Market structure (BOS & CHoCH)

What it is

Market structure is the pattern of swing highs and swing lows. In an uptrend price makes higher highs (HH) and higher lows (HL); in a downtrend, lower highs (LH) and lower lows (LL).

A break of structure (BOS) is price closing beyond the last swing in the direction of the trend, which confirms the trend is continuing. A change of character (CHoCH) is the first break against the trend, such as an uptrend closing below its last higher low, and is the first sign the trend may be turning.

CHoCH is a smart money concepts (SMC) term; the phrase itself goes back to Wyckoff. ICT traders use a stricter cousin, the market structure shift (MSS), which needs a liquidity sweep and displacement behind the break. Many traders use the two words for the same thing, but they are not quite the same.

How to spot it

• Mark the obvious swing highs and lows on the timeframe you trade. Ignore tiny wiggles.
• Bullish: each high is above the last and each pullback holds above the previous low.
• A BOS needs a candle body to close beyond the swing, not just a wick poking through.
• A CHoCH is the first close through the most recent higher low (uptrend) or lower high (downtrend).

How to use it

• Trade with the structure of the higher timeframe, and use the lower timeframe to time entries.
• After a bullish BOS, look for longs on the pullback into a zone such as an order block or FVG.
• Treat a CHoCH as a warning to stop looking for trades in the old direction, not as an entry on its own.

Common mistakes

• Marking every small swing, so structure 'breaks' constantly.
• Calling a wick through a level a break of structure.
• Reading lower-timeframe structure while ignoring the higher-timeframe trend.

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