0:00

Hi and welcome to the Day

0:02

Trading for Beginners podcast. This is

0:04

season 3 episode 2 and in

0:06

this episode we are talking about

0:08

market structure. So my name

0:10

is Tyler Stokes from Stokes Trades.com. I'm

0:12

on a journey to become a full-time

0:15

day trader and here we want

0:17

to talk about market obstruction. Now

0:19

this is something I probably should

0:21

have covered in season 1 when

0:23

we were talking all about technical

0:25

analysis. It's very much a beginner

0:27

type of... topic, however, I didn't get

0:30

around to it until now in season

0:32

three and I'm kind of glad I

0:34

did in terms of this podcast because

0:36

over the last six months of me

0:38

studying a strategy, actually looking at charts,

0:41

I've come to actually personally understand market

0:43

structure a lot better and I think

0:45

that this podcast is going to be

0:47

more beneficial. Now releasing it now

0:49

as opposed to when I was sort

0:51

of just learning it Myself so as

0:54

always below this video you can find

0:56

some resources If you are a first

0:58

time listener you can go and download

1:00

the six-month blueprint you go to stokes

1:02

trades.com/blueprint or you can find a link

1:04

in the show notes And that's going

1:06

to help you get on the right

1:08

path to starting your day trading journey

1:11

as well as our community on school

1:13

you can find a link to that

1:15

below this video here we are talking

1:17

market structure form I'm hoping that this

1:19

is going to be useful but do

1:21

check out the links below because I

1:23

am eventually going to have a YouTube

1:25

video about this where we are going

1:27

to actually look at some charts and

1:30

that's going to be you know much

1:32

more beneficial as well and as with

1:34

all these types of podcasts This is

1:36

just an introduction. Certainly you will

1:38

want to find other resources for

1:40

market structure. I don't take this

1:42

one podcast as the only resource

1:44

you need to sort of master

1:46

this. Many people explain market structure

1:48

a little bit differently, specifically the

1:50

various time frames that you are

1:52

looking at in market structure. So

1:54

it's always good to get a

1:56

bunch of touches on this from

1:58

various people to fully. sort of

2:00

understand. But here what we want to

2:03

do, talk about market structure, sort of

2:05

more of a beginner type of discussion,

2:07

and talk about just a few key

2:09

terms with market structure, and talk more

2:12

about the high time frame market structure,

2:14

because that's what I personally have been

2:16

looking at in terms of my trading

2:19

over the last sort of six months.

2:21

I'm doing more of a momentum type

2:23

of trading strategy, because day trading for

2:26

me at the moment is not working

2:28

with my... personal schedule, but momentum trading

2:30

is working much better because I don't

2:32

need to look and trade every single

2:34

day. I just can't be doing that

2:37

right now. So personally, high time frame

2:39

market structure is something I've been

2:41

looking at. So weekly charts and more

2:43

of a monthly charts, but depending on

2:46

what trading strategy you look at, you

2:48

know, you might be looking at market

2:50

structure on the hourly chart, and then

2:53

things are going to be just a

2:55

little bit different. So just keep in

2:57

mind when you're studying market structure. explanations

2:59

are certainly going to differ based on

3:02

the time frame that you are trading

3:04

your securities or whatever you are trading.

3:06

Now I'm recording this podcast March 1st

3:09

so it's actually a good time to

3:11

think about market structure because you know

3:13

we have been in a bullish market and

3:15

recently in the last week or so

3:18

the last week of February there's been

3:20

quite a bit of a sell-off but

3:22

you know many people are going to

3:24

say you know the bare markets here

3:26

we're going to you know be finding

3:28

even lower lows or you know, Bitcoin

3:30

is no longer going to, you know,

3:32

rise the rest of the year. It's

3:34

always good to take a step back,

3:36

look at the high time frame support

3:38

and kind of see, you know, is

3:40

the market structure for sort of a

3:42

monthly time frame still intact? Are you

3:44

still making higher highs and higher lows?

3:47

So it'll be interesting to see, you

3:49

know, in the coming weeks, you know,

3:51

a lot of this sell-off is just,

3:53

you know, you know, a liquidity

3:55

grab a chance for the market

3:57

makers prices down because they've been

3:59

overextended. and then still maintain this healthy

4:01

bullish market structure. So hopefully at the end

4:03

of the podcast, you'll be able to go

4:06

into trading view, look at some charts, and

4:08

sort of understand that and kind of compare

4:10

it with what's going on in the real

4:12

market right now in terms of, you know,

4:15

some selloffs, but maybe, you know, it's just

4:17

a temporary push down and the market structure

4:19

is still positive. So basically, you know,

4:21

if you are new to trading, Or perhaps

4:24

you've been following along and you've actually been

4:26

doing some paper trading, you've been looking at

4:28

some charts. You know, event, when you were

4:30

starting out, I think every trader, when they

4:33

start out, they look at these price starts,

4:35

they look at candlestick charts, and they're sort

4:37

of wondering, you know, how can you make

4:39

sense of this all? Well, Understanding

4:42

market structure can help you get a

4:44

clear story of what is going on

4:46

with that particular stock or that security.

4:49

You can spot trends, you can potentially

4:51

predict reversals, and you can trade with

4:53

much more confidence when you understand market

4:56

structure. So in this podcast, what we

4:58

want to do is talk about it

5:00

for the beginner and just learn some

5:03

basics of things like a BOS, a

5:05

break of structure. So what that means.

5:07

Talk about a change of character. That's

5:10

another main term. And then just talk

5:12

about the general patterns of market structure,

5:14

so higher highs and higher lows. And

5:16

again, below the podcast, we're going to

5:19

have a link eventually where you can

5:21

see a YouTube video of this. It's

5:23

going to help actually seeing some visuals

5:25

as well. So we're going to have

5:28

some examples in this podcast. So if

5:30

you're listening, you can kind of understand.

5:32

They're going to be very simple stock

5:34

prices. Just understand that. they are just

5:37

for example purposes you know stocks move

5:39

much differently up and down and so

5:41

on but we're gonna use some round

5:43

numbers just to make it more easy

5:46

to understand through audio so basically market

5:48

structure well what is it well it's

5:50

the you know the shape prices carve

5:52

out on a chart over time so

5:54

it's how traders figure out if the

5:56

market's trending up so higher highs higher

5:59

lows or trend down lower highs and

6:01

lower lows are just you know drifting

6:03

sideways that's consolidation so you can think

6:05

of it if you want like a

6:08

river this was an analogy from Grock

6:10

that I got you know up close

6:12

you can see little waves and that's

6:15

kind of like short-term moves but if

6:17

you step back you can see the

6:19

whole flow and that's like the bigger

6:22

picture trends so the catch like I

6:24

mentioned is that time scales that you're

6:26

looking at will matter a lot so

6:29

If you're looking at an hourly, a

6:31

daily chart, or a weekly chart, it

6:33

certainly does change the story about the

6:36

various structure of that particular market on

6:38

that time frame. So an hourly chart

6:40

might show that a stock is climbing

6:43

fast with each peak and dip higher

6:45

than the last. So making higher highs

6:47

and higher lows, that's an up trend

6:50

on a short time frame. But when

6:52

you zoom out to a weekly chart.

6:54

You'll see that those wiggles might sort

6:57

of flatten out into nothing and reveal

6:59

a bigger slower move that you may

7:01

have missed and it might be, you

7:04

know, trending actually down. So neither view

7:06

isn't necessarily wrong. They're just through a

7:08

different lens. So it's important to understand

7:11

that short-term traders, you know, they will

7:13

chase these hourly waves, long-term traders are

7:15

more concerned with, you know, the weekly

7:18

tides if you want to stick to

7:20

that river analogy. So you're going to

7:22

have to have to pick one. that

7:25

suits your trading strategy. I think based

7:27

on what I've learned over the last

7:29

year or so, it's always good to

7:32

just generally know the market structure in

7:34

terms of whatever strategy you're using. I'm

7:36

sure there are the trading strategies that

7:39

focus on short-term time frames that don't

7:41

really necessarily care if the general market

7:43

of or the general market structure of

7:46

the particular security. is bullish or barest.

7:48

I'm sure that's the case, but I

7:50

think it's always good to just generally

7:53

be able to look at the market,

7:55

look at the indexes, and just understand

7:57

if it is bullish, if it's in

8:00

an up trend, or if it's barest

8:02

and we're in it down. and market

8:04

structure certainly can tell you that. So

8:06

the building blocks of this is something

8:09

you've probably heard many times before, higher

8:11

highs and lower lows. So these patterns

8:13

are really the heartbeat of market structure.

8:16

They tell you who's winning. Are the

8:18

buyers winning or are the sellers winning?

8:20

What we're going to do is just,

8:23

again, use some clean numbers to keep

8:25

it simple. Again, real charts are much

8:27

more wild, but you'll get the gist

8:30

of it through these examples. If you

8:32

want to just think of this as

8:34

sort of a sketch, not a photo

8:37

in terms of what we're going to

8:39

talk about. So higher highs and higher

8:41

lows, that is an uptrend. So when

8:44

the price of a stock, for example,

8:46

it hits a new peak. So that's

8:48

a high. But then it dips and

8:51

stays above the last low, that's a

8:53

higher. low and then it climbs up

8:55

again. So example, say we've got a

8:58

stock that rises to $40, retraces back

9:00

to 38, that's the low, rises now

9:02

to 42, we have a higher high,

9:05

we're in an uptrend, and then it

9:07

might retrace back to 39, which is

9:09

a higher low. So 39 is higher

9:12

than 38, and 42 is higher than

9:14

40, we're going up in a zigzag,

9:16

that's an uptrend, higher highs. and higher

9:19

low. So it's like, you know, stairs

9:21

going up, the buyers are sort of

9:23

in charts here. Now, in terms of

9:26

strategy, we're not going to talk too

9:28

much about strategy, but sometimes people buy

9:30

when there is that pullback. So you

9:33

reach a higher 42, if it pulls

9:35

back to what is shown to be

9:37

confluence around a support zone at 38,

9:40

that might be an opportunity where people

9:42

buy and then the stock rises back

9:44

to 42. So there are strategies involved

9:47

with market structure in general. Lower highs

9:49

and lower lows. So now we're talking

9:51

a down trend. So price drops to

9:54

a new bottom, that's the low, bounces

9:56

but stays below the last high. We've

9:58

got a lower high. then it falls

10:01

again. So example, say we've got $50

10:03

as the high and we drop down

10:05

to 48, which is a low, and

10:08

then we rise back up but we

10:10

only get to 49. So it's a

10:12

high but it's lower than 50. We've

10:15

got a lower high and then we

10:17

drop down to maybe 46. We've got

10:19

a lower low. So we've got a

10:21

staircase going down, the sellers are sort

10:24

of in charge. So these are the

10:26

general structure very basic. of market structure

10:28

and then a change of character as

10:31

well. We want to talk a little

10:33

bit more technical about what's going on

10:35

here. We've got two sort of definitions

10:38

that we want to cover in this

10:40

podcast. One is called a break of

10:42

structure and you're going to learn this

10:45

and be aware of this when you

10:47

dive into more detailed analysis of market

10:49

structure and then a change of character

10:52

as well. So a BOS is break

10:54

of structure. You can think of this

10:56

as like the trends green light. So

10:59

a break of structure is when price

11:01

smashes past a key level proving that

11:03

the trend is still kicking. So in

11:06

an up trend, another example, price makes

11:08

a higher high, pulls back, and then

11:10

breaks above that high, that is a

11:13

break of structure. So if we've got

11:15

that example we were talking about, we've

11:17

got a $50 stock price, it dips

11:20

back to 48, and then it breaks

11:22

to 51. As it breaks 50 there.

11:24

That is a break of structure. Buyers

11:27

are flexing. The trend is still alive.

11:29

In a down trend, as price hits

11:31

a lower low, bounces, and then breaks

11:34

below that low, that is another break

11:36

of structure to the downside. So if

11:38

you've got $50, stock drops to 48,

11:41

then stock rises back to 49. and

11:43

turns around and drops to 47, we've

11:45

got a break of structure, drop below

11:48

the low of 48, a break of

11:50

structure to the downside. That is the

11:52

definition of that here the sellers are.

11:55

So a break of structure, a BOS,

11:57

it's a signal to stick with the

11:59

trend. It's confirming that things are still

12:02

moving in that direction. Now, the other

12:04

thing that we have here is called

12:06

a change of character. And that's when,

12:09

you know, it could be a warning

12:11

sign that the trend might be reversing.

12:13

So a change of character is when

12:16

the price breaks a key level against

12:18

the trend. So that could be a

12:20

hint that... we could be flipping the

12:23

trend here. So this might be, you

12:25

know, when the market whispers heads up,

12:27

things might be changing and it's good

12:30

time to be cautious no matter what

12:32

time frame you are looking at. So

12:34

again, in an up trend, if price

12:37

has been climbing but then drops below

12:39

a recent high and drops below that

12:41

recent high, we might be changing the

12:43

character of the trend. So examples here,

12:46

we've got $50 and then as the

12:48

high. we retrace a bit to 48

12:50

and then we hit 49 a lower

12:53

high then we come down to 47

12:55

we have a change of character there

12:57

we've got a lower high there so

13:00

basically we've got we were up we've

13:02

got a lower low or excuse me

13:04

a higher low and we come up

13:07

to a higher a lower high there

13:09

and we break down we could be

13:11

starting to a higher a lower high

13:14

there and we break down we could

13:16

be starting to lose to lose that.

13:18

So 48 was the higher low and

13:21

as we pull down we break past

13:23

that to 47. So we are no

13:25

longer in that higher high higher low

13:28

structure. We've broken it because we've dropped

13:30

below that higher low to 47. Now

13:32

in a down trend it's when you

13:35

know the change of character might be

13:37

to the upside. So we've got $50.

13:39

We move up to 52. That was

13:42

the previous lower high and then we

13:44

break. up to 54 so we've broken

13:46

the lower high the we've broken the

13:49

lower, high, lower, low structure and we're

13:51

breaking back up and changing the structure

13:53

from a downturn to an uptrend. So

13:56

again, a visual of this is probably

13:58

going to be beneficial for you, but

14:00

just understand that a change of character,

14:03

it's a heads up to rethink the

14:05

trade. There might be a shift in

14:07

the whole story. It's when you're no

14:10

longer making those perfect break of structures,

14:12

peaks from higher highs to higher low.

14:14

You've got something that's broken that... basic

14:17

framework of market structure and it could

14:19

be indicating that the trend is going

14:21

to reverse. Not always, but it could

14:24

be a sign to be cautious. So

14:26

if we put it all together, again,

14:28

just talking about some of these examples

14:31

here, again, up trend, we've got higher

14:33

highs and higher lows. We've got 50

14:35

to 48, up to 52, back to

14:38

49. We're making higher highs. When it

14:40

breaks to 52 there. breaks that 50

14:42

original peak, we've got a break of

14:45

structure. The buyers keep pushing up. This

14:47

is a time where people jump in.

14:49

We've got a shift now. So example,

14:52

we hit $55. And now we dip

14:54

to 53, which is a higher low.

14:56

Then we go up to 54. So

14:58

we don't make a new higher high.

15:01

We make a lower high. Then as

15:03

the security crashes down to 52. we

15:05

have a change of character. We've no

15:08

longer maintaining that low of 53. We

15:10

could be changing character. The uptrend, it

15:12

could be shaky, might be time to

15:15

exit, things might be going in the

15:17

other direction. So those are the general,

15:19

very basic, easy visuals of market structure.

15:22

So why does this matter for beginners?

15:24

Well, I think if you master these

15:26

basics again, if you jump to charts,

15:29

go to trading view You can get

15:31

a free trial with trading view. It's

15:33

the charting software that I use and

15:36

you can actually look at these charts

15:38

And you can start to try and

15:40

visualize this market structure and And allowing

15:43

being able to master this and being

15:45

able to see market structure, it's going

15:47

to give you an idea of the

15:50

direction without sort of guessing. You can

15:52

focus on the charts instead of the

15:54

news narratives. There might be news narratives

15:57

for whatever reason, but if the charts

15:59

don't sort of go along with those

16:01

narratives, then they could. be, you know,

16:04

could be just a distraction. It could

16:06

be all noise and no signal. So

16:08

you can focus on the charts when

16:11

you understand market structure and you can

16:13

trust your strategy if you understand market

16:15

structure. And then, you know, whatever strategy

16:18

you're using, you can use some of

16:20

your entry points or exit points based

16:22

on market structure that could be part

16:25

of your overall strategy. So what I

16:27

would do is, you know, start small,

16:29

you can get a free tool like

16:32

trading view, you can pick a stock.

16:34

like Apple or Tesla, anything, and start

16:36

marking the higher highs and the higher

16:39

lows on various time frames and see

16:41

if you can kind of match and

16:43

indicate when there's been a breaker structure

16:46

or there's been a change of character.

16:48

And soon, you know, the chaos on

16:50

the charts when you look at it

16:53

as a beginner will start to turn

16:55

into more of a story that you

16:57

can follow. Now final thoughts here, market

17:00

structure, it isn't a mystery, it's basically

17:02

price showing you whose boss, the buyers

17:04

or the sellers. So if you can

17:07

identify break of structures, you can ride

17:09

the trends, you can identify change of

17:11

characters, you might be able to spot

17:13

some reversals, and just understand the higher

17:16

highs, lower lows to keep track of

17:18

the direction that the security is going

17:20

in. Keep it simple practice, you know,

17:23

just following a stock for a period

17:25

of time. I've found that, you know,

17:27

I've been watching certain stocks over the

17:30

last six months and I've got a

17:32

better picture of how important market structure

17:34

is and sometimes, you know, I has...

17:37

someone who might be studying a day

17:39

trading strategy you might be only looking

17:41

at very low time frames so some

17:44

of this might feel like it doesn't

17:46

matter as much but if you can

17:48

kind of step back and get a

17:51

general sense of the the broader market

17:53

structure on a weekly or monthly time

17:55

frame, you can kind of see the

17:58

general direction that the market is going

18:00

and I think that's going to be

18:02

beneficial for any type of strategy that

18:05

you are using. Also, just to keep

18:07

in mind, we mentioned quite a few

18:09

times that you're looking at and trading

18:12

with is going to dictate whether the

18:14

market structure matters for your strategy. So

18:16

if you are doing a trading strategy

18:19

that I'm currently doing a momentum type

18:21

of trading, then the day-to-date fluctuations don't

18:23

really matter as much. The market structure

18:26

on an hourly chart isn't going to

18:28

dictate the trades that I might be

18:30

making. However, if you're day trading and

18:33

using much lower time frames, then that

18:35

market structure certainly is going to matter.

18:37

It's still the same. definitions, the same

18:40

theory of how everything works, but you're

18:42

looking at a lower time frame, that

18:44

market structure matters much more than the

18:47

weekly and the monthly time frames as

18:49

well. So I hope that you found

18:51

this useful. The best thing to do

18:54

and the main thing I want to

18:56

get across with this podcast is that

18:58

marker structure. is super important to understand.

19:01

I would recommend that you learn this

19:03

and you can understand, you can look

19:05

at a chart and understand the story.

19:08

I think it's gonna be beneficial for

19:10

any type of strategy that you do

19:12

end up using. So thanks so much

19:15

for listening below. Again, in the show

19:17

notes, we've got resources that you can

19:19

take advantage of, you can join our

19:22

community on school, which is free, and

19:24

eventually we'll have a video episode that

19:26

will demonstrate this with some visuals that

19:28

will be much. will be beneficial for

19:30

you as well, I believe. So thanks

19:33

so much for listening and we will

19:35

talk in the next episode.