Market Structure Shift

Market Structure Shift

Identify trend direction and potential reversals through swing point analysis.

Structure

Swing Points

• Higher High (HH) + Higher Low (HL) = Uptrend
• Lower Low (LL) + Lower High (LH) = Downtrend

Choose an objective swing algorithm before analysis—for example, a pivot with fixed left/right bars or an ATR-reversal rule. State how equal highs/lows, nested swings, and the unconfirmed final pivot are handled.

Break of Structure (BOS)

• Descriptive continuation label under the chosen swing rule
• Bullish BOS: Price breaks above swing high (HH)
• Bearish BOS: Price breaks below swing low (LL)

Change of Character (CHoCH)

• Descriptive possible-change label, not confirmation of reversal
• Bullish CHoCH: In downtrend, price breaks above LH
• Bearish CHoCH: In uptrend, price breaks below HL

Workflow

1. Identify current trend on a predeclared context timeframe:

   get_candles_around_date(symbol=<symbol>, exchange=<exchange>, interval="4h", date=<date>)
   

2. Mark swing points using draw_chart_analysis with highlight type (label HH, HL, LH, LL)
3. Detect structure breaks only after a closed bar exceeds the pivot by a calibrated tick/ATR buffer.
4. Map nested timeframes with exact ratios and timestamps. If context and execution structure conflict, return watch or no trade; do not force alignment.

Trend Continuation Entry (BOS)

1. Wait for the closed-bar BOS trigger
2. Enter on pullback to FVG or order block
3. Stop below recent swing low (bull) or above swing high (bear)

Trend Reversal Entry (CHoCH)

1. Treat HTF CHoCH as a candidate reversal condition
2. Wait for LTF BOS in the new direction
3. Enter on retracement to CHoCH level
4. Stop beyond the CHoCH swing point

Evidence and Validation

• Treat the setup as a testable hypothesis, not a prediction. Define thresholds, entry, invalidation, and exit before evaluating outcomes.
• Calibrate on the same instrument, venue, session, and timeframe. Use closed candles and a held-out or walk-forward sample; record every variant tried.
• Include spread, fees, slippage, borrow or funding, partial fills, and latency. Reject the setup when net expectancy is not positive or depends on one narrow parameter.
• Return observed inputs, missing data, cost assumptions, entry, invalidation, exit, and a valid, watch, or no-trade status.
• Research basis: Use BOS/CHoCH as explicit swing-labeling rules. Lo, Mamaysky & Wang shows why visual price patterns must be algorithmically defined and tested.

Key Rules

• The context timeframe supplies a feature, not an immutable direction.
• Never use an unconfirmed right-edge pivot or intrabar break.
• Predeclare whether a single close, retest, or second-timeframe event is required; avoid future leakage.
• Select timeframes for the instrument/session and test nested conflicts explicitly.

Related Skills

• order-blocks — define and test candle zones around objective structure events
• liquidity-zones — Structure breaks often occur after liquidity sweeps of swing points