Understanding **Market Structure** is the foundation of all Smart Money Concepts (SMC). If you can read structure correctly, you can predict where price wants to go with high accuracy.
This guide explains **BOS (Break of Structure)**, **CHoCH (Change of Character)**, liquidity grabs, and how professional traders determine trend direction.
1. BOS vs CHoCH: The Two Core Signals
Market structure describes how price moves in trends, creating highs and lows (Higher Highs/HH, Lower Lows/LL). The two most critical structural signals are:
| Signal | BOS (Break of Structure) | CHoCH (Change of Character) |
| **Meaning** | Trend continuation | Potential trend reversal (Warning) |
| **Action** | Breaks previous HH/LL | Breaks previous structural HL/LH (opposite direction) |
SVG 1: Structural Continuation (BOS) vs. Reversal (CHoCH)
2. Market Structure Shift (MSS) and Liquidity
A **Market Structure Shift (MSS)** occurs when the market aggressively breaks structure with strong momentum, usually **following a liquidity grab** (a Stop Hunt). This is the highest conviction setup in SMC.
MSS Checklist:
- **Liquidity Sweep:** Price moves past an obvious high/low to hit retail stop losses.
- **Strong Displacement:** The price aggressively reverses, confirming the liquidity sweep was a trap.
- **CHoCH:** The structural low/high (e.g., Higher Low) is violated, confirming the shift.
- **Imbalance:** A **Fair Value Gap (FVG)** is left behind, indicating the speed of the shift.
SVG 2: Liquidity Grab & CHoCH Setup (High-Conviction Entry)
3. How to Use BOS/CHoCH for Risk-Managed Entries
The goal is to enter on the **Retracement** following the structural shift, not on the initial breakout.
Buy Setup (Downtrend Reversal)
- Bearish liquidity grab (Stop Hunt)
- Strong bullish **CHoCH** (breaks structural LH)
- Wait for retracement into the **Imbalance/Order Block** zone.
- Enter with Stop Loss protected below the liquidity sweep low.
Use the Lot Size Calculator to size your trade correctly for the Stop Loss placement, and the Risk & Reward Calculator to ensure a favorable outcome.
4. Timeframes and Common Mistakes
Best Timeframes for Structure Trading
- **H1/H4:** Used for identifying the major trend bias and liquidity zones (HTF structure).
- **M15/M5:** Used for execution and confirmation of CHoCH/BOS (LTF entries).
**Common Mistakes:**
- Marking **minor highs/lows** instead of real swing points.
- Entering immediately on BOS without waiting for the **retracement** (FOMO).
- Ignoring the **liquidity sweep** before CHoCH.
Conclusion
**Break of Structure (BOS)** and **CHoCH** remain the backbone of Smart Money trading in 2025. Mastering these tools, especially when combined with liquidity concepts (FVG, Order Blocks), will dramatically improve your ability to read the market and execute with institutional precision.
