Market Structure

ICT market structure refers to the way the market behaves, and shifts based on various
factors such as institutional order flow, imbalances, and key levels. It represented in a
series of either higher lows and higher highs - bullish, or series of lower highs and lower
lows - bearish.

Market Structure Concept

The actual turning points include highs and lows within it (Intermediate highs and
lows).

The market trades in a generic pattern or rhythm and it is easy to read if you are aware
of the basic structure price tends to move in.

1. Generally, the market trades from short-term low (STL) to short term-high (STH)
back to a new short-term low (STL). As these STL’s and STH’s form, they will develop a
“market structure” of price action.

2. Any short-term low (STL) that has higher short-term lows (STL) on both sides of it is
considered an Intermediate term low (ITL).

3. Any short-term high (STH) that has lower short-term highs (STH) on both sides of it
is considered an Intermediate term high (ITH).

4. Any intermediate-term low (ITL) that has higher intermediate term lows (ITL) on
both sides of it is considered long term low (LTL).
5. Any Intermediate term high (ITH) that has lower intermediate term highs (ITH) on
both sides of it is considered long term high (LTH).

Interbank Traders do not view Market Structure with Retail's method.

Interbank Traders view Price in terms of Liquidity and Imbalances.

1) The highest time frame will act as a Long-term Perspective:

- This time frame will show you Higher Time Frame Levels which will offer Trade
Setup Opportunities.
- Trade Ideas will be built upon levels derived from the Higher Time Frame.

2) The mid-level timeframe will act as an Intermediate-Term Perspective:

- Following the Trade Setup Opportunity found on the HTF, Mid-level will give you
more definition in terms of structure based on that HTF Level
- Managing Trades will be done via a mid-level time frame.

3) The lowest time frame will act as a Short-term Perspective:

 - Following the Trade Setup Opportunity found on the HTF and insights given with
Mid-level, the short-term perspective will give you even more definition in terms
of structure.
- Timing trades with entries will be done via the lowest time frame.

Intermediate Term High/Low – Any short-term low (STL) that has higher short-
term lows (STL) on both sides of it is considered an Intermediate term low (ITL). Any
short term high (STH) that has lower short-term highs (STH) on both sides of it is
considered an Intermediate term high (ITH).
If you see a Rebalanced ITH, that tells you that the market is VERY weak. That is the
market “tipping its hand” towards Interbank Traders.
To effectively recognize Market Structure in a manner akin to that of an Interbank
Trader, it's imperative to first grasp the prevailing market narrative.

The narrative guides us towards assessing liquidity conditions. Specifically, a liquidity

draw serves as the foundation for establishing our daily bias.

Key questions arise:

- What is the current market narrative?

- Is it going higher for Buy Side Liquidity or to Rebalance a SIBI?
- Is it going lower for Sell Side Liquidity or to Rebalance a BISI?

FAILURE TO UNDERSTAND MARKET STRUCTURE LIKE AN INTERBANK TRADER,

WILL LEAD YOU TO FALL VICTIM TO FALSE MARKET STRUCTURE BREAKS.

When you look at the charts, look each time to see if the market is retracing an
imbalanced candle. Classify this as an intermediate high/low. Then make sure prices
don't violate it.

If you are bearish and your intermediate high is broken, then you need to step aside and
not enter again. Wait for another setup.

The daily chart shows exactly what institutions and banks are using. That's where the
money is. This is also where your preferences will be determined. Most of your time and
study should be focused on determining where the daily chart will be for the next day,
two, or week.

From Narrative to Market Structure:

How Market Structure is built:

Market profiles will assist in market structure analysis concepts. Are we trending, in a
reversal pattern or in a consolidation preparing for a breakout scenario? It helps you
determine if we are bullish or bearish.

Below you see two examples of how market structure is built. To the left you see a
market rally into a key (Higher Time Frame) resistance level followed by a Smart Money
Reversal (SMR) and then a decline (which can be a retracement or a reversal dependent
on if we’ve taken HTF external or internal liquidity) and to the right the opposite. Here
the decline reaches a key (HTF) support level. These support and resistance levels are
your so called “PD arrays” (ICT Core Content month 4) and you must use the highest
timeframe to identify those levels. Without key support and resistance levels you’re not
going to get a directional bias regardless of what trading model you’re using.

Swings consist of consolidation and expansions until we reach a key support/resistance

level where the smart money reversal (SMR) takes place. The SMR takes place at the top
by either a turtle soup or a failure swing (CC month 5 ep. 5). Same goes for the support
level. You can anticipate an entry at the SMR after we hit the key support/resistance
level.
The consolidations are the building blocks that we work with. During a consolidation
you look for dynamic support/resistance levels to trade off until we reach the key
support/resistance level (HTF). Those levels are very clear. So as price declines,
you want to see these swing lows being formed and every swing low that forms there will
be a discernible OTE at the retracement.

Which timeframes to use to break down market structure depends on the type of
trade(r)?

There are lots of different timeframes, and that can be overwhelming. Your primary
objective is to know the timeframe that you’re trading. That depends on what type of
trader you want to be, as disposed in the image above. You see 3 timeframes per type of
trade(r):

- HTF: trade idea based on this, directional bias and manage trade.
- Middle timeframe: manage your trade.
- LTF: short term, for timing your entry and looking for early reversal signs,
so you know it’s time to take profits.
[Blue dots: are ITH/ITL, Orange arrows: those ITH/ITL are LTH/LTL. Green =
STH/STL]

If Price is Bearish, we want to see price spend little time above highs, create shallow
runs on highs, reject, and/or Respect Premium Arrays. We also want to see
DISPLACEMENT LOWER. Violating discount arrays and/or LT,IT,ST LOWS.

Below you see 2 charts. The daily timeframe and the price action between the red lines
from a 1h perspective. The daily is the parent of the 1h price structure so minor price
swings are subordinate to it.
[On this daily you see the dealing range and a retrace into premium (just above EQ to
rebalance that FVG)]

[1h TF]

As you see you will have 2 possible entry points, an aggressive entry and a low risk high
confirmation entry as displayed below.
Once an ITH/ITL is broken, you have a significant break in market structure
(BMS/MSB). Once we break down and take out the STL and ITL or just an ITL/ITH,
then we have a significant break in market structure. This is more significant than just
simply going into a chart and saying okay well it took out a short-term low there it is.

Your entry should be based on the lowest of the 3 timeframes.

Now let’s assume we are a swing trader; the market structure is bullish and we’ve traded
off of a higher timeframe support level and we had a market shift to the upside on the
highest timeframe chart. Our midlevel timeframe has allowed us to find a key
support/resistance level that converges with the HTF s/r level. Our confluence: pattern
overlaps with that s/r level.

We now have a bias and that’s bullish. Keep in mind that not every day a setup will be
delivered and every day the bias is both directions. You have to decide what it is that
you’re trading, and you want the bias that you are holding to line up with price action,
you can’t force price action to do what you want it to do, you want to get in sync.

During the Killzone (time!) you wait for the key support level to be hit (as in the example
below) and you look for a market shift there (based on the highest of the 3 timeframes)
in the form of either a stop run or a failure swing (cc month 5 episode 5) and after that
market shift happened you look for an entry on the lowest timeframe.

After MSS and you’ve found your entry, you can use standard deviations for target
projections. Once we break that ITL, we can use the fib standard deviations to
determine price targets from this consolidation.
[You see the yellow price swing on the left. As soon as the low is taken out, you can use
the swing projection for targets]

Above, as you can see, I drew the FIB from the ITH at the top to the LTL at the bottom
of the range. Why anchor the FIB like this? This is not random of course. Because
that’s the up move, so the swing, from where the decline starts. It’s the
retracement swing up that fails that starts to decline. The projection is -2.0
STDV.

Once you are in trade, use institutional order flow to know if the move is still good.
When you’re bearish, all of your up close candles should keep price from going higher
than that. So, they are your resistance. For bullish price action, down close candles
should support price.
Do NOT lose the desire to hold the trade.

Interbank Traders understand that Down Candles will be used as Buying Opportunities.
IF YOU UNDERSTAND THAT PRICE WILL WANT TO REACH THE BUY SIDE
LIQUIDITY.

Every down candle is the chance for Smart Money to accumulate new long positions.
Questions to ask before you enter on an Order Block:

1) Does Price want to reach higher?

2) Does Market Structure support your Order Block?

YOU CAN ALSO USE AN IMBALANCE AS SUPPORT INSTEAD OF THE

ORDER BLOCK.

High Probability Order Blocks have an FVG paired with them.

 [Credit to Braveheart]

High Probability Order Blocks are blended with Time Theory.

[Credit to Braveheart]
Market Structure Shift (MSS) - is a shift in the direction of price delivery. When price is
going in a direction and shifts to the exact opposite. It occurs when price takes out
previous short-term lows or highs within a trend. Identifying these shifts allows for an
understanding on which side of the market to be trading with.

MSS must be energetic and leave behind displacement to ensure that the market is
looking to reverse.

Remember that structure means nothing without narrative. Lose sight of the draw on
price, HTF structure, and resting liquidity and you are vulnerable to being faked out.

As the ICT disciples are aware, the foundational concept of market analysis posits that
in an uptrend, price action forms higher highs and higher lows, while in a downtrend,
price action manifests as lower highs and lower lows.

When the market is in an uptrend, the market structure shift level is typically identified
as a point where a lower low is formed. Conversely, in a downtrend, the market
structure shift level is often observed at a juncture where a higher high emerges.
Notably, these market structure shifts tend to arise following a displacement, signaling a
potential shift in the overall trend direction.

The Bearish Market Structure Shift

The market will see Price deliver a rally above an Old High or Highs, then quickly shift
lower. Significance is placed on the term “quick” and with Displacement Lower - not a
small candle move lower or a wick only, after a candle close.

The Bullish Market Structure Shift

The market will see Price deliver a decline below an Old Low or Lows, then quickly shift
higher. Significance is placed on the term “quick” and with Displacement Higher - not a
small candle move higher or a wick only, after a candle close.