With swing points marked, you can describe any market in one of three states. Each swing high is compared with the previous swing high, and each swing low with the previous swing low.
Bullish structure
Higher highs (HH) and higher lows (HL). Buyers push price beyond the last high, and when sellers push back, they can't reach the last low. As long as each new low holds above the previous one, the uptrend is intact.
Bearish structure
Lower highs (LH) and lower lows (LL). Sellers push beyond the last low, and rallies fail before reaching the last high. The downtrend is intact as long as each new high stays below the previous one.
Ranging structure
Highs and lows at similar levels. Neither side can make progress. The range has a high and a low, and price rotates between them until one breaks. Ranges are where trends pause, and often where they reverse.
| State | Highs | Lows | Bias |
|---|---|---|---|
| Bullish | Higher highs | Higher lows | Look for buys |
| Bearish | Lower highs | Lower lows | Look for sells |
| Ranging | Equal-ish | Equal-ish | Trade the edges or wait |
Markets move between states
Trends don't usually flip in one candle. Typically an uptrend stalls, the highs stop progressing, price chops sideways, and then lower highs and lower lows appear. Reading which state you're in, and spotting the first signs of the next one, is the core skill of structure trading.
Key takeaways
- Bullish structure makes higher highs and higher lows; bearish structure makes lower highs and lower lows.
- A range shows highs and lows at similar levels, with neither side making progress.
- Compare each swing high with the last swing high, and each swing low with the last swing low.
- Markets usually move from trend to range to reversal, and the first lower high or higher low is the early warning.