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MARKET STRUCTURE POINTS

Market structure points are important chart patterns, which every trader should be able to identify and keep an eye on. Two types of market structure (MS) points exist:

  • Market Structure High (MSH) points
  • Market Structure Low (MSL) points

About Market Structure Points

The role of technical analysis is not to predict if the market will go up or down. The role of technical analysis is to detect patterns in the broadest sense of the word. A pattern allows traders to determine if and when they open a position and how they manage the position. Market structure points are one of the most important patterns. In general futures charts are more suitable for market structure point trading.

The advantages of market structure points:

  • They indicate key reversal moments.
  • They are easy to identify.
  • They can be used in all time frames.
  • They can be used on all instruments.
  • They can be used in most trading strategies.
  • They are a good tool to learn how to trade.

This example shows a random day on the DOW market index on a 60-minute chart. Notice that the day’s main turning points are also MS points. There are always more MS points than key turning points. It is up to trader to try and identify when a MS point and a key turning point coincide.

Market structure points.

A MS point consists of at least three candles. Only the highest and the lowest values of the candles are relevant. The colour of the candle is not relevant.

A market structure low (MSL) is a buy signal. A MSL is identified as follows:

  • Low candle 1 > low candle 2
  • Low candle 3 > low candle 2

These are five examples of MSL points. Notice that the colour of the candles is not relevant.

Market Structure Low

A market structure high (MSH) is a short sell signal. A MSH is identified as follows:

  • High candle 1 < high candle 2
  • High candle 3 < high candle 2

These are five examples of MSH points. Notice that the colour of the candles is not relevant.

Market Structure High