Market Structure & Swing Foundation - Price Action Basics

What is Market Structure?

Market Structure is the pattern of price movement up and down. It shows when buyers (bullish) are in control and when sellers (bearish) are in control.

In simple terms:

• Moving upward = Swing Highs and Swing Lows are being created higher (bullish trend)
• Moving downward = Swing Highs and Swing Lows are being created lower (bearish trend)

Understanding Swing Highs and Swing Lows

What is a Swing High?

A Swing High is a peak where:

• At least 2 smaller candles on the left side
• This peak is the highest point
• At least 2 smaller candles on the right side

What is a Swing Low?

A Swing Low is a valley where:

• At least 2 higher candles on the left side
• This valley is the lowest point
• At least 2 higher candles on the right side

Professional Market Structure Chart:

In the chart analysis below:

• T1: First Swing Low (1.0800) - Starting point
• T3: First Swing High (1.0950) - Higher than T1 ✓
• T4: Second Swing Low (1.0870) - HIGHER than T1 ✓ (HL)
• T5: Second Swing High (1.0980) - HIGHER than T3 ✓ (HH)
• T6: Third Swing Low (1.0900) - HIGHER than T4 ✓ (HL)
• T7: Third Swing High (1.1000) - HIGHER than T5 ✓ (HH)

Pattern Recognition: Every new High is higher, every new Low is higher = CONFIRMED STRONG UPTREND

This is the foundation of reading market structure professionally.

CHOCH Explained (Change Of CHaracter)

CHOCH (Change Of Character) means the market structure behavior has changed.

Bullish to Bearish CHOCH:

Swing High 1330  ← old peak broken
    / \
   /   \
  /     \
 /       \ 1310 ← New Swing Low is lower
/         \
Swing Low  \
1300        \  ← CHOCH! Now bearish

What it means: Buyers can no longer maintain control. Sellers are now in charge.

Bearish to Bullish CHOCH:

1300 ← Swing Low is broken (upward)
    /
   / 1310 ← New Swing High is higher
  /
 /  ← CHOCH! Now bullish
Old High

What it means: Sellers have been stopped. Buyers are now in control.

What is BOS? (Break Of Structure)

BOS (Break Of Structure) is when price breaks below a level that showed the trend direction.

Bullish BOS:

     Previous Swing Low = 1300
            |
            |
           \|/
            V ← Price breaks below
           1295 ← This is bearish, BUT...

However, if a new higher Swing Low and High form afterward, the bullish trend resumes.

Complete Market Structure Steps

Step 1: Identify Swing High/Low

1350 ─── Swing High 1
       /\
      /  \
1340 /    \ Swing Low 1
    /      \
   /        \
1330 ─────────\─ Previous Support

Step 2: Identify Uptrend

• New Swing High > old Swing High? ✓
• New Swing Low > old Swing Low? ✓
• Then uptrend is active

Step 3: Look for CHOCH

• Old Swing Low is broken?
• New Swing Low is created below?
• Then possible trend reversal beginning

Tradeable Levels (Trading Levels)

Premium Area (Bullish Strength):

Small candles at Swing High = strength at level
Price stays above = Buyers in control

Discount Area (Bearish Weakness):

Small candles at Swing Low = weakness at level
Price stays below = Sellers in control

Real Chart Example (EURUSD 4-Hour)

Scenario: Uptrend to Downtrend Reversal

Time    Price   Status
T1      1.0900  ← Swing High (peak)
T2      1.0850
T3      1.0920  ← New Swing High (Uptrend continues)
T4      1.0880
T5      1.0870  ← Swing Low
T6      1.0875
T7      1.0845  ← New Swing Low (lower) ← CHOCH! Downtrend begins
T8      1.0810

First pullback: Unclear signal At T7 CHOCH forms: Now clear—quality short entry opportunity

Common Mistakes

Key Takeaways

• Swing High/Low = Direction indicators for market
• CHOCH = Structure broken = current trend ending
• BOS = Level broken = new strength evidence
• Premium/Discount = Area strength measurement

Next: FVG and Order Blocks — which give you precise entry levels.

FVG & Order Block Complete Guide