# Price Action and Market Structure Define observable structure without hindsight labels. Use this workbook alongside the course. Write your answers before opening the solutions. Practical work is self-reviewed; scored knowledge checks are in the Academy. ## 1. Structure definitions ### Swing confirmation delay A swing definition may require later bars to confirm a local high or low. Record the confirmation delay. A swing marker drawn back on its turning bar can make a historical chart look as though the information was available earlier than it was. ### Higher highs and lower lows Higher highs and lower lows describe a chosen sequence of observations. Define the swing rule and timeframe before assigning a trend label. Different definitions can legitimately classify the same path differently. ### Ranges and transitions A range is a working description of repeated movement within specified boundaries. A transition requires an operational rule, not hindsight recognition after a large move. Specify how a range can be invalidated and how ambiguous cases are recorded. ### Timeframe dependence Structure depends on timeframe. A short-term decline can occur within a longer-term rise. Rather than forcing one label to be universally correct, state which horizon controls the decision and how conflicting horizons are handled. ### Worked example A local high at bar 5 is confirmed only after bars 6 and 7 close. A backtest entering at bar 5 because that marker exists later uses unavailable information. The earliest eligible decision must respect confirmation time. ### Independent exercise Define a two-bar confirmation rule and state when the high at bar 5 becomes usable. Include a case where a later higher bar prevents confirmation. My inputs and assumptions: My calculation or decision: Evidence that would change my conclusion: ## 2. Levels ### Support and resistance hypotheses Support and resistance are hypotheses about behavior near a reference area. A line does not prove resting liquidity or guarantee a reversal. Record how the area was chosen and what observation would weaken the hypothesis. ### Prior session extremes Prior-session extremes are reproducible only when the session and price stream are defined. A different timezone or bid/ask convention can alter the level. Preserve those definitions with the chart annotation. ### Round numbers Round numbers can be convenient reference points, but visual prominence does not establish predictive value. A research rule should specify the rounding increment and count all qualifying interactions, including those with no meaningful response. ### Level width and uncertainty Treat levels as areas with uncertainty rather than infinitely precise barriers. Width can be defined in price units or by a documented scale measure. Test whether conclusions survive reasonable changes in the width. ### Worked example A rule marks the prior session high with a tolerance of 0.5 price units. A price 0.4 above it is inside the area; a price 0.8 above is outside. This classification does not by itself determine whether to trade. ### Independent exercise Specify a level-selection rule, width and invalidation condition, then explain why the line alone is not an entry signal. My inputs and assumptions: My calculation or decision: Evidence that would change my conclusion: ## 3. Price behavior ### Break and retest A break-and-retest description needs separate rules for the break, return and confirmation. Without them, a reviewer may select only attractive completed examples. Define when the sequence expires if the return never occurs. ### Failed breakout A failed breakout is identified by a specified return or invalidation, not merely because the eventual trade lost. Record when failure becomes observable. Later knowledge should not be backdated to improve an entry or exit. ### Pullback versus reversal A pullback and reversal can share the same early price path. Their distinction may require later information. Use conditional scenarios and predetermined exits rather than assuming the label can always be known immediately. ### Gap and opening behavior Gaps and opening moves can skip prices. An apparent level crossing on a bar chart does not prove execution at that level. The strategy's fill model must allow for unavailable prices and adverse movement. ### Worked example A market moves from 100 directly to 103 across a planned trigger at 101. A historical line crossing does not justify recording a fill at 101 when no executable observation supports it. ### Independent exercise Write a conservative handling rule for the gap example and explain how it changes a backtest compared with an exact-trigger fill. My inputs and assumptions: My calculation or decision: Evidence that would change my conclusion: ## 4. Rule testing ### Predeclare annotations Write annotation rules before revealing the later chart. Use a fixed sample and preserve uncertain cases. This reduces the temptation to revise definitions around outcomes that are already visible. ### Measure observer disagreement Ask another learner to apply the same rules without seeing your labels. Disagreement identifies ambiguity in the specification. Agreement improves reproducibility but does not establish that the pattern is profitable. ### Count failed examples Count failures and non-events as well as successful examples. A collection of textbook winners is useful for recognition but not for estimating performance. Maintain a clear inclusion rule for the evaluation sample. ### Compare to a simple entry baseline Compare the proposed rule against a simple baseline using consistent costs and timing. Added complexity needs to justify itself through evidence. If both methods perform similarly within uncertainty, the more elaborate labels may not add useful information. ### Worked example Two reviewers agree on only 12 of 20 setup labels. Before evaluating profitability, inspect the eight disagreements and identify which wording caused different classifications. ### Independent exercise Design a revision process that improves rule clarity without deleting the disputed examples from the evaluation record. My inputs and assumptions: My calculation or decision: Evidence that would change my conclusion: ## Course project Annotate a fixed sample using written swing and break rules, including ambiguous examples. ### Self-review rubric - Concepts and reasoning: 25% - Calculations, data and evidence: 30% - Process and risk controls: 25% - Limitations and communication: 20% Record one correction and one next practice task. This rubric is not automatically graded. ## Worked solutions ### Exercise 1 The marker becomes usable after bar 7 closes if the stated comparison conditions hold. If the required later bars violate the rule, no confirmed swing exists under that definition. Store turning time and availability time separately. ### Exercise 2 The response should state observable construction and a condition that contradicts the idea. Entry still needs a trigger, cost assumptions and risk plan. A level is contextual information, not a complete trading system. ### Exercise 3 Use an available subsequent quote or a documented gap-fill assumption, including costs, and flag uncertainty. The result may be worse than the exact-trigger model; that difference is part of implementation feasibility. ### Exercise 4 Preserve original labels, document the revised wording and apply it to a new reserved sample. Keep the disputed cases as evidence of the earlier ambiguity rather than pretending the final rule was always clear. ## Further reading - https://www.tradingview.com/support/folders/43000587405/