Market Structure
Market structure is built from three grades of highs and lows: short term, intermediate term, and long term. Knowing which is which tells you which levels are protected (safe for stops) and which are unprotected liquidity, and it powers your entries and targets.
Market structure is comprised of three types of highs and lows: short term, intermediate term, and long term. Each grade tells you something different, and together they let you read the trend, find safe places for stops, and confirm your bias.
What we use market structure for
- To understand when price is about to expand.
- To decide where to place a stop loss.
- To decide where to place a take profit (TP).
- Most importantly, to confirm the draw on liquidity, your bias.
- To understand the market trend and to help identify the order flow.
The three grades of highs and lows
- Short term high/low (STH/STL): a plain swing high or low with one lower high (or higher low) on each immediate side. These are UNPROTECTED.
- Intermediate term high/low (ITH/ITL): a bigger pivot that has a short term high (or low) on its left AND its right. PROTECTED.
- Long term high/low (LTH/LTL): the major reversal high or low, formed where Smart Money reversed after hitting a higher-timeframe PDRA. PROTECTED.
Price rallies to a major high and reverses down. This is where Smart Money turned after hitting a higher-timeframe PDRA, so this is the Long Term High (LTH).
Spot it: The biggest high, at the reversal, with smaller highs on both sides = the LTH.
Protected vs unprotected
Intermediate and long term highs/lows are PROTECTED: place stop losses just beyond them, because price would need to take a lot of liquidity to breach them. Short term highs/lows are UNPROTECTED: never put a stop there, the market takes them out as liquidity.
Why protected = HRLR, unprotected = LRLR
Long and intermediate term highs/lows are high resistance liquidity runs (HRLR): hard to breach. Short term highs/lows are low resistance liquidity runs (LRLR): easily breached and taken out, after which price simply continues in its bias. That is why your stop sits behind a protected level.
The breaker entry
A breaker already contains a STH, an ITH, and a STH. Once the right-hand STH is created, you can enter at the breaker zone. The lessons ahead lean on breaker and entry patterns built from exactly this structure.
The same idea for lows (bullish)
Everything flips for a bullish reversal. After price hits a higher-timeframe PDRA and turns up, the major low is the Long Term Low (LTL). A short term low (STL) is a plain pullback low. When an STL gets taken out by another STL, with short term lows on both sides, you get an Intermediate Term Low (ITL), which is protected.
Price drops into a higher-timeframe PDRA and reverses. This major low is the Long Term Low (LTL), a protected low. Price should not come back here until the liquidity above is taken.
Spot it: The reversal low at a HTF PDRA = the LTL (protected).
The safer entry model
For safer entries, confirm an MSS first, then wait for the structure to build: STL, then ITL, then STL. Enter on the next STL, usually an FVG, with your stop hidden below the protected low. You give up a little reward for a much more protected stop.
How pros apply it
- Bullish (weekly HTF): after a HTF PDRA was hit they marked the LTL, then waited as STLs and an ITL formed, and entered at the FVG with a stop below the protected low.
- Bearish (weekly HTF): a HTF PDRA was hit, an ITH and STHs formed, and they entered at the FVG (or an order block when no FVG was present) with the stop above the protected high.
- Once a HTF PDRA is hit, you will almost always see a long term high or low form at that reversal: that is your anchor for reading the rest of the structure.
Key takeaways
Three grades: short, intermediate, long term highs and lows. ITH/ITL and LTH/LTL are protected (HRLR): put stops just beyond them. STH/STL are unprotected (LRLR): never stop there. The STH-ITH-STH (or STL-ITL-STL) trio is the breaker pattern you enter from. Anchor everything to the long term high/low at a HTF PDRA.
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