There is no dispute that market structure and liquidity are two fundamental elements that cannot be separated in any financial market. Some believe that liquidity is what shapes market structure, while others argue that market structure is what leads to the formation of liquidity. However, when we dive deeper into the details, we realize that we are dealing with a financial market — and that means capital itself is the primary driver of price movement.

Since ancient times — from the very first school of technical analysis known to mankind — there has been one unified rule: The trend remains intact until proven otherwise. And this means: If the trend is bullish, we look for buying opportunities. If the trend is bearish, we look for selling opportunities. There is no school of technical analysis that contradicts this principle.

In the Smart Money Concept school: The trend is defined by market structure. Market structure is formed by: Higher highs and higher lows in an uptrend. Lower highs and lower lows in a downtrend. It is not possible to determine trade direction based on liquidity alone; the overall trend must first be identified through market structure.

When I open a chart, the first thing I try to identify is the market structure, not the liquidity zones. After defining the overall trend, I then begin searching for liquidity areas — liquidity that has already been taken, and liquidity that the market maker may seek to capture next. Market structure defines the direction. Liquidity defines the entry and exit points.

The relationship between market structure and liquidity can be compared to a car and its fuel. The car represents market structure because it determines the direction. The fuel represents liquidity because it is what drives the car forward. A car cannot move without fuel, and its direction cannot be determined without a steering wheel. Both complement each other, and neither can be relied upon without the other.