Reading structure from swing points
Structure is the sequence of swing highs and swing lows. A swing high is a candle whose high is above the highs of the candles on both sides of it; a swing low is the mirror image. In the playbook a swing is only "confirmed" once a set number of candles after it have closed (three by default), so a swing cannot appear and then vanish.
Higher highs and higher lows mean bullish structure. Lower highs and lower lows mean bearish structure. When the swings overlap, or a higher high is followed by a lower low, the market is ranging or unclear.
Bullish, bearish and range structure
Bullish: HH + HL
Bearish: LH + LL
Range: overlapping swings
Bullish, bearish, range or unclear
The playbook labels the 4H condition with one of four words. Bullish and bearish need a clear sequence of confirmed swings or a confirmed break of the last swing. Range means price keeps rotating between the same two areas. Unclear means there are not enough confirmed swings to say.
A single 4H candle, green or red, is not structure. And the current 4H candle is not confirmed until it closes, so while it is still forming the playbook calls the bias "provisional".
- Bullish: prefer long setups after downside liquidity is swept and reclaimed.
- Bearish: prefer short setups after upside liquidity is swept and rejected.
- Range or unclear: require stronger confirmation, or wait.
Confirmed 4H swings on gold
Bias is a filter, not a command
A bullish 4H does not mean "buy now". It means that when a setup appears, long setups get the benefit of the doubt and short setups need a deliberate countertrend decision. Countertrend mode is off by default, and a countertrend setup should be labelled as one and held to stricter confirmation.
Structure also changes. A bullish 4H that breaks its last higher low with a strong close is no longer bullish, whatever you thought this morning.
Bullish example
- 1On the 4H chart, mark the last two confirmed swing highs and swing lows.
- 2The latest high is above the previous high and the latest low is above the previous low: bias is bullish.
- 3On the setup timeframe, look only for long setups after a low is swept and reclaimed, or after a bullish breakout is accepted.
- 4Re-check the bias at every new 4H close.
Bearish example
- 1Mark the last two confirmed 4H swing highs and lows.
- 2The latest high is below the previous high and the latest low is below the previous low: bias is bearish.
- 3Look only for short setups after a high is swept and rejected, or after a bearish breakout is accepted.
- 4If price closes above the last lower high, the bearish bias is no longer valid.
What confirms it?
- At least two confirmed swing highs and two confirmed swing lows in the same direction.
- A 4H candle that closes beyond the last opposing swing with a strong body (a structure break).
- Pullbacks that hold above the last higher low (bullish) or below the last lower high (bearish).
What invalidates it?
- A 4H close beyond the last swing that defined the trend.
- Swings that start to overlap, turning the trend into a range.
- Treating a still-forming 4H candle as if it had closed.
Common mistakes
- Calling the trend from the colour of one 4H candle.
- Using unconfirmed swings, which redraw as new candles print.
- Treating the bias as an entry signal and buying the moment it turns bullish.
- Ignoring a range and forcing trend trades in it.
- Quietly taking countertrend trades without labelling them or tightening the rules.
Replay exercise
- Open the XAU-USD chart and switch to the 4H timeframe.
- Use replay to go back two weeks, then step forward one candle at a time.
- Mark each swing high and low only after three more candles have closed, and write down the bias after each 4H close.
- Compare your notes with how price behaved in the next London and New York sessions.
Quick quiz
Pick an answer to see the explanation. Nothing is saved.