areas of support and resistance.
Support: A price level that can halt a downtrend due to a concentration of demand or buying interest. Support levels usually contain a large number of buy orders in the order book from major market participants.
Resistance: A price level that repels an uptrend due to the emergence of an increased number of sellers. Resistance lev
Support: A price level that can halt a downtrend due to a concentration of demand or buying interest. Support levels usually contain a large number of buy orders in the order book from major market participants.
Resistance: A price level that repels an uptrend due to the emergence of an increased number of sellers. Resistance lev
Market Structure With Candlesticks
Market Structure can also be defined by candlesticks as illustrated below:
Price Continuation
To confirm a trend it’s important to see candlesticks close above the previous higher high (in an uptrend) or below the previous lower low (in a downtrend).
This shows the continuation of buying as the price increases or the continuation of selling as the price decreases.
Price Failure
If price action sweeps above the previous higher high but then closes below, this shows weakness and could be the e
Price Continuation
To confirm a trend it’s important to see candlesticks close above the previous higher high (in an uptrend) or below the previous lower low (in a downtrend).
This shows the continuation of buying as the price increases or the continuation of selling as the price decreases.
Price Failure
If price action sweeps above the previous higher high but then closes below, this shows weakness and could be the e
What Is Market Structure in Trading?
Market structure definition: The framework or structure that any given market is currently trading in. Market structure can help you understand the behavior, condition, and current flow of the market. It highlights support and resistance levels, swing highs, and swing lows.
Types of Market Structure
Market structure can be broadly classified into three distinct categories:
Bullish Market Structure: A bullish structure is defined by a series of higher highs (HH) and higher lows (HL). The trend
Types of Market Structure
Market structure can be broadly classified into three distinct categories:
Bullish Market Structure: A bullish structure is defined by a series of higher highs (HH) and higher lows (HL). The trend
Key points in identifying market structure
Recognizing the end of a corrective movement requires experience, patience, and a lot of practice.
After creating a BOS, we usually expect a pullback.
The structure of larger time frames is more valid than smaller time frames.
Always trade in the trend direction. Trading against the trend will eventually take you out of the market.
Never enter a trade before identifying a trend. You're probably in a ranging market when you can't identify a market trend. In such cases, the best thing to do is to wait to start a new trend.
Recognizing the end of a corrective movement requires experience, patience, and a lot of practice.
After creating a BOS, we usually expect a pullback.
The structure of larger time frames is more valid than smaller time frames.
Always trade in the trend direction. Trading against the trend will eventually take you out of the market.
Never enter a trade before identifying a trend. You're probably in a ranging market when you can't identify a market trend. In such cases, the best thing to do is to wait to start a new trend.
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