The Bottom Line:
- Properly identify major swing highs and lows to spot accurate levels of market structure
- Utilize the Trend Reversal Structure Strategy to capitalize on trend reversals with high accuracy
- Implement the Breakout Structure Strategy to identify and trade breakouts with confidence
- Master the Retest Structure Strategy to find low-risk, high-reward trading opportunities
- Gain a deep understanding of market structure and how to create profitable trading opportunities around it
Identify Swing Highs and Lows for Accurate Market Structure Levels
Defining Major Swing Highs and Lows
To properly identify major swing highs and lows, it’s crucial to understand that pullbacks rarely consist of just red candles followed by an impulsive move that breaks the previous major structure high. In reality, pullbacks often have smaller trends within them, with multiple minor swing lows and highs before breaking above the previous major structure high. The key is to recognize that as long as price does not close below the major swing low, everything happening during the pullback is part of the uptrend’s pullback.
The Three-Candle Pullback Rule
To accurately identify swing lows and highs, a useful rule is to require at least a three-candle pullback from a major swing high before considering it a new major structure high. This means waiting for at least three red candles in the pullback during an uptrend before identifying the previous high as the new major structure high and the bottom of the pullback as the new major structure low. The three candles do not need to be consecutive; they can be interspersed with green candles, but a minimum of three red candles is required.
Applying the Rules to Bearish Trends
In a bearish trend, the same rules apply, but in reverse. After a major structure high pulls down to a major structure low, a lower high is formed, and a push below the major structure low confirms the downtrend. During the impulsive move, at least a three-candle pullback to the bullish direction is needed to identify the level as the new major structure low. Once this pullback occurs, the market may consolidate, but as long as it doesn’t close above the previous major structure high, it remains a pullback within the downtrend. Only after a close above the major structure high can a new major structure high be identified.
Capitalize on Trend Reversals with the Trend Reversal Structure Strategy
Identifying Pullbacks in Uptrends
When an uptrend begins, there is an initial move to a major swing high, followed by a pullback to a major swing low, and then an impulsive move up to the next major swing high. It’s essential to understand that everything happening during the pullback, as long as the price does not close below the major swing low, is part of the uptrend’s pullback. This means that even if there is consolidation for an extended period, as long as the price remains above the major swing low, the uptrend is still intact.
The Importance of Three-Candle Pullbacks
To avoid marking false major swing highs and lows during pullbacks, a rule has been established that requires at least a three-candle pullback from a major swing high before identifying it as a new major structure high. This means waiting for at least three red candles in the pullback during an uptrend before considering the previous high as the new major structure high and the bottom of the pullback as the new major structure low. The three candles do not need to be consecutive; they can be interspersed with green candles, but a minimum of three red candles is necessary.
Applying the Rules to Bearish Trends
In a bearish trend, the same rules apply, but in the opposite direction. After a major structure high pulls down to a major structure low, a lower high is formed, and a push below the major structure low confirms the downtrend. During the impulsive move, at least a three-candle pullback in the bullish direction is required to identify the level as the new major structure low. Once this pullback occurs, the market may consolidate, but as long as it doesn’t close above the previous major structure high, it remains a pullback within the downtrend. Only after a close above the major structure high can a new major structure high be identified.
Trade Breakouts with Confidence Using the Breakout Structure Strategy
The Gold Standard: Trend Reversal Structure Strategy (TRSS)
The Trend Reversal Structure Strategy (TRSS) is considered the most accurate market structure-based strategy. To implement this strategy, look for a market in a downtrend, then identify the break of the previous major structure high, which will serve as the trend reversal level. When the price returns to that major structure high, look for potential buy trades in that area. This strategy is highly effective because it allows traders to enter at the beginning of a new uptrend, providing excellent reward-to-risk ratios when executed correctly.
Identifying Swing Highs and Lows on Real Markets
To apply the TRSS, start by identifying swing highs and lows on the chart. For example, on the pound Swiss chart, the first swing high would be the level where, after the high, there are at least three red candles in the pullback. Remember that the three candles do not need to be consecutive; they can be interspersed with green candles, but a minimum of three red candles is required to confirm the swing high.
Capitalizing on Trend Reversals
Once the swing highs and lows have been identified, focus on the trend reversal level, which is the break of the previous major structure high in a downtrend. When the price returns to this level, it presents an opportunity to enter a buy trade, potentially catching the start of a new uptrend. By accurately identifying the trend reversal level and entering trades at the right time, traders can maximize their profits and minimize their risks.
Find Low-Risk, High-Reward Opportunities with the Retest Structure Strategy
The Gold Standard: Trend Reversal Structure Strategy (TRSS)
The Trend Reversal Structure Strategy (TRSS) is considered the most accurate market structure-based strategy. To implement this strategy, look for a market in a downtrend, then identify the break of the previous major structure high, which will serve as the trend reversal level. When the price returns to that major structure high, look for potential buy trades in that area. This strategy is highly effective because it allows traders to enter at the beginning of a new uptrend, providing excellent reward-to-risk ratios when executed correctly.
Identifying Swing Highs and Lows on Real Markets
To apply the TRSS, start by identifying swing highs and lows on the chart. For example, on the pound Swiss chart, the first swing high would be the level where, after the high, there are at least three red candles in the pullback. Remember that the three candles do not need to be consecutive; they can be interspersed with green candles, but a minimum of three red candles is required to confirm the swing high.
Capitalizing on Trend Reversals
Once the swing highs and lows have been identified, focus on the trend reversal level, which is the break of the previous major structure high in a downtrend. When the price returns to this level, it presents an opportunity to enter a buy trade, potentially catching the start of a new uptrend. By accurately identifying the trend reversal level and entering trades at the right time, traders can maximize their profits and minimize their risks.
Mastering Market Structure for Profitable Trading Opportunities
The Three-Candle Pullback Rule for Identifying Major Swing Points
To accurately identify major swing highs and lows, it’s essential to follow the three-candle pullback rule. This rule states that in an uptrend, a major swing high is only confirmed after at least three red candles appear in the pullback. These candles don’t need to be consecutive and can be interspersed with green candles. Once the three red candles are identified, the previous high becomes the new major structure high, and the bottom of the pullback becomes the new major structure low.
Applying Market Structure Rules to Bearish Trends
In a bearish trend, the same market structure rules apply, but in reverse. After a major structure high pulls down to a major structure low, a lower high is formed, followed by a push below the major structure low, confirming the downtrend. During the impulsive move, look for at least a three-candle pullback in the bullish direction to identify the level as the new major structure low. As long as the price doesn’t close above the previous major structure high, any consolidation remains a pullback within the downtrend.
Capitalizing on Trend Reversals with the TRSS
The Trend Reversal Structure Strategy (TRSS) is a highly effective market structure-based strategy that allows traders to capitalize on trend reversals. To implement this strategy, identify a market in a downtrend and look for the break of the previous major structure high, which serves as the trend reversal level. When the price returns to this level, it presents an opportunity to enter a buy trade, potentially catching the start of a new uptrend. By accurately identifying trend reversal levels and entering trades at the right time, traders can maximize their profits and minimize their risks.
