Reading market structure: swings, breaks and shifts

Market structure is a way of describing trend from price alone: the sequence of swing highs and swing lows.

Swings

A swing high is a peak with lower highs on both sides; a swing low is the reverse. How many candles you require on each side is a choice — and it determines which swings you see.

Trend by structure

• Uptrend: higher highs (HH) and higher lows (HL).
• Downtrend: lower highs (LH) and lower lows (LL).
• Range: neither sequence holds.

Break of structure and change of character

A break of structure (BOS) happens when price closes beyond the last swing in the trend's direction — continuation. A change of character (CHoCH) is the first close beyond a swing against the trend — the earliest structural hint that the trend may be changing.

A CHoCH is information, not a reversal guarantee. Many are followed by the original trend resuming.

Timeframes nest

A pullback on the daily chart can be a full downtrend on the 15-minute chart. Decide which timeframe defines your bias and which you use for execution, and write it down in your strategy rules.

Practical checklist

1. Mark the last two swing highs and lows on your bias timeframe.
2. Label the sequence (HH/HL or LH/LL).
3. Note where a CHoCH would occur — that is where your bias is invalidated.
4. Only then drop to your execution timeframe.

Tools like the Swing Structure indicator automate the marking, but understanding the definitions is what lets you judge when the automated read is unhelpful.