MTF Market Structure - SMC Indicators

14 de dez. de 2023

The Multi Timeframe Market Structure helps understand and identify bullish or bearish Market Structure by highlighting “KEY” Highs and Lows. It also identifies changes in market direction by identifying a “Shift in Market Structure” (See Point 2 below) or “Break in Market Structure” (See Point 3 Below).

What are Key Highs and Lows?

Not every high or low is a “Key” high or low. “Key” highs and lows are specific highs and lows that form the structure of the market and have significance in understanding the current trend in the market (see point 1 below).

The indicator identifies these “Key” highs and lows on multiple time frames, allowing the trader to keep a perspective of the Market Structure with multiple timeframes simultaneously (see point 5 below).

The key highs and lows identified by the indicator are as follows:

Key Lows: Identify significant Swing Lows, Short-term lows “STL”, Intermediate-Term Lows “ITL”, and Long-Term Lows “LTL”.
Key Highs: Identify significant Swing Highs, Short-term highs “STH”, Intermediate-Term Highs “ITH”, and Long-Term Highs “LTH”.

Significant Swing High: This is a price swing with one lower candle to the right and one lower candle to the left of it.
Significant Swing Low: This is a price swing with one higher candle to the right and one higher candle to the left of it.

https://www.tradingview.com/x/vYloxfpI/

Short-Term High “STH” is a price swing with one lower Significant Swing High to the right and one lower Significant Swing High to the left of it.
Short-Term Low “STL” is a price swing with one higher Significant Swing Low to the right and one higher Significant Swing Low to the left of it.

https://www.tradingview.com/x/YOhGzB8w/

Intermediate-Term High “ITH” is a price swing with one lower STH to the right and one lower STH to the left of it.
Intermediate-Term Low “ITL” is a price swing with one higher STL to the right and one higher STL to the left of it.

https://www.tradingview.com/x/aIbsM036/

Long-Term High “LTH” is a price swing with one lower ITH to the right and one lower ITH to the left of it.
Long-Term Low “ITL” is a price swing with one higher ITL to the right and one higher ITL to the left of it.

https://www.tradingview.com/x/BD9gK21c/

By identifying key highs and lows using the Market Structure Indicator, it can be used in multiple ways by using those reference points as follows:

1. Identifying Market Trends by Connecting Key Highs and Lows.

Bullish trend identification is when the indicator is making higher ITLs and ITHs.

https://www.tradingview.com/x/WrqTwWCo/

Bearish Trend identification when the indicator is making lower ITLs and ITHs.

https://www.tradingview.com/x/3QAzDo7c/

PS: it’s essential to understand the underlying market trend on multiple timeframes to use the next features correctly. Always use the Shifts and Breaks in Market Structures in line with the 1H or higher timeframes Market Trend for higher probability trade opportunities. This is because, generally, higher timeframes have more importance than lower timeframes.


2. Shift In Market Structure - SMS for Entries

A Shift in Market Structure “SMS” identifies potential reversal in short-term market trend relative to the timeframe where the SMS is identified.

This occurs after a run of any Significant Swing High or Low and then reversing, creating a Fair Value Gap “FVG”.

There can be Bullish and Bearish Market Structure Shifts.

When a Bullish Shift in Market Structure occurs, the indicator identifies an opportunity for the price to change from Bearish to Bullish, as seen in the image below.

https://www.tradingview.com/x/R9H832PQ/

When a Bearish Shift in Market Structure occurs, the indicator identifies an opportunity for the price to change from Bullish to Bearish.


3. Break In Market Structure - BMS for Entries

A Break in Market Structure “BMS” has a similar function to the Shift in Market Structure “SMS”; however, when it occurs, it identifies a potential longer-term trend reversal (compared to the SMS) relative to the timeframe where the BMS is identified.

Unlike “SMS”, the BMS occurs after a run only after a run on Key Highs or Lows.

Similar to the SMS, there can be Bullish and Bearish Breaks in Market Structure.

When a Bullish Break in Market Structure occurs, the indicator identifies an opportunity for a longer-term trend change from Bearish to Bullish, as seen in the image below.

The FVG must occur in the lower 50% of the impulse price leg (at Discount).

https://www.tradingview.com/x/NrwQtSs1/

When a Bearish Break in Market Structure occurs, the indicator identifies an opportunity for a longer-term trend change from Bullish to Bearish.

The FVG must occur in the upper 50% of the impulse price leg (at Premium).


4. Inversion Break and Shift in Market Structure for Early Entries

Inversion “BMS” and “SMS” are similar to the normal SMS and BMS, but they occur:

Bullish: When the FVG of the Bearish BMS/SMS forms in the lower 50% of the impulse price leg (at Discount).
We use the FVG that forms from the Bearish SMS/BMS as an inversion FVG for potential entry after market trend change from Bearish to Bullish.

https://www.tradingview.com/x/MhVPNSqM/

Bearish: When the FVG of the Bullish BMS/SMS forms in the upper 50% of the impulse price leg (at Premium).
We use the FVG that forms from the Bullish SMS/BMS as an inversion FVG for potential entry after market trend change from Bullish to Bearish.

https://www.tradingview.com/x/6jfTsGZm/


5. Multi Time Frame analysis

The indicator allows multiple timeframe perspectives to be considered when using it.

The key Highs and Lows have significance not only on the current timeframe they are identified but also on lower or higher timeframes simultaneously.

This is because a ITL/ITH on the 1H means

It’s a LTL/LTH on one or more timeframes lower (15Min, 5M, and 1Min).

https://www.tradingview.com/x/Wzi7ZGxN/

https://www.tradingview.com/x/J6USCmq3/


And at the same time, it’s a STL/STH on one timeframe higher (4H)

https://www.tradingview.com/x/zO52bnax/

Also, it’s a Significant Low/High (marked with a dot) on two timeframes higher (Daily).

https://www.tradingview.com/x/QvSzI9T9/

The same logic applies to all other Key Highs and Lows.

Another example is a Significant Low/High (swing marked with a dot below or above it) on the current timeframe (1D) means it’s a STL/STH on one timeframe lower (4H) and an ITL/ITH on two timeframes lower (1H) and a LTH/LTH on three timeframes lower or more (15M, 5M, 1Min, 30 Seconds, etc…).

This Multi-time frame analysis is a great way to help traders understand Market Structure and Market trend on multiple timeframes simultaneously, and it also assists in Top-down analysis.

PS: Note that this multi-timeframe analysis approach and logic can be applied to any timeframe and for any type of trading (swing trading, day trading, scalping, or short-term trading) because the price is fractal.

For example, if a trader is a swing trader, then it’s best to identify trader opportunities on the 1H or higher; however, lower timeframes Market Structure can still be used to help the traders refine their entries and target key highs and lows in the opposite direction.

If a trader is a day trader or a scalper, the trader could use Market Structure on 15M or lower to identify trader opportunities and target key highs and lows in the opposite direction.


6. Setting Targets

The indicator can also be used to identify potential targets after the SMS or BMS occurs. Targets can be chosen above Key Highs or Lows depending on the trade objective and timeframe where the trade idea is identified.

https://www.tradingview.com/x/EIkBcWg3/


Bonus Features

Highlight Market Structure Trend

This feature is an excellent backtesting visual tool to look at changes in market trends highlighted in colours. These changes are based on the Shift or Break in of Market Structure depending on the selection option.

When "Shift/Break" in Market Structure" is selected, a Bullish trend is highlighted in blue when a Bullish Shift/Break in Market Structure Occurs and in Red when a Bearish Shift/Break in Market Structure Occurs.

https://www.tradingview.com/x/F5HawHfe/

Notifications

Sends notifications when there is a Shift or Break in Market Structure on the current timeframe of choice.