True Market Structure
Overview
The True Market Structure is a technical analysis tool designed for use across all timeframes. It identifies and visualizes market structure breaks (MSBs) and break of structure (BOS) events, emphasizing interim highs and lows using the "Deroz Wick" system. Unlike many other indicators, this tool does not rely on traditional pivot points, making it a unique addition to any trader's toolkit.
How It Works
The True Market Structure indicator uses a combination of algorithms to detect and highlight significant market structure events. By analyzing price action and identifying key levels, the indicator aids in understanding potential reversal points and trend continuations.
- Bull and Bear Market Structures: Differentiates between bullish and bearish market structures, applying distinct color settings for easy visualization.
- Customizable Settings: Users can tailor the indicator’s appearance and functionality to their preferences, including toggling lines, labels, and selecting between SWING and INTERIM MS settings.
How our market structure indicator is different
All known market structure indicators work with pivot points. This is a lookback function to find highs and lows within a certain period and then producing market structure.
Our indicator doesn't work like this as the DCAquant True Market Structure finds swing and interim lows and saves it into memory thus giving us the ability to create real market structure breaks and BOS’s.
This is achieved when an MSB or BOS is triggered the script will perform a check through its memory to find previous Interim or swing which ever setting the user has selected.
A saved interim or swing will never change unless it is broken giving you true market structure, this Indicator cannot repaint because it only produces breaks whenever candle is closed.
The next MSB or BOS you see on the chart are the direct function of saved memory points which gives clear indication of true market structure.
Almost 500 lines of code to give you True Market Structure usable on any timeframe.
Key Features
1. Market Structure Breaks (MSBs) and Break of Structure (BOS)
- Market Structure Breaks (MSBs): Occur when the price breaks through a previous significant high or low, indicating a potential reversal or continuation of the current trend.
- Break of Structure (BOS): Highlights significant breaks in market structure, providing insights into potential trend changes.
2. Visualization Options
- Customizable colour settings for both bull and bear market structures, ensuring it integrates with any chart setup.
- Options to enable or disable lines and labels for flexible information display.
3. The WICK System
- Standard WICK System: Identifies wicks based on standard high/low calculations.
- Deroz WICK System: Enhances the standard WICK system by looking back at price history and replacing the standard wick if an even lower or higher wick is found in the subsequent bar.
4. MS Settings
- SWING Setting: Sets future MSB events at swing highs/lows, offering a broader market perspective.
- INTERIM Setting: Sets future MSB events at interim highs/lows, providing more immediate and frequent market structure updates.
Understanding Market Structure
Market structure is defined by a series of price actions that form recognizable patterns indicating the current trend. Key elements include:
- Higher Highs (HH) and Higher Lows (HL): Indicate an uptrend, where each successive high and low is higher than the previous one.
- Lower Highs (LH) and Lower Lows (LL): Indicate a downtrend, where each successive high and low is lower than the previous one.
Application in Breakout Trading
Market structure analysis is crucial for breakout trading, where traders seek to capitalize on significant price movements following a break of established price levels.
- Uptrend Breakouts: Traders watch for breaks above higher highs as potential entry points for long positions.
- Downtrend Breakouts: Traders watch for breaks below lower lows as potential entry points for short positions.
Visual Representation
Indicator Settings
Standard WICK vs. Deroz WICK System:
Standard WICK
Deroz WICK
SWING MSB
INTERIM MSB
Summary
The True Market Structure indicator provides a clear and detailed view of market structure changes. By highlighting key MSB and BOS events and incorporating advanced wick detection through the Deroz WICK system, this tool can aid in making informed decisions based on a thorough understanding of market dynamics. However DCAquant recommends using this indicator as part of a system.