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Lesson 7 Market Structure 1

This document introduces market structure concepts like swing highs and lows (long-term, intermediate-term, short-term) and volume imbalances to help traders build narratives around price movements. It explains how these concepts can be used across time frames to simplify trading into a repeatable system. Specific examples are provided to illustrate volume imbalances, buyside/sellside imbalances, and how price interacts with identified structure points.

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S Wavesurfer
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277 views

Lesson 7 Market Structure 1

This document introduces market structure concepts like swing highs and lows (long-term, intermediate-term, short-term) and volume imbalances to help traders build narratives around price movements. It explains how these concepts can be used across time frames to simplify trading into a repeatable system. Specific examples are provided to illustrate volume imbalances, buyside/sellside imbalances, and how price interacts with identified structure points.

Uploaded by

S Wavesurfer
Copyright
© © All Rights Reserved
Available Formats
Download as PDF, TXT or read online on Scribd
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Lesson 7: Market Structure #1

Now that we have a grasp on what individual pieces of market structure look like, lets
use these newly acquired tools to create our narratives for price. We want to build a
story of what price is telling us and where it wants to go. The WHOLE point of this is to
simplify our trading process so that it becomes a repeatable, mechanical system.

WHY? If our goal it to use the market to make money, we need to do it in a state of mind
where trading is EASY. If we are desperate to make money from the market, WE WILL
FORCE ideas and narratives into our trading system AND FAIL. WHY? We begin to
remove the easy, mechanical components of our system, and replace then with our own
needs. Things come easily to us when they are easy.

So lets begin to make them easy.

Some New Terms


Long-term swing high/low

Intermediate swing high/low


Short-term swing high/low
Volume Imbalance
Buyside Imbalance Sellside inefficiency (BISI)
Sellside Imbalance Buyside Inefficiency (SIBI)

These are all another way to view what we have already learned from the previous
lessons. They specifically force your eyes to look for liquidity, and how price will arrive
there. Again, TIME and PRICE are both fractal, so all concepts work across all time
frames and prices.

The Different Types of Swing Points

Swing Highs

Lesson 7: Market Structure #1 1


General Template for our Swing High’s Pattern (it can vary):

Long-Term Swing High (LTSH)


These will be your ‘protected’ points, they shouldn’t be broken going forward (as long as
mmxm supports the reasoning).

→ You will be looking for a failure to displace up clue on higher time frames (hint:
taking liquidity and then reversing back into the range!)

Lesson 7: Market Structure #1 2


Intermediate-Term Swing High (ITSH)

These will be your points that will setup a possible earlier entry to get in with the trend.
→ This is where price will test the long-term swing high/low price and provide an
entry to capture the trend.

→ Could be a point where smart money may induce buyers or sellers (run the stop
losses of internal liquidity but only to continue the new trend).

Lesson 7: Market Structure #1 3


Short-Term Swing High (STSH)

These are your points where price reaches into a premium to continue the trend back
down.

→ This is where the speed of the directional move occurs quickly, some people like
to call this the “silver bullet” setup of the move.

Lesson 7: Market Structure #1 4


Swing Lows
General Template for our Swing High’s Pattern (it can vary):

Lesson 7: Market Structure #1 5


Long-Term Swing Lows (LTSL)

These will be your ‘protected’ points, they shouldn’t be broken going forward (as long as
mmxm supports the reasoning).

→ You will be looking for a failure to displace down clue on higher time frames! (hint:
taking liquidity and then reversing back into the range!)

Lesson 7: Market Structure #1 6


Intermediate-Term Swing Low (ITSL)
These will be your points that will setup a possible earlier entry to get in with the trend.
→ This is where price will test the long-term swing low price and provide an entry to
capture the trend.
→ Could be a point where smart money may induce buyers or sellers (run the stop
losses of internal liquidity but only to continue the new trend).

Lesson 7: Market Structure #1 7


Short-Term Swing Low (STSL)
These are your points where price reaches into a discount to continue the trend back
up.

→ This is where the speed of the directional move occurs quickly, some people like
to call this the “silver bullet” setup of the move.

And this is what the buy-side of the curve looks like:

→ Repricing from sell-side liquidity to buy-side liquidity!

Lesson 7: Market Structure #1 8


The Different Types of Imbalances
A volume imbalance is when 2 candles form a gap where the wicks overlap each
other. Here are some examples of this occurring in both directions (using the daily
chart).

A volume void is the same thing as the above, EXCEPT there is no overlap of the
wicks. It is a true void where no transactions have occurred. Here are some examples
of this occurring in both directions (using the daily chart).

Lesson 7: Market Structure #1 9


Both of these are points of interest for price to trade into or through them. They begin to
form a true level of ‘support’ or ‘resistance’ once price has traded through these
imbalances in both directions. Heres what that looks like.

Volume Imbalance

Lesson 7: Market Structure #1 10


→ Here are three examples (labelled as 1, 2 and 3) of volume imbalances that occur
roughly around the same price range across the chart. For all three of them, price
trades through them in both directions across the chart.

1) Develops on a down trend. When price trades back into it (and slightly above), price
has a hard time moving away from this area (temporarily acts as support) . Eventually,
price displaces back down to continue the years downtrend.

Lesson 7: Market Structure #1 11


2) Develops on the rally up. Immediately acts as support to push price higher before an
eventual decline back down. Afterwards, this area along with volume imbalance 1 begin
to provide resistance across the chart.

3) Develops on the move back down. Price manages to trade back above it for a brief
time before displacing back down with energy and a large magnitude. All 3 volume
imbalances are now acting as areas of resistance across the chart.

Quite recently, price has made it all the way back up to the first volume imbalanced
labelled on the chart. As you can see, price has made a huge rejection again from this
area after taking out buy-side liquidity. Price is now below all three volume imbalance
ranges again. This is suggesting that price is more likely to seek sell-side liquidity below
if price cannot get above these ranges aggressively and quickly.

Buyside Imbalance Sellside Inefficiency (BISI)

When price moves in the UP direction without providing or attempting to take sellside
liquidity (giant trend days - usually coupled to some sort of news/event like CPI or
FOMC).

Lesson 7: Market Structure #1 12


In this example, price is now making its way back down towards the original move to
rebalance the BISI (after spending more than a month hovering over it).

Sellside Imbalance Buyside Inefficiency (SIBI)


When price moves in the DOWN direction without providing or attempting to take
buyside liquidity (giant trend days - usually coupled to some sort of news).

Lesson 7: Market Structure #1 13


A very strong directional move without any attempt at a pullback. Price eventually filled
this SIBI out taking over a month to do it.

Summary

We can now start to combine our market structure of candles (imbalances, FVG’s, OB’s,
etc) with the structure of how price is shaping up on the chart (LTSH, ITSH, STSH, etc).
This will allows us to better understand the trend, where price points will be ‘protected’,
and where setups will occur on higher time frames.

Lesson 7: Market Structure #1 14

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