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Market Structures

Market structures are core concepts of the smart money concepts methodology. The LuxAlgo Premium Price Action Concepts toolkit automatically detect and highlight real time market structures on the market, allowing for a wide variety of customisation.

Type Of Market Structures

Type of market structures
Type of market structures

Market structures allows to determine trend continuations as well as trend reversals in the market trough two distinct structures:

  • Change of Character (CHoCH)
  • Break of Structure (BOS)

These are further described in the sub sections below.

Change Of Character (CHoCH)

Type of CHoCH's
Type of CHoCH's

A change of character (CHoCH), sometimes also reffered as market structure shift is characterized by price breaking a prior swing low during an uptrend (bullish CHoCH) or a prior swing high during a downtrend (bearish CHoCH), and thus indicates a potential market reversal.

The LuxAlgo Premium Price Action Concepts label two distincts type of CHoCH:

  • Leading CHoCH (labelled as CHoCH)
  • Supported CHoCH (labelled as CHoCH+)

The difference between each is based on the relative position of prior swing highs/lows. A leading CHoCH is characterized by not having prior signs of a reversal such as a failed higher high (lower high) during an uptrend or a failed lower low (higher low) during a downtrend.

However a supported CHoCH (CHoCH+) is preceeded by an early sign of market reversal, such as a failed higher high (lower high) during an uptrend or a failed lower low (higher low) during a downtrend.

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Users can show allow the toolkit to show all or only specific types of CHoCH's from the drop down menus within the Market Structures settings section in the toolkit.

Break Of Structure (BOS)

A break of structure (BOS) can be thought as the opposite of the CHoCH, with a BOS being characterized by price breaking a prior swing high during an uptrend (bullish BOS) thus forming a new higher high, or a prior swing low during a downtrend (bearish BOS) thus forming a new lower low. These structures occurs after a CHoCH.

BOS's do not indicates reversals but continuations of a trend, as such it is common to observe successive BOS in a trend.

Swing & Internal Structures

The LuxAlgo Premium Price Action Concepts offers two distinct dimensions when it comes to market structures:

  • Internal Structures
  • Swing Structures

Internal structures are constructed from shorter term swing high/low points, while swing structures are constructed from longer term ones.

The toolkit highlight internal structures with dashed lines and labels with a smaller text size.

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The size of the labels for internal and swing structures can be changed from the General Styling settings section.

Equal High's & Low's

The toolkit returns historical equal high's & low's constructed from very short term swing points. Equal high's & low's can indicate short term reversals, and incoming market structures such as CHoCH or BOS.

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Equal high's & low's requires the most recent swing point to be confirmed, which takes 3 bars. As such it is important to understand these are displayed retrospectively.

Structures MTF Scanner

By default a dashboard showing the market sentiment given by the most recent structures (CHoCH/BOS) on different timeframes (15m, 1h, 4h, 1d) of the ticker on the user chart.

Returned BOS's are followed by a number, indicating the number of consecutive BOS succeeding a CHoCH.

Settings affecting the size and location of the dashboard are available in the General Style settings section of the toolkit.

Candle Coloring

Users can color candles depending on the detected internal market structures. This is useful if users want to be able to determine a detected internal market structure without having labels and lines on their chart, freeing up space on the chart to use other indicators.

Candle coloring is affected by the colors settings selected by the user for the internal market structures. Candle coloring is determined as follows:

  • Darker bullish color : Bullish CHoCH active
  • Regular bullish color : Bullish BOS active
  • Darker bearish color : Bearish CHoCH active
  • Regular bearish color : Bearish BOS active
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Users can make highlighted structures and candle colors monochrome from the General Styling settings by using the monochrome option in the Theme drop down menu.

Alerts

Builtins alerts are available for each supported market structures, including swing structures, internal structures, and equal highs/lows.