Speaker A
What is going on, sexy people? Welcome to Break of Structure. Let's get into this.
Learn how to identify Break of Structure in market trends to predict price action and improve trading decisions.
Ask about this video. Answers come from its transcript only — with the timestamp, so you can check them.
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Key Takeaways
- Break of Structure signals a shift in market trend and is crucial for trend identification.
- Wait for candle closure beyond recent highs or lows to confirm BoS, not just price wicks.
- BoS can be combined with liquidity concepts to improve trade accuracy and timing.
- Recognizing BoS helps traders enter positions aligned with the new trend direction.
- Market structure consists of patterns of highs and lows that define bullish or bearish trends.
What the video covers
- Break of Structure (BoS) is a key concept to identify shifts in market trends between bullish and bearish structures.
- An uptrend consists of higher highs and higher lows, while a downtrend consists of lower highs and lower lows.
- A Break of Structure in an uptrend occurs when price closes below the most recent higher low, signaling a potential trend reversal.
- A Break of Structure in a downtrend occurs when price closes above the most recent lower high, indicating a possible shift to an uptrend.
- Identifying BoS requires waiting for a full candlestick close beyond key levels, not just wicks or intraday price moves.
- Using BoS along with liquidity concepts can help traders predict price action with higher probability.
- The video provides practical chart examples showing how to spot BoS and interpret market structure changes.
- Traders can use BoS signals to enter short or long positions aligned with the new trend direction.
- Understanding BoS helps in recognizing when order flow shifts and when to expect trend continuation or reversal.
- The lesson emphasizes simplicity and clarity in applying BoS for daily trading decisions.
Chapters
- 00:00Introduction to Break of Structure
- 00:51Understanding Market Structure and Trends
- 01:44What Constitutes a Break of Structure
- 02:38How to Identify Break of Structure on Charts
- 03:29Examples of Break of Structure in Uptrends
- 05:02Examples of Break of Structure in Downtrends
- 06:30Importance of Candle Closure vs Wicks
- 07:23Common Confusions and Clarifications
- 08:22Summary and Practical Trading Application
Full Transcript — Download SRT & Markdown
Speaker A
What is Break of Structure? Why is it useful for us, and how can we apply it to the charts? How can we apply Break of Structure with the advanced liquidity concepts and the liquidity concepts that we learned over
Speaker A
the past two days? That being said, let's jump straight into it. Today is going to be a relatively quick lesson, okay? You guys don't really need to learn too much. It's very, very, very simple what Break of Structure is. So, if you guys think back
Speaker A
to, I think it was like day three or four when we learned about how the market moves, what trends are. Okay, so we know that uptrends move in higher highs and higher lows. Boom. We already understand that. What else do we know about trends?
Speaker A
They move in lower highs and lower lows. So, now we know what a trending market looks like. Now, this is market structure. We have a high, then a low, higher high, low, higher low, higher high, higher low. In a downtrend, it's a
Speaker A
low, a high, lower low, lower high, lower low, lower high, lower low, lower high, lower low, lower high. Okay, that's how the market moves, and that is market structure. So, when we're in a downtrend, we're in bullish market structure or sorry, when we're in
Speaker A
an uptrend, we are in bullish market structure, and when we're in a downtrend, we are in bearish market structure. So, if we think about the word or the confluence that we are learning today, what does Break of Structure mean? It
Speaker A
means when the current market structure that price is in breaks. So, how do we break a bullish market? How do we break bullish market structure or an uptrend?
Speaker A
Well, if we're forming higher highs and higher lows, what would be a market structure break? We would have to break underneath the higher low and in turn make a lower low and then in turn make a lower high,
Speaker A
and then boom. That is a market structure shift. That is a Break of Structure, okay? And then on the flip side, what's a Break of Structure to the upside when we're in a downtrend? We're making low, high, lower low, lower high,
Speaker A
lower low, lower high. We have to push and break above a high to end up making a higher high, then creating a higher low. That is a shift in market structure to the upside when we are in a
Speaker A
downtrend. So, you're probably saying, well, how do we identify this on the chart? It is very, very easy. It's just like how you guys were using and identifying uptrends if you guys did your homework on that day
Speaker A
where we're looking for higher highs, higher lows, higher highs, higher lows. It's as simple as looking on the chart and seeing, okay, we're making higher highs and higher lows at this point in time, and all that we're looking for is
Speaker A
the most recent low to get closed underneath. That is when we break bullish market structure. Now, in the same way but in the opposite direction, if we're in a downtrend making lower lows and lower highs, how do we see a
Speaker A
market structure break to the upside? We need to see a candle closure above the most recent high. Emphasis on the most recent high. So, if we are looking at price action, are we looking at this low to get broken?
Speaker A
No, because this is the most recent low. Are we looking for this low to get broken? No, because this is the most recent low. Are we looking for this high to get broken above? No, because this is the most recent high. Hopefully you guys
Speaker A
get that. Now, with that being said, let's go on to the chart. Like I said, this is going to be very, very easy, very, very simple for you guys to understand. Let's look from this point onward. What are we in? Well, we have a
Speaker A
high, then we have a low, then we have a higher high, then we have a higher low.
Speaker A
Awesome, we're in an uptrend. We go up, we make a higher high. We go down, we make a higher low. We go up, we make a higher high then uh-oh, what do we do?
Speaker A
We make a lower low. When do we break structure? When we see a candle closure underneath the most recent low. So, if we go on here and we see, okay, what are we in? We just identified bullish structure. We have a high, a low, higher
Speaker A
high, higher low, higher high, higher low, higher high. Uh-oh, somebody pooped his pants. If we go on here, we can again, if we're looking for a change in market structure, all that we're going to be doing is if we're looking for a change in market
Speaker A
structure to the downside, all that we're going to be doing is we're going to be monitoring the most recent lows that are made within the uptrend. So, this was the most recent low. When do we break structure? Is it on this candle? This is
Speaker A
a good example right here. No, it's not on this candle. This is a very difficult one to read because we don't actually close underneath the low right here because the candle, the candle body is equal with
Speaker A
this low. We need the candle body to close underneath the lowest point of the most recent low. So, when do we actually get that Break of Structure? We get the Break of Structure right here on the S&P 500, and then from there, what are we now
Speaker A
in? We're in a downtrend. We have a high, a low, lower low, lower high, making a lower high right now, potentially going to make a lower low, and I'm actually in a short position right now from all of
Speaker A
this market structure, believe it or not. Eventually, you guys are going to be able to take trades like this, and you guys are eventually going to start making money. But, that's not what we're here to talk about just yet. So, again,
Speaker A
the goal is for us to be able to accurately predict price action on a daily basis with a high probability, and without these confluences, we are going to be unable to do that. Now, let's show an example of a Break of
Speaker A
Structure to the upside. So, we can show, we can see a pretty clear downtrend here. We have a high, then we have a low, then we have a lower high, then we have a lower low, lower high, lower low,
Speaker A
lower high, big sell-off to make a lower low, and then we make a lower high, then we make a higher low. Just be, or sorry, just because we make a higher low from this low doesn't mean we've broken
Speaker A
structure yet. Why? Because when we're looking for a Break of Structure to the upside in bearish market structure, okay, what do we need? We need a candlestick closure above the most recent high. So, are we looking for this
Speaker A
high to get closed above? No. What high are we looking to get closed above? This one right here. We see a move up then a move down. This is the most recent high.
Speaker A
So, wow, this is super similar to the last one that we did. So, when do we get a candlestick closure above this? Do we get it on this candle? No, because all it did was put a wick above it. That's
Speaker A
something that's super important. If we see candlestick wicks that go above these highs, are we immediately pressing buy? Absolutely not. We need to wait until a full candlestick closes above the most recent high, and then we can say, awesome. Price has shifted its
Speaker A
order flow to the upside, okay? Awesome, and then we end up going higher. All right, same thing here, okay? We see a downtrend that that that gets formed.
Speaker A
Now, let me show you a quick example here that can confuse a lot of people. Let's take price from right here, okay? We have a high, then we have a low, then we have a lower high, but does this break
Speaker A
market structure? No, because when we're looking for a Break of Structure to the downside, down to the downside when we are in a current uptrend, we are looking for the most recent highs to get closed above or sorry,
Speaker A
when we are looking for a Break of Structure to the downside, we are looking for the most recent lows to get closed below.
Speaker A
Sorry. We are in an uptrend, so what are we doing? We are monitoring the lows.
Speaker A
So, we have a move down then a move up. Awesome, this is the most recent low right here.
Speaker A
We have a move up then a move down. This is a high. Is it higher than this high? No.
Speaker A
But, does that mean we've broken structure to the downside? No, because in order for us to break st
Speaker A
are formed within the trend. So, following that, we end up putting in a new low. So, we have a move down then a move up. Awesome, now this is the low that we're monitoring. Do we see a candlestick closure underneath that?
Speaker A
No. Awesome, we have a high, then we go up, we make a higher high. Awesome, then we get a move down then a move up.
Speaker A
Awesome, a higher low. Now, this is the low that we're monitoring to look for a break of structure to the downside.
Speaker A
We make a higher high. We come down and we make a drastically lower low, okay?
Speaker A
We Look at this candlestick wick. It comes all the way down here. Is this a break of structure?
Speaker A
Is this a break of structure? NO! [screaming] WHY IS IT not a break of structure?
Speaker A
Why is it not a break of structure? Because we don't get a candlestick closure underneath this low.
Speaker A
So, we get a move down then a move up. Okay? Move down then a move up.
Speaker A
Where's now our most recent low? Now, this is the most recent low that we're monitoring within this uptrend. We're still in an uptrend even though we end up making a lower high and a lower low.
Speaker A
We need a candlestick closure underneath the low. We see a move down then a move up. Awesome, that's a new low that we're monitoring.
Speaker A
Now, do we get a break of structure to the downside? Yes. When do we get it? On this candlestick closure underneath this low.
Speaker A
And then from there, we end up making a lower high, lower low, lower high, higher low and then boom, we start the reversal one more time back to the upside once we close above this high right here.
Speaker A
[sighs] That is all break of structure is. It's a very, very simple concept. It's a very simple confluence and we are going to be using it side by side in tandem with liquidity sweeps. We can I mean, it's
Speaker A
very beneficial. We can I can literally show you guys this uh working in real time right now on the S&P 500. Price pushes up, takes out this high, takes out this high right here, and then if we go down to the lower time frames, how
Speaker A
can we identify the change in order flow and the the filling of those orders on that liquidity sweep? Again, price comes up, takes out high time frame draws on liquidity, a bunch of highs. What can we do? We can scale down to the lower time
Speaker A
frame, and we can see that those orders are getting filled. How? Through a low time frame 5-minute change in trend. How can we identify change in trend? By spotting break of structure. Boom, we get a break of structure, and now we are
Speaker A
trending lower. Why do we know that we were going to go lower from there? Well, because we had a bunch of resting orders that had the opportunity to get filled up here. How did we know that they got
Speaker A
filled? Because we saw a change in the current bullish market structure on the low time frame. There are other confluences that come into play with this. It's not just as simple as, "Okay, we pushed above a high and we got a
Speaker A
break of structure to the downside, so price is obviously going to go lower." But, you guys are hopefully starting to understand what we are looking for in the markets by slowly putting these confluences together. Okay? So, today was very, very simple, very, very easy
Speaker A
covering break of structure, how to understand when a trend is changing changing structure to the upside, changing structure to the downside, how to identify it. Again, it's not a candlestick wick, it's a candlestick closure. Candlestick closure, and we are
Speaker A
monitoring the most recent highs and the most recent lows in the market. My trade is doing very well right now. I need to keep an eye on it, but with that being said, I love and appreciate you guys. I will see you guys tomorrow to
Speaker A
talk about fair value gaps, which is our first continuation confluence, okay? Break of structure is a confirmation confluence. Why do I call it a confirmation confluence?
Speaker A
It's because it confirms that the that orders have been filled, okay? Where do you orders have the potential to be filled? Above liquidity. My strategy is as follows. We look for potential for orders to be filled, confirmation that
Speaker A
orders are filled, and then a continuation of the current trend that is now being created. It's very, very simple, very, very easy, and you guys, I mean, if you guys were on stream today, you guys saw me take this trade, and we
Speaker A
are making money from this in real time. So, this is not a joke. I love and appreciate you guys. I'll see you guys tomorrow for fair value gaps.
Topics:Break of Structuremarket structuretrading trendsprice actionliquidity conceptshigher highshigher lowslower highslower lowstrend reversal
