Market structure is the skeleton underneath every chart: the sequence of swing highs and swing lows. Strip away indicators and patterns and this is what is left — a series of peaks and troughs whose order tells you, objectively, whether the market is trending or ranging and which way control is shifting.
Swing highs and swing lows
A swing high is a peak with lower highs on either side; a swing low is a trough with higher lows on either side. They are the points where price turned. Marking them is the single most useful charting habit you can build, because everything else — trends, levels, patterns — is defined relative to them.
The three states of a market
- Uptrend — higher highs and higher lows (HH/HL). Buyers keep paying up and dips keep finding support higher.
- Downtrend — lower highs and lower lows (LH/LL). Sellers keep pressing and bounces keep failing lower.
- Range — highs and lows roughly flat between a floor and a ceiling. Neither side is in control.
Break of structure and change of character
A trend stays intact until its pattern breaks. In an uptrend, the warning sign is a break of the most recent higher low — once price closes below the low it should have held, the HH/HL sequence is broken (a 'break of structure'). The first such break after a long trend is often called a change of character: not yet a confirmed reversal, but the first objective evidence that control may be shifting.
This is why structure beats opinion. You do not need to predict the top — you wait for the market to break its own pattern, and let that define when your bullish read is wrong.
Trading with structure
Trade in the direction of the structure on your timeframe, and treat the relevant swing point as your invalidation. In an uptrend, a higher low is both an entry idea (buy the dip into support) and a stop level (if it breaks, the thesis is wrong). Combined with the top-down habit from the previous lesson, you get a clear rule: align with the higher-timeframe structure, enter on the lower-timeframe one.