MASTERING MARKET STRUCTURE : BOS, CHOCH
Break of Structure: This term is used in trading and technical analysis to describe a significant change in the price action of an asset. It occurs when the established pattern of higher highs and higher lows (in an uptrend) or lower highs and lower lows (in a downtrend) is disrupted, indicating a potential change in market sentiment and trend direction.
Examples of Break of Structure: You can find examples of "break of structure" in both bullish and bearish movements. In a bullish scenario, a "break of structure" occurs when a new Higher High (HH) is formed, surpassing the previous High (H). In a bearish context, it happens when the price forms a new Lower Low (LL) below the previous Low (L), indicating a potential shift in market sentiment and trend direction.
Shift in Structure: Sometimes, a "break of structure" leads to a more profound change in market character, referred to as a "Shift in Structure." This often involves a transition from a bullish to a bearish trend or vice versa.
Change of Character (CHOCH): The first instance of a significant shift in market sentiment and trend direction is termed "Change of Character" (CHOCH). This emphasizes the unique nature of the initial change.
Break of Structure (BOS): Subsequent occurrences of a similar shift in market sentiment are labeled as "Breaks of Structure" (BOS). These serve to differentiate the first significant change from those that follow.
These concepts are vital in trading and technical analysis as they help traders identify changes in market sentiment, adapt to evolving trends, and make informed trading decisions. Recognizing a "break of structure" and understanding when it leads to a "shift in structure" is essential for effective trading.
Examples of Break of Structure: You can find examples of "break of structure" in both bullish and bearish movements. In a bullish scenario, a "break of structure" occurs when a new Higher High (HH) is formed, surpassing the previous High (H). In a bearish context, it happens when the price forms a new Lower Low (LL) below the previous Low (L), indicating a potential shift in market sentiment and trend direction.
Shift in Structure: Sometimes, a "break of structure" leads to a more profound change in market character, referred to as a "Shift in Structure." This often involves a transition from a bullish to a bearish trend or vice versa.
Change of Character (CHOCH): The first instance of a significant shift in market sentiment and trend direction is termed "Change of Character" (CHOCH). This emphasizes the unique nature of the initial change.
Break of Structure (BOS): Subsequent occurrences of a similar shift in market sentiment are labeled as "Breaks of Structure" (BOS). These serve to differentiate the first significant change from those that follow.
These concepts are vital in trading and technical analysis as they help traders identify changes in market sentiment, adapt to evolving trends, and make informed trading decisions. Recognizing a "break of structure" and understanding when it leads to a "shift in structure" is essential for effective trading.
Comment:
Hello traders! In this live chart example, we're exploring a bearish trend that forms lower highs (LH) and lower lows (LL). Eventually, we encounter a specific price point, prompting a shift to a bullish trend. This shift, known as 'CHOCH' or change of character, signifies a change in market sentiment. We observe the development of higher highs and higher lows (HH and HL), until once again, the price reaches a critical level and reverts to a bearish trend. This analysis illustrates how understanding market structure and trend reading can help anticipate the next market move. Keep in mind, this analysis applies to various timeframes. While this example is in the 2-hour (2H) timeframe, what may appear as a substantial bullish push here could merely be a minor pullback on a daily chart
