Forex market structure is the basic principle of how the forex market works; market structure in forex is what determines the direction of the market.
That being said, market structure is formed every day in our trading chart, however, if we are unable to recognize or identify them when they are formed we miss out on entry opportunities.
Many beginner traders keep asking the wrong question on trading forex when they should be asking “what is market structure in forex” understanding the answer to the question will open your eyes to the common mistake you make when trading forex.
In this article, I will try my best in the simplest form to explain forex market structure and how to identify them.
Note: the market moves in basically three directions
- Uptrend (bullish)
- Downtrend (bearish)
- Sideways (ranging)
Table of Contents
HOW TO IDENTIFY MARKET STRUCTURE IN FOREX
The best way to identify market structure in forex is to look at the higher timeframes, forex market structure can be seen in every time frame however is it much better in higher time frames where major zones can be found.
The higher timeframes will filter the Noise and give you a dominant trend in a long term. You can find the most informed forex market structure cheat sheet on tradingaxe or check-in depth forex chart pattern.
WHAT IS MARKET STRUCTURE IN FOREX?
Market structure in forex is the patterns that are formed on your trading chart that determines the forex market-dominant trend. They are used mostly for technical analysis trading. They require no indicator, it is purely naked chart trading.
Forex market structure comprises;
- Basic support and resistance level
- Supply and demand zones
- Chart patterns
- Candlestick patterns (Candle stick tradind Bible)
FOREX TRADING TOOLS TO HELP YOU IN TRADING.
These forex tools are required to help you map or mark your levels and see the market structure formed and find reversal and retracement zones.
- Horizontal line
- Vertical line
- Fibonacci tool
MARKET STRUCTURE FOREX TERMS
- Order block
- Reversal zones
- Retracement zones
- Pin bar
HOW TO READ MARKET STRUCTURE IN FOREX
Identifying the market structure in forex is not enough, it is important you also know how to read market structure in forex too. Reading market structure means knowing the best place for market entry after the structure is completed.
The best time to enter after a market structure is completed is after the retest of the structure, the retest becomes support or resistance depending on the market trend direction.
FOREX MARKET STRUCTURE PATTERNS
There are numerous forex market structure patterns that you will find on tradingaxe.com
However, in this article, I will only focus on two forex market structure patterns.
- Reversal patterns
- Continuation pattern
There are basically three reversal patterns for a bullish trend and bearish trend respectively.
Bullish trend reversal pattern
Head and shoulder
Double top (M pattern)
Bearish trend reversal pattern
Inverted Head and shoulder
Double bottom (W pattern)
The continuation pattern in forex is after there is a market impulse on a higher timeframe and the market retraces to a retracement level for the trend to continue in the dominant trend. These retracement levels can be found using the Fibonacci tool.
The Fibonacci tool will help you find possible zones where the market will stop retracing and the trend resumes its original direction.
MARKET STRUCTURE AND POWERFUL SETUPS
Market structure has proven to be the most reliable trading strategy with powerful setups that will guarantee profit. Below are images of market structure and powerful setups.
UNDERSTANDING MARKET STRUCTURE
Every successful forex trader knows that understanding market structure is inevitable for consistent profit.
Market structure is what rules the forex market, especially for technical analysis trading.
In this article above you will find information regarding understanding market structure.
WHAT IS PRICE ACTION IN FOREX?
Price action is strictly trading with a naked chart (without lagging indicators) and interpreting the forex market with chart patterns and candle patterns.
Price action in trading is used by many professional traders, trading with price action will save you from messy charts, and you will have a clear direction of the market when price action is applied properly.
WHAT IS THE PRICE STRUCTURE IN FOREX?
The price structure is forex trading is trading the forex market in real-time; based on what the market is presently doing not what it will do.
Price structures use support and resistance, candlestick pattern, and pin bar.
Note; that there are other price actions to look at in trading forex.
HOW IS MARKET STRUCTURE USED IN FOREX?
Market structure in forex is used to spot major zones where price action confluences are high. With forex market structure you can identify a zone where the majority of traders are looking towards placing a trade preferably pending orders.
HOW DO YOU READ A MARKET STRUCTURE LIKE A PRO?
It takes time to build a skill in any profession, trading forex isn’t any different, to be able to read forex market structure like a pro, you must be willing to invest time in growing your knowledge on understanding forex market structure.
You will need to demo trade first with a broker before trading on real money.
In this article above are links to websites on forex market structure.
WHAT IS THE DIFFERENCE BETWEEN MARKET STRUCTURE AND PRICE ACTION
Market structure is the totality of how the forex market works using chart patterns, candlestick patterns, support and resistance, and more while price action is purely momentum price movement which is based on a forex trader’s decision.
Price action can be interpreted through the candlestick formations.
IS MARKET STRUCTURE A STRATEGY?
Market structure is more than a strategy. Market structure is what the forex market is made of; it is what moves the market.