Market Structure 101
Learn the alphabet of price: higher highs, higher lows, lower highs, lower lows — and how they define uptrends, downtrends, and ranges.
The four building blocks
Price moves in swings. Each swing creates a high or a low. Comparing consecutive swings gives us the four structural points that define every market:
Higher High (HH) — a new high above the previous swing high. Higher Low (HL) — a low that holds above the previous swing low. Lower High (LH) — a high that fails to exceed the previous high. Lower Low (LL) — a new low beneath the previous swing low.
An uptrend is a sequence of HHs and HLs. A downtrend is a sequence of LHs and LLs. A range is a mixed sequence with no clear directional bias.
Why structure matters
Structure is the skeleton of every move. Before you look at any indicator or pattern, you must know the current structure: are we making HHs and HLs, or LHs and LLs?
Structure tells you which side of the market you should be on. In an uptrend (HH/HL), you look for buys. In a downtrend (LH/LL), you look for sells. Trading against structure is the most common beginner mistake.
Identifying swing points
A swing high is a candle (or cluster) with lower highs on both sides. A swing low is a candle with higher lows on both sides. Mark these points on your chart — they are the reference levels for every structural decision that follows.
Start on a higher timeframe (daily or 4H) to see the dominant structure, then drop to lower timeframes for precision. Structure on the higher timeframe always takes precedence.
Reading structure on the ES daily
You open the ES (S&P 500 futures) daily chart with no indicators. Your only job: label the swings.
- 1Price rallies from 4,460 to 4,520 (swing high), pulls back to 4,460 and holds (swing low).
- 2It rallies again to 4,580 — a Higher High. It pulls back to 4,470 — a Higher Low.
- 3The sequence is HH → HL: this is an uptrend by definition.
- 4Your bias for all lower timeframes: long only. A pullback is a potential entry, not a reason to short.
Before any strategy, the daily structure already told you which side of the market to be on.
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