Market Structure Deep Dive: Strong & Weak Highs/Lows

This lesson advances the concept of market structure by teaching how to differentiate between strong and weak swing points, which is key to anticipating future price movements.

Introduction: Not All Highs and Lows Are Created Equal

In basic market structure analysis, we identify trends by looking for Higher Highs (HH), Higher Lows (HL), Lower Highs (LH), and Lower Lows (LL). However, a more advanced perspective involves assessing the strength of these swing points. Understanding which highs and lows are "strong" (likely to hold) and which are "weak" (likely to be broken) provides a significant edge in predicting the market's next move.

Defining Strong and Weak Structural Points

The strength of a swing point is determined by its role in breaking structure.

• Strong High: A swing high that leads to a Break of Structure (BOS) to the downside (i.e., it creates a Lower Low). This high has proven its strength by successfully pushing prices lower and breaking a previous low. It is considered a protected high, and the market is less likely to break above it in the near term.

• Weak High: A swing high that fails to break a previous low. It has not proven its strength. This high is considered a target for liquidity, and the market is likely to eventually trade above it.

• Strong Low: A swing low that leads to a Break of Structure (BOS) to the upside (i.e., it creates a Higher High). This low has proven its strength by successfully pushing prices higher and breaking a previous high. It is considered a protected low, and the market is less likely to break below it in the near term.

• Weak Low: A swing low that fails to break a previous high. It has not proven its strength. This low is considered a target for liquidity, and the market is likely to eventually trade below it.

The Market Flow: Targeting Weak Points

Price naturally flows from strong points to weak points. The market will move to take out the liquidity resting at weak highs and lows.

• In an uptrend, the Higher Lows (HLs) that cause a Break of Structure (creating a new HH) are strong lows. The Higher Highs (HHs) themselves are initially considered weak highs because they have not yet caused a downside BOS. The expectation is that the next pullback will form another strong HL, which will then target and break the previous weak HH.

• In a downtrend, the Lower Highs (LHs) that cause a Break of Structure (creating a new LL) are strong highs. The Lower Lows (LLs) are initially considered weak lows. The expectation is that the next rally will form another strong LH, which will then target and break the previous weak LL.

How to Use This Concept

• Trade Direction: This concept helps you stay on the right side of the market. In an uptrend, you should be looking for buying opportunities from strong lows, targeting the weak highs. You would not want to sell at a weak high, expecting it to hold.
• Stop-Loss Placement: Place your stop-loss below a confirmed strong low (for a long trade) or above a confirmed strong high (for a short trade). These levels are less likely to be violated.
• Take-Profit Targets: Weak highs and lows are natural targets for your take-profit orders.

Conclusion

By moving beyond simply identifying swing points and starting to assess their strength, you can develop a much more nuanced and predictive understanding of market structure. This framework helps you anticipate which levels are likely to hold and which are likely to be run for liquidity, forming a cornerstone of advanced SMC analysis.

In the next lesson, we will begin our deep dive into Points of Interest (POIs), starting with a refined look at Order Blocks.