Discussing the article: "Price Action Analysis Toolkit Development (Part 57): Developing a Market State Classification Module in MQL5"
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Check out the new article: Price Action Analysis Toolkit Development (Part 57): Developing a Market State Classification Module in MQL5.
This article develops a market state classification module for MQL5 that interprets price behavior using completed price data. By examining volatility contraction, expansion, and structural consistency, the tool classifies market conditions as compression, transition, expansion, or trend, providing a clear contextual framework for price action analysis.
Before examining market states in the context of price action, it is useful to begin with a familiar scientific concept: the states of matter. Matter is anything that has mass and occupies space, and it can exist in different physical states depending on internal energy and external pressure. These states are commonly identified as solid, liquid, and gas.
In a solid state, particles possess relatively low energy. They are tightly packed and strongly bound, limiting their freedom of movement. As energy increases, these bonds weaken, and matter transitions into a liquid state, where particles remain close but are no longer rigidly fixed. With further increases in energy, particles become highly active and disperse freely, forming a gaseous state.
A key principle is that the substance itself does not change—only its state does. Water remains water whether it is ice, liquid, or vapor. What changes is the internal energy and how that energy expresses itself through structure and movement. This principle provides a useful framework for interpreting market behavior. Price does not change its identity; instead, it expresses different behavioral states depending on internal conditions such as volatility and structural organization. These states describe how the market behaves, not where it is headed.
From Physical States to Market States
The diagram below illustrates how the states of matter are used as an analogy for market states, focusing on volatility and structural constraint rather than directional trend.
Author: Christian Benjamin