Swing Structure vs. Internal Structure: Navigating Market Complexity – Advice funda

Swing Structure vs. Internal Structure: Navigating Market Complexity

If you are still confused on this point, market structure is something that will help you. This guide will explain market structure’s most critical characteristics about how to determine market changes, use the premium and discount model, and learn the three types of market structures that you may never know. This will be combined in order to help position you for a profitable trade.

Simple Structure Part 1: Expectation vs. Reality

The simplicity starts in part one. The market structure expectation always looks too good—price waves move in nice clean waves higher highs and higher lows in the uptrend or lower lows and lower highs in the downtrend. This textbook idealized view is often used in online videos about trading and seems so neat.

However, in the real world, markets rarely operate in this idealized perfect manner. But you will more likely deal with a rather more complex and irregular form of market structure, even in relatively simple cases. But that’s still a viable structure, and I will take you through it in detail.

The Case of the Simple Structure

Let’s begin with the bull case.

Low to High

The low and high which mark our current range.

Pullback Phase

Following an upward move, the price will usually pull back and develop internal swings within the current trading range.

Realignment

On the way up, the price continues to realign internally before breaking out of the structure and continuing with the trend.

The swing structure is of most importance here; that is, one learns the difference between swing versus internal structure. The swing structure is the move that creates the external low and high, and everything else inside this range is just the internal structure.

For example, if price moves from a low to a high, then pulls back before moving higher, the low that created the high is your swing low. It’s critical not to mistake this internal pullback for a reversal or a new swing. If price hasn’t broken structure and then pulled back, it’s part of the existing range, not a new trend.

How to Identify Swing Structure

The largest confusion exists when a trader assumes an internal low is the swing low. The solution to that is as follows:

The external low is that one that finally broke structure.

If this external low has yet to break the structure, it’s part of the current range.

The lowest low prior to moving out of range is the only swing low worth watching, and not internal bounces within a range.

Bearish Market Structure

In a bearish scenario, the process is essentially the same, but in reverse. We’ll start by breaking structure to the downside, creating a new low and high, followed by a pullback. The internal highs and lows may look complicated, but the concept remains the same.

Break of Structure

Price moves down, making a new lower low.

Internal Pullbacks

During the bearish move, price pulls back and forms smaller ranges.

New Structural Range

When price breaks structure again to the downside, a new trading range is created.

The art of correctly defining bearish market structure again falls on the shoulders of the highest external point that is the structural high and its following low. When price breaks structure to the downside, a new bearish range is created.

Conclusion: Achieving Simple Structure

Once you understand the difference between swing and internal structure, you will understand how price moves. Sometimes, market structure seems very complicated, but when you break it down into these fundamental concepts, it becomes much easier to predict where price is heading. Take your time and continue practicing to solidify these concepts.

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