Understanding market structure is one of the most critical aspect of becoming a consistent, lucrative and a successful trader.
Really understanding market structure and how you place yourself in any order flow.
Some traders continue to trade using a basic rule based “system” with a “good risk/reward ratio” which keeps them in the market long enough for the Smart Money algorithms to detect their stops and pull them out. Market structure is the key to avoiding continuous stop outs coupled with knowing how the contemporary algorithms operate. You don’t have a chance against the tremendous whipsaws of the contemporary algos unless you have a comprehensive knowledge of how they operate.
Market structure is significant for both novice and expert traders as it may impact the liquidity and price activity of a market. It’s also one of the most often utilized tools to evaluate trends, detect probable reversal points, and gain a sense for current market circumstances, Because market structure is a reflection of the two-way auction process and psychological fluctuations of market mood, it gives tremendous insight into how the market is functioning. It might give significant signals about where the price movement is moving next.
While utilizing market structure to determine the movement of price on a chart, it relies on the time period chosen.
Using multi-timeframe analysis to discover the trading opportunities and the flow of the market is extensively utilized and extremely successful. Going from a longer time period to identify the significant peaks and troughs of an asset will offer you places of critical support and resistance. From then lowering down to the time window you are really intending to trade on will make it a lot simpler. On the time period, you trade on you will discover different market structure. The microstructure of the present assets motion.
Market structure may also assist to produce efficient markets (asset prices reflect all available information) (asset prices reflect all available information). Market makers are a significant element of this and provide liquidity to enable smooth transactions.