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As a Trader, it is our first priority to catch reversals in the market. This task seems as an easy one, but in real market this task is difficult than any other task in the market. As an ICT trader, we collect probabilities and confluences of other ICT concepts. This helps us to predict the short-term or long-term reversal (depends upon your market timeframe analysis).
In ICT, Market Structure Shift (MSS) is used to predict the reversal in the market. However, this alone does not deliver guaranteed results. Multiple ICT concepts are combined to get the results. This article explores basic understanding of ICT market Structure. How the swing highs and swing lows are formed, and bullish and bearish market structure.
Understanding of ICT Market Structure
Understanding market structure is crucial in ICT market analysis. Understanding structure is the most important things in ICT and SMC concept. Strategies and concepts will not work in the market if our structure mapping in incorrect.
Before mapping ICT market Structure, we have to be clear about the type of trader we are. It would be or first job to decide whether we are intraday trader, swing trader, or position trader. This helps us to select specific timeframes. For example, if we are position trader, we will select monthly, weekly, and daily charts. The following frameworks are used for ICT structure mapping and trade management:
Position Trades | Monthly, Weekly, and Daily |
Swing Trades | Daily, 4 Hour, and 1 Hour |
Short-term Trades | 4 Hour, 1 Hour, and 15 min |
Day trading and Scalps | 1 Hour, 15 Min, and 5 Min |
The Higher timeframe in each type of trading is used for structure mapping, middle timeframe is used for trade management, and the third one is used for confirmations and entries.
Market moves by creating higher highs and higher lows, and lower lows and lower highs. These highs and lows are composed of intermediate and short-term lows and highs. At first, it seems easy to mark the structure on live market but we have to be cautious while marking highs and lows in the market. Not all MSSs are considered as reliable. MSS from HTF resistance and support are considered as genuine. HTF PD Arrays are also taken in considerations.
ICT Swing High and Swing Low
For understanding ICT market structure shift, one must know how to mark swing high and swing low in ICT market analysis. Swing high, in ICT, is a three-candle formation. In this candlestick pattern, the high of the middle candle is higher than the first and third candle. It can be like that:
Swing Low, in ICT, is a three-candle formation. In this candlestick pattern, the low of the middle candle is lower than the first and third candle. It can be like that:
There is one more thing that adds strength in market structure shift. If market breaks the structure with a displacement move. It is considered as powerful sign of trend reversal.
ICT Market Structure Shift in Trading
Market structure shift is an initial sign of change trend. MSS is a trend reversal which can be either short term or long-term change in market structure. It is different from temporary pause or retracement.
In a Bullish market, price moves by creating higher highs and higher lows. This reflects upward price movement. When price breaks below the last higher low with a strong move and makes a lower low. It is a Market Structure Shift. This shift of structure denotes that buyers are losing control in the market and soon the downtrend will start.
In a Bearish market, price moves by creating lower lows and lower highs. This reflects downward price movement. When price breaks below the last lower high with a strong move and makes a higher high. It is a Market Structure Shift. This shift of structure denotes that sellers are losing control in the market and soon the uptrend will start.
In ICT trading these signs are used to spot early reversal signs. This is because when change of character on higher timeframe occurs, trader often miss opportunities and entries in the market.
ICT Bullish Market Structure Shift
A bullish MSS occurs when price movement transitions from a bearish trend to a bullish trend. Price breaks a recent swing high (lower high) with a strong bullish displacement move. Displacement move is a decisive price action driven by institutional participation. This also reflect a shift in control from sellers to buyers.
This shift in market structure is an early indication of a potential bullish trend. In the price action, there is an offer to align with the trend direction. Strategies are often combined especially in ICT trading. We must look for liquidity sweeps and grabs, order blocks, breaker blocks or fair value gaps.
As we emphasized on the importance on timeframe selection. In HTF market respect resistance or support level (or supply/demand zone). After that we zoom into the third timeframe for entries and confirmations. There must be market structure shift and then, for additional confirmation, we look for additional ICT concepts.
ICT Bearish Market Structure Shift
A bearish MSS occurs when price movement transitions from a bullish trend to a bearish trend. Price breaks a recent swing low (higher low) with a strong bearish displacement move. Displacement move is a decisive price action driven by institutional participation. This also reflects a shift in control from buyers to sellers.
This shift in market structure is an early indication of a potential bearish trend. In the price action, there is an offer to align with the bearish trend direction. Strategies are often combined, especially in ICT trading. We must look for liquidity sweeps and grabs, order blocks, breaker blocks or fair value gaps.
As we emphasized on the importance on timeframe selection. In HTF market respect resistance (or supply zone). After that we zoom into the third timeframe for entries and confirmations. There must be market structure shift and then, for additional confirmation, we look for additional ICT concepts.
Final Note
Understanding and applying the ICT Market Structure Shift (MSS) requires practice and a clear grasp of price action principles. Always combine MSS with ICT concepts, such as liquidity zones and order blocks, to enhance accuracy. Patience and discipline are essential for successful trading.
Trading in financial markets involves significant risk and may not be suitable for all investors. The concepts discussed, including MSS, are educational and should not be considered financial advice. Always conduct thorough research and use proper risk management techniques. Only trade with capital you can afford to lose.
What is ICT Market Structure Shift (MSS)?
ICT Market Structure Shift is a change in the market’s direction. It is identified by the break of a significant swing high or low. It signals a change of trend (from bullish to bearish or bearish to bullish). This break helps traders spot potential reversal.
How to identify Market Structure Shift in an uptrend?
In an uptrend, market moves by creating higher highs and higher lows. So, MSS in an uptrend is an indication of trend reversal. This happens when the price breaks a previous higher low with a strong bearish displacement move. This signals a shift of trend from Bullish to Bearish.
How to identify Market Structure Shift in an downtrend?
In a downtrend, market moves by creating lower lows and lower highs. So, MSS in a downtrend is an indication of trend reversal. This happens when the price breaks a previous lower high with a strong bullish displacement move. This signals a shift of trend from Bearish to Bullish.
Can MSS used alone in ICT trading?
MSS is used along with other ICT concepts. Along with other fundamental concepts, a proper confluence of ICT concept is created in order to gain accuracy in trading.
I’m Aatiq Shah, a dedicated forex and crypto market practitioner with three years of hands-on experience. Currently, I’m working as a Financial Manager. My journey in the world of finance has equipped me with the skills and knowledge needed to navigate the complexities of the forex and crypto markets.