Direct answer
A worked example of market structure is a step-by-step scenario where you (1) define what counts as a swing high and swing low, (2) label those points on a simple price sequence, and (3) demonstrate what “break” and “shift” mean using only the provided numbers. The goal is not predicting results; it is making the logic testable and repeatable.
Mechanism or definition
Market structure is a way to describe the sequence and relative arrangement of local highs and lows in price over time. In practical use, the “structure” you track depends on explicit rules such as:
- Swing high/low rule: A swing high is a price point higher than its neighbors within a chosen lookback window; a swing low is lower than its neighbors.
- Trend (context): Often described as whether successive swing highs are rising and successive swing lows are rising (or the opposite).
- Break/shift concept: A “break” is when price moves beyond a previously labeled key level (for example, beyond a prior swing high in an up-context). A “shift” often means the structure changes from making progress in one direction to stalling or making contrary swing points.
Because these rules are choices, a worked example must state them up front.
Evidence or example (transparent, numerical, with assumptions)
Assume a simplified, non-real-time sequence of closing prices (no spreads, no gaps), indexed by time:
Time t: 1 2 3 4 5 6 7 8 9 10 Price: 100,103,101,106,104,108,107,109,105,107
Assumptions (state everything):
- Swing definition: With a lookback of 1 step, a swing high at time t means price[t] > price[t-1] and price[t] > price[t+1]. A swing low means price[t] < price[t-1] and price[t] < price[t+1].
- Key level: The most recent swing high in the current structural context is the “key level” to monitor for a break.
- No commissions/costs: This example ignores trading costs; it only labels structure.
Step 1: Label swing points using the rule
- t=2 (103) is a swing high? Check neighbors: price[1]=100, price[3]=101; 103 > 100 and 103 > 101 ⇒ swing high at t=2 (103).
- t=3 (101) is a swing low? neighbors 103 and 106: 101 < 103 and 101 < 106 ⇒ swing low at t=3 (101).
- t=4 (106) is a swing high? neighbors 101 and 104: 106 > 101 and 106 > 104 ⇒ swing high at t=4 (106).
- t=5 (104) is a swing low? neighbors 106 and 108: 104 < 106 and 104 < 108 ⇒ swing low at t=5 (104).
- t=6 (108) is a swing high? neighbors 104 and 107: 108 > 104 and 108 > 107 ⇒ swing high at t=6 (108).
- t=7 (107) is not a swing high/low using this strict neighbor rule because it is between 108 and 109.
- t=8 (109) is a swing high? neighbors 107 and 105: 109 > 107 and 109 > 105 ⇒ swing high at t=8 (109).
- t=9 (105) is a swing low? neighbors 109 and 107: 105 < 109 and 105 < 107 ⇒ swing low at t=9 (105).
Step 2: Describe structure change using the key-level idea
Prior to time 8, swing highs were rising: 103 → 106 → 108 → 109, while swing lows were also moving up: 101 → 104 → (then 105 after the pullback).
Now consider a “break” beyond the previous key swing high:
- The key swing high right before the drop is at t=8 (109).
- After t=8, price falls to t=9 (105) and then rises to t=10 (107). Under this example’s strict swing definition, the structure shows a pullback that creates a new swing low at t=9.
Step 3: Measured move (scenario math, not prediction)
If you want a purely arithmetic measurement from labeled points, compute the move from the prior swing high (109 at t=8) down to the new swing low (105 at t=9):
- Measured decline = 109 − 105 = 4 points.
This 4-point figure is just a description of how far price moved between two labeled structural points. It does not claim what will happen next.
Limitations and risks (material failure modes)
- Rule sensitivity: Changing the swing rule (lookback window, strict vs.