Introduction:

Now that we have learned the theory of structures, it’s time to put our knowledge into practice and understand how to map swing structures, internal structures, and fractals. In this article, I will guide you through a explanation of these concepts. By the end, you’ll have a better understanding of how to identify and analyze swing structures on real charts.

Importance of Swing Structures in Trading:

The most crucial type of structure in trading is the swing structure, which represents the largest moves on a chart. Identifying swing structures is essential because they provide valuable insights into market trends and potential trading opportunities. While the smaller movements may seem overwhelming, focusing on the swing structure alone can be sufficient for successful analysis. The other structures, such as internal structures and fractals, serve as supporting factors that add to the overall analysis of price movement and direction.

Mapping Swing Highs and Lows:

Let’s start with an example to illustrate how to identify swing highs and lows. Imagine a chart with a significant upward movement, followed by a pullback. The point where the upward movement ends can be marked as the swing high. When the subsequent pullback breaks the previous structure with a candle body close, we confirm that it is a swing structure. Similarly, we can identify swing lows based on significant pullbacks and confirmations using candle body closes.

Internal Structures and Their Role:

Internal structures, unlike swing structures, represent smaller movements within the larger picture. They help us understand how price is creating the significant moves we observe on the charts. While mapping internal structures is not as critical as identifying swing structures, it can make chart analysis more organized and comprehensible. By marking the highs and lows of internal structures, we gain additional clarity about price direction and potential reversals.

Fractal Structures and Their Characteristics:

Fractal structures are often brief pauses or movements consisting of one or two candles. They are not typically mapped as they represent minor market fluctuations. However, observing how price reacts to fractal structures can provide valuable insights. For example, if price respects a fractal by reversing its direction, it indicates a significant level of demand or supply in that area.

Importance of Pullbacks in Determining Swing Lows:

When analyzing price movements, pullbacks play a crucial role in determining swing lows. If a pullback occurs after a significant push, we can mark it as a swing low if it continues to move upward. However, if the pullback is minimal and price continues its downward trajectory, it does not qualify as a swing low. Only when we observe larger pullbacks after substantial pushes can we confidently establish swing highs and lows.

Understanding a Trend Change vs. Pullback:

Differentiating between a trend change and a pullback is essential for accurate analysis. For instance, after a bearish swing boss, we might witness a pullback or an internal structure that turns bullish temporarily. Such bullish movements often serve as a temporary relief or facilitator for price to reach a certain area. It’s important to remember that these internal structures and pullbacks are secondary to the significant swing structures that dictate overall price movement.

Bearish Choch and Reaction to an Important Zone:

Bearish chochs, like pullbacks, can provide valuable trading opportunities. They occur when price reacts to an important zone, such as a swing supply or demand area. A bearish choch represents the nearest low in a movement, and its break can serve as an entry point for trades. However, it’s essential to analyze the overall context and consider additional factors before executing a trade.

Next Lesson: Practice on Charts…

Now that we have covered the theory and examples of swing structures, internal structures, and fractals, it’s time to apply this knowledge to real charts