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Market Structure Glossary

Quantified & Objective Trading Terminology

Core Terminology

Candidate High
The current highest price point under observation that is pending validation. It becomes a valid high only when a subsequent candle closes below the low of the candle that created this high point.
Candidate High
Candidate Low
The current lowest price point under observation that is pending validation. It becomes a valid low only when a subsequent candle closes above the high of the candle that created this low point.
Candidate Low
Valid High
A candidate high becomes validated when any subsequent candle closes below the low of the candle that created the high.
High Low of Candidate High Validation: Close
Valid Low
A candidate low becomes validated when any subsequent candle closes above the high of the candle that created the low.
Low High of Candidate Low Validation: Close
Break
Price trades through (wicks above or below) a specified level. Does not require a candle close.
Resistance Level for a valid High "Break" (Wick trades through)
Close
Price closes a candle above or below a specified level. Required for validation of highs and lows.
Resistance Level for a valid High "Close" (Body closes above)
Protected High
A valid high that becomes protected when price trades through (breaks) the previous valid low. This indicates a shift to bearish market structure.
Protected High (Once price breaks low) Valid Low Break!
Protected Low
A valid low that becomes protected when price trades through (breaks) the previous valid high. This indicates a shift to bullish market structure.
Valid High Protected Low (Once price breaks high) Break!

Validation Process

1
Identify Candidate High/Low
Locate a swing point where price forms a local high or low. Candidate High ? Candidate Low ?
2
Wait for Validation
  • For Valid High: Wait until a candle closes below the candidate low of the candle that formed the high
  • For Valid Low: Wait until a candle closes above the candidate high of the candle that formed the low
Valid High Example: Candidate High Low of Candiate High VALIDATED: Close Valid Low Example: Candidate Low High of Candidate Low VALIDATED: Close
3
Track Breaks
Monitor when price trades through levels (breaks). Note that breaks do not need a close to validate the break. Valid High Valid Low BREAK! (Price trades through)
4
Establish Protected Zones
Once a valid high or low is validated, the subsequent break of the opposing valid level creates a protected high or low, which defines market structure and trend direction. Valid High Valid Low BECOMES PROTECTED BREAK! This break... ...protects that low.

Key Clarifications