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Market Structure

Speaker: Manish Patel

 Part of Technical Analysis

1. What is the Market structure?

2. Principles of Market Structure

3. Elements of the Market structure

What is the market structure?

● Market structure gives us bias for trading opportunities. In the bull

market, we always look to buy dips
● Range market we look for buy low sell high

Principles of Market Structure

1. Price moves within a structural of support and resistance.

2. A breakout of the structural of support or resistance will lead to price
movement in the next area of the support or resistance
Elements of
the Market structure

The market structure

consists of

1. Phases
2. Trend
Phases

How does the market really work?

Law of Demand

Law of Supply
Let’s think from the perspective of

smart money

1. Smart money are nothing but

professional money, big hedge funds
and institution’s
2. If you want to be a successful trader
you have to understand where these
smart money place themselves and
where their orders are
3. If you don’t know this you might get
trapped by smart money
ACCUMULATION
●

How smart money do that

Accumulation
How does trend change?

● Stopping action
(stopping the downtrend)
● Change of character
(strength of trend change
from bearish to bullish)
● Testing of supply
(testing supply whether
present or not)
● Mark up
(if no supply found
in testing action )
There are many other patterns that
signify accumulation. Some of them are

● rounding bottoms,
● reverse head and shoulder and
● double bottoms patterns
● triple bottom pattern
UPTREND

Once the supply observes by smart

money. When general market
conditions appear favorable, the
Smart Money can then mark up the
price of the stock At some time in
the future First, the market breaks
out from the end of the
accumulation phase, moving
higher steadily, with average
volume and now want to maximize
profits by building bullish
momentum slowly, as the bulk of
the distribution phase will be done
at the top of the trend, and at the
highest prices possible.
DISTRIBUTION

Smart money will take advantage of the higher prices obtained in the rally to take
profits by beginning to sell the stock back to the uninformed traders/investors
Opposite of accumulation process
DOWNTREND
Once the distribution

completed, the Smart

Money can then mark

down the price of the

currency at some time

in the future.

Let’s combine all

phase
So, let’s try to put the above phases with chart
 So, let’s see both together

This is all the smart money is doing, they are simply playing on the emotions of the
markets which are driven by just two. Fear and greed. That’s it. Create enough fear
and people will sell. Create enough greed and people will buy. It’s all very simple and
logical.
This cycle of accumulation and distribution is then repeated endlessly, and across all
the time frames. Some may be major moves, and others minor, but they happen every
day and in every market.
TRENDS

Let us first understand

what is a trend. In a
healthy bull trend, the
upswing generally
exceed the downswing
in length and making a
higher high and higher
low, the reverse is true
for the bear market
WHY Trend Analysis for Trading?

● Trading against the trend, without a

trend, or poor quality trends are one
of the most common reasons traders
fail.
● The quality or strong trends have
more predictable success (edge)
● Controlled arrangement of price bars
and pullbacks provide greater
certainty that reverses at supply and
demand happen
● Poor or weak trends have lower
predictability
● Uncontrolled arrangement of price
bars and pullbacks into supply and
demand lessens chances of a reversal
Determining the MARKET TREND

According to Dow Theory, the

market has three trends
PRIMARY trend: In Dow Theory,
the primary trend is also
considered as a major trend in
the market. It has a long term
impact
SECONDARY trend: Dow calls a
correction in the primary trend as
a secondary trend. In a bullish
market, the secondary trend will
be a downward movement and in
a bearish market, it will be a rally.
SHORT TERM trend: The Minor
Trend is a corrective move within
the secondary trend
Which TIME FRAME TREND is best?

● Timeframes establish
and dominate the trend

●
bull move
in 30 minutes time frame we
might be a short term bear
market even though overall
market is bullish
So, let’s see TREND on chart
So, let’s see TREND on chart
Final conclusion of technical analysis is to find the location of trend and
trade according to the trend
Some of the tools which
are used for technical analysis are

● Swing(the building block of trend)

● Support and resistance
● supply and demand zone
● trend line
● pattern
● gaps
● volume
● open interest
● signal candle for entry