Market structure

Market structure is one of the most important things to understand in ICT trading. It’s basically how price moves over time. If you look at any chart, you’ll notice that the price doesn’t just shoot straight up or drop straight down. It moves in waves — up and down, again and again. These waves create a pattern, and that pattern is what we call market structure.

In simple terms, market structure helps you figure out whether the market is going up, going down, or just moving sideways. And once you know that, you’ll have a much better idea of what to do next—whether to buy, sell, or wait.

ICT traders look at market structure because it shows what the smart money is doing. Smart money means big players like banks and institutions. These are the ones who actually move the market with large orders. They don’t buy or sell randomly — they do it in a way that leaves clues behind. Market structure helps us read those clues.

Uptrend (Bullish Market Structure)

In ICT trading, an uptrend means the market is making its way higher over time. But price doesn’t just go straight up — it moves in steps. It pushes up, then pulls back, then pushes up again. These steps leave behind a pattern.

In a healthy uptrend, price forms:

Higher highs – Each high is higher than the last one.

Higher lows – Each low is higher than the one before it.

This shows that buyers are in control, and smart money is likely pushing the price higher. ICT traders look to join the move after price pulls back to key areas like fair value gaps, order blocks, or previous lows.

Downtrend (Bearish Market Structure)

A downtrend is the opposite. The market is moving lower over time, but still in steps. Price drops, bounces up a bit, then drops again.

In a downtrend, price forms:

Lower highs – Each bounce is smaller than the one before.

Lower lows – Each drop goes lower than the last.

This shows that sellers are in control, and smart money is likely offloading positions or building shorts. ICT traders look for the price to pull back into key levels before joining the move down.

Consolidation (Sideways Market Structure)

Sometimes the market doesn’t trend at all. It just moves sideways, stuck in a range. This is called consolidation. Price bounces between a support level at the bottom and a resistance level at the top, without making clear higher highs or lower lows.

This often happens when smart money is preparing for the next move. They may be building long positions (accumulation) or short positions (distribution), but they’re doing it quietly, without pushing price too far in either direction.

To the average trader, this might look like the market is doing nothing. But to an ICT trader, consolidation is a key phase where important setups are building. Price often grabs liquidity on both sides of the range before it finally breaks out and starts a real move.

How to Tell If the Market Is Making Higher Highs and Lows

To figure out whether the market is in an uptrend or downtrend, you need to track the swing points — the places where the price changes direction.

Look at the chart and ask:

Is each new high higher than the last one?

Is each new low higher too?

If yes, the market is likely trending up.

Or:

Is each new high lower than the last one?

And is each new low lower as well?

If yes, the market is likely trending down.

These highs and lows create the structure of the market. ICT traders use them to mark shifts in trend, spot reversals, and confirm setups. If structure breaks (for example, a higher low fails and price makes a lower low), that could be a sign of weakness or a trend change.

Swing Points

Swing points are key turning points on the chart where price shifts direction. They help us spot the highs and lows that form market structure.

There are two types of swing points:

• Swing highs
• Swing lows

Swing High

A swing high happens when the middle candle has the highest high, and the candles before and after it both have lower highs.

Swing Low

A swing low is the opposite. The middle candle has the lowest low, and the candles on both sides have higher lows.

Break of Structure (BOS)

A Break of Structure (BOS) happens when price breaks above a recent high in an uptrend or breaks below a recent low in a downtrend.

BOS helps you understand where the market is going, and it’s one of the most important concepts in price action and smart money trading.

How BOS Works

In an Uptrend:

• Price forms higher highs and higher lows.
• A BOS occurs when price breaks above the most recent swing high.
• This confirms that buyers are still in control.

In a Downtrend:

• Price forms lower highs and lower lows.
• A BOS occurs when price breaks below the most recent swing low.
• This confirms that sellers are still in control.

Market Structure Shift (MSS)

In trading, price doesn’t move in one straight line. Trends go through phases — they grow stronger, slow down, and eventually reverse. A market structure shift (MSS) is one of the first signs that the current trend might change.

MSS signals a possible reversal, not just a pullback. It shows that the market may be transitioning from bullish to bearish — or vice versa.

A market structure shift happens when the price breaks a key level that is holding the trend together. Think of it as the moment when buyers or sellers lose control, and the opposite side starts to take over.

• In an uptrend (higher highs and higher lows), an MSS occurs when the price breaks below a previous higher low.
• In a downtrend (lower lows and lower highs), an MSS occurs when the price breaks above a previous lower high.

This break tells you that the structure of the current trend is no longer intact — the market is changing direction.

What Makes an MSS Valid?

To confirm a valid MSS, you need:

A Clear Existing Trend

There must be a visible bullish or bearish trend in place — a series of higher highs/lows or lower highs/lows.

Break of a Major Structure

Price must break and close beyond the last major swing point that held the trend. A wick alone doesn’t count — you need a full candle body close.

• In a bullish trend → price must close below the most recent higher low.
• In a bearish trend → price must close above the most recent lower high.

Strong Displacement

The break should happen with strong momentum — large candles, imbalance, or a clear shift in price behavior. This shows that control has changed hands.

MSS vs. Break of Structure (BOS)

While both BOS and MSS involve price breaking the previous structure, the key difference is:

• A Break of Structure confirms the continuation of the existing trend.
• A Market Structure Shift suggests a reversal or change in trend.

For example, in an uptrend:

BOS happens when the price breaks above a previous high.

An MSS happens when price breaks below a previous low, shifting the bias from bullish to bearish.