Market structure in gold trading
Market structure is the sequence of swing highs and lows: higher highs and higher lows define an uptrend in gold, lower highs and lower lows a downtrend.
Also called Structure, Trend structure, HH/HL and LH/LL
Market structure describes a chart in terms of its swing points. An uptrend is a series of higher highs (HH) and higher lows (HL); a downtrend is lower highs (LH) and lower lows (LL); a range is neither. Structure is the backbone of Smart Money and ICT analysis: a break of structure (BOS) confirms the trend is continuing, and a change of character (CHoCH) warns it may be reversing. Everything else, order blocks, fair value gaps and liquidity, is read in the context of structure.
How it applies to gold trading
Reading structure on gold starts on the 4-hour or daily chart, then moves down. If the daily structure is bullish (HH, HL) and the 15-minute chart has just printed a CHoCH to the upside after a pullback into a daily level, the two agree and a long has context. If the 15-minute chart prints a BOS to the downside while the daily is bullish, that is likely a pullback, not a reversal, until the daily structure itself changes.
Structure also places stops: below the most recent higher low in an uptrend, because a break of that low changes the structure and invalidates the long.
A common mistake
Labeling every small wiggle as a structural swing. The swings that define structure are the ones that produced a meaningful pullback on the timeframe being analyzed.
See also: BOS, CHoCH, Swing high and swing low, Multi-timeframe analysis.
Frequently asked questions
How do I read market structure on gold?
Mark the significant swing highs and lows on the 4-hour or daily chart and note whether each is higher or lower than the last. Then repeat on the lower timeframe you trade, and look for setups that agree with the higher one.
What is the difference between a BOS and a CHoCH?
A BOS breaks a swing in the direction of the existing trend (a new higher high in an uptrend). A CHoCH breaks a swing against it (the first lower low in an uptrend), and is the earliest sign of a possible reversal.