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Market structure is the framework upon which price action is built. Without understanding it, you are essentially trading blind. In this post, we will dive deep into the concepts of Higher Highs (HH), Higher Lows (HL), Lower Highs (LH), and Lower Lows (LL).
Identifying the trend is the first step. An uptrend is defined by a series of HH and HL. Conversely, a downtrend is a series of LH and LL. Trading with the trend increases your probability of success.
A Break of Structure occurs when price closes beyond a previous structural point. This confirms the continuation of the trend. We look for these breaks to enter trades in the direction of the momentum.
A Change of Character signals a potential trend reversal. This happens when the price breaks a structural point that opposes the current trend. For example, in an uptrend, if price breaks the last Higher Low, it may signal a shift to a downtrend.
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