Price charts tell a story. To read it, you need to understand its underlying structure. This structure is built from a series of peaks and troughs, which traders call Swing Points—specifically, Swing Highs and Swing Lows. A Swing High is a peak price point that is higher than the prices immediately surrounding it. A Swing Low is the opposite, a valley lower than the prices on either side.

By connecting these points, you can map the market's skeleton. In an uptrend, you'll see a series of higher highs and higher lows. In a downtrend, you'll see a series of lower lows and lower highs. This sequence isn't just a pattern; it's the fundamental language of the market, telling you who is in control: buyers or sellers.

Not all swings are created equal. The market moves in waves, which can be broken down into two types: Major Structure and Minor Structure.

Major Structure is the primary trend, the big-picture movement defined by the most significant Swing Highs and Lows. This is the tide.

Minor Structure consists of the smaller swings that occur within the Major Structure. These are the ripples on the tide.

Recognising the difference is crucial. A small move against the main trend doesn't necessarily mean the trend is over. It's often just a minor pullback before the major trend continues.

This leads us to two key phases of market movement. An Impulse Phase is a strong, decisive move in the direction of the major trend. This is where price makes new highs in an uptrend or new lows in a downtrend. A Corrective Phase is a temporary pullback or consolidation against the trend. It's a pause, where the market catches its breath before the next impulse.

Once you can map the structure, you can spot when it changes. There are two key events to watch for: the Break of Structure and the Change of Character.

A Break of Structure (BOS) is a confirmation. In an uptrend, it happens when an impulse move pushes price above the previous major swing high. This signals that the trend is healthy and likely to continue. In a downtrend, a BOS occurs when price breaks below the previous major swing low. Think of it as the market saying, "Yes, we're still going this way."

A Change of Character (CHoCH), on the other hand, is an early warning. It's the first potential sign that a trend is losing steam and might be about to reverse. In an uptrend, a CHoCH occurs when price fails to create a new high and instead breaks below the most recent swing low that led to the last high. It's a shift in behaviour, a crack in the trend's foundation. It doesn't guarantee a reversal, but it tells you to pay very close attention.

By combining these concepts, you can build a dynamic map of the market. You identify the major trend with its impulse and correction waves. You then watch for a Break of Structure to confirm its strength or a Change of Character as the first sign of weakness. This framework provides the essential context needed to make informed trading decisions.

Let's test your understanding of these structural dynamics.

Mastering market structure is a foundational skill. It turns a chaotic-looking chart into a coherent narrative of buying and selling pressure.