MARKET STRUCTURE

CONCEPT
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INTRODUCTION
Welcome to the Wyckoff Method. Our goal of this educational material is to take you on a journey of
exploration to discover what Wyckoff Method is, how it is used and why we implement Wyckoff
analysis in our trading.

Price action viewed through eyes of Institutional traders is powerful technique to analyze charts. It
helps us to find the best price levels to enter trades. We found that adding Wyckoff schematics to
our already profitable chart analysis has even increased the probability of recognizing those price
levels that have potential of delivering trades with very high risk reward ratios.

Retail forex industry is flooded with trading strategies based on never-ending list of indicators and
chart analysis techniques that do not explain why price moves from or to certain price level. For
majority of retail traders choosing the best method to time and predict the market movement can
be frustrating and confusing. Same as Wyckoff, we also advocate a return to basics.
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Richard Wyckoff is considered to be one of the best technical analysts in history. Observing the
market in the early 20th century, Richard Wyckoff pioneered a method of technical analysis that is
still widely used by traders today. The Wyckoff Method is one of the best blueprints when it comes to
picking winning stocks, the best times to buy them, and the most effective risk management
approach.

Observing price action, Wyckoff ultimately formulated his theory which identifies key elements in the
development of trends. In his model, these periods are marked by accumulation and distribution.

You may be asking, “Why should I implement Wyckoff in my own trading?”. The main reason is, that
it will allow you to recognize upcoming price moves. Once you mark the end of the accumulation
phase, you can expect the price to move higher and therefore long trades will have higher
probability of working out. And after marking the distribution phase, price is expected to move lower.
Then you can start looking for short entries.

Some traders who mastered this method and are trading it in combination with our core strategy,
have been able to position their trade entries with such high precision that on some trades they
managed to achieve over 1:100 risk reward ratio. This could be possible for you too.
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UNDERSTANDING MARKET
STRUCTURE
Is the market random? Of course, it isn't. It may seem random if you don't understand how it
operates and carry out your decisions using trading indicators as a reference. These indicators are
designed by institutional traders to restrict the movements of retail traders. Indicators are
completely useless, the market's movements have nothing to do with indicators. It moves because
of the confluence or opposition of institutional plans.

Static structure visible on charts, made up of previous movements in the market and places where
those movements stopped refers as Market Structure. To understand market structure completely
you need to understand the dynamic process (market psychology) that creates the market
structure.
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Market psychology refers to market action (How the market moves? Why does it move the way it
does?) Market, in general, is complicated and confusing. Peculiarly if you don't understand the
fundamentals. If I were to explain market action in the simplest terms, I would make the most of the
concept of newton's laws of motion. Let's take a look at these three laws.

Newton's first law states that a body will remain at rest or keep moving in a straight line at constant
speed unless it is acted upon by an external force.

Newton's second law states that, if a force applied to a body can change the magnitude of the
momentum, or its direction, or both.

Newton's third law states that in every action there is an opposite and equal reaction. This law is
significant in analyzing problems of static equilibrium, where all forces are balanced.

You might be wondering how this is relatable to market action. Let me explain.
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About newton's law of motion, The normal state of existence in markets the majority of the time
represents equilibrium, meaning the two forces are in balance. Buyers and sellers express no sharp
disagreement over the price; the market may drift around a median value, however, there are no
large trends or price changes. This is what we called a Market in consolidation or a market that is
trending sideways.

Markets in this state of equilibrium will have varying amounts of liquidity and the ability to absorb
large orders. Sooner or later, there is a failure of liquidity or if the liquidity is injected on one side, the
market generates a quick, strong movement in one direction. This movement may be in response to
recent information (External force; fundamental factors...Etc.) coming into the market, or the market
is manipulated.

From this point, as stated in Newton's third law "Every action has an opposite and equal reaction" the
market regains its balance again by balancing the imbalance in the market. This may be at a
recent level, or prices may immediately retrace their course and return to the mean.
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In summary:

1. When buyers are more aggressive than sellers, upswings will be longer, than downswing.

2. When sellers are in control, downswings will be longer than upswing.

3. When there is relative balance, there is no visible pattern to the swings

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MARKET STRUCTURE CONCEPT

Market structure in trends is often driven by a strong imbalance of buying and selling pressure.
However, markets do not always trend. We do not always know when markets are trending, how
long the trend will last, or what potential our trend trades may have.

The market trade represents a generic pattern of rhythm, and it is straightforward to read if you are
aware of the basic structure price tends to move in. This concept is universal. It relies on the proper
understanding of swing Highs and Swing Lows. There are three main types of market trends:

PRIMARY (LONG TERM) TREND - Lasting from months to many years, this is the major market
movement. Within the Primary Movement Long term high (LTH) and Long term low (LTL) are created.

LONG TERM HIGH (LTH): Any Intermediate-term high (ITH) with Lower Intermediate-Term highs on
both sides.
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LONG TERM LOW (LTL): Any Intermediate-term low (ITL) with higher intermediate-term low on both
sides.

SECONDARY (INTERMEDIATE TERM) TREND - Lasting from weeks to a few months during which
interval Intermediate-Term High and low is created.

INTERMEDIATE-TERM HIGH(ITH): Any Short-term high(STH) with lower Short-Term highs on both
sides of it.

INTERMEDIATE-TERM LOW(ITL): Any Short-Term Low(STL) with Higher Short-Term lows on both sides
of it.

TERTIARY (SHORT TERM) TREND - Tends to die in less than a week or not longer than ten days. In
some cases, they may last only for a few hours or a day. It is important only in that it forms part of
the primary or secondary moves; it has no forecasting value for longer-term investors.
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This is particularly necessary since short-term movements can be manipulated to some extent,
unlike the secondary or primary trends.

Generally, the market trades from Short-term low (STL) to Short-term high (STH), back to a new
Short-term low. As this Short-term swing High/Low unfolds, they develop the Market structure of
price action.

SHORT-TERM HIGH (STH): A Bar with a higher high relative to both the preceding and the following
bars.

SHORT-TERM LOW(STL): A bar with a lower low relative to both the preceding and the following bars.

Trade totally on the aspect of the trend. Long on bullish and short on bearish.
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TRADING WITH MARKET STRUCTURE

When your analysis suggests the market is bullish, it'd be wise to think about trading on the bullish
side and filter counter-trend setups thus placing the odds in your favor.

Let us assume for an instant you are looking forward to a long opportunity, by using Market
structure. Highlight, short-term, intermediate, and long-term lows.

Not to mention, if you missed an opportunity to go long near Long-term, Intermediate low, buying
near Short-term low will many times provide a wonderful entry point for trade with upside aim
based on the Long-term, Intermediate low swing projection. For shorting opportunities simply
reverse the direction and hunt for Long-term high, Intermediate, and Short-term highs respectively.

The market structure eventually breaks after reaching the Support or Resistance Level and when
ITL/ITH is created and if the structure is breaking in the opposite direction look for optimal trade
entry (OTE).
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Every swing has an equal leg in price it is counter trading against or trading in sync with, and the
price measurement in terms of projection aims is quite astonishing.

If a swing up moves 50 pips after consolidation, if it continues higher, expect another 50 pips higher
added to the low during consolidation. Do not trade higher anticipate a decline of 50 pips from
higher made from the most recent rally. Conversely for selling condition.
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THINGS TO KEEP IN MIND

1. When the market structure is bullish - The price will be breaking previous swing highs however

respecting swing lows.

2. When the market structure is bearish - The price will be breaking previous swing lows however

respecting swing highs.

3. Hunt Intermediate swings. Limit your consideration to only trading the Intermediate-term highs for

short trades and Intermediate-term lows for long trades

4. Taking short-term scalps and or intra-day trades in that same direction is ideal. Your trading plan

is not to capture every move in the market but to enter on the lowest risk setups.

5. When the bearish market structure is broken, the market structure can shift to bullish and when

the bullish market structure is broken, the market structure can shift to bearish. Always wait for the

retracement.
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6. Expect the Market structure to be broken at any support/resistance level.

7. Monitor Market structure on a Higher time frame like weekly, daily, and monthly charts.

8. You can have a bullish Market flow in a bearish market structure, For Example, you can have

Bullish Movements in a Lower time frame within a higher time frame Bearish Market structure.

9. Wait for a Higher time frame market structure to be coordinated with low time frame Market flow.

10. In a Bullish market, structure pay attention to swing lows and not swing highs (buy low)

11. In the Bearish market, structure pay attention to swing highs and not swing lows (buy low)

12. Monitor market during this period and Dollar Index Analysis for confluence.