If you can't read Market Structure, you are trading blind.
It doesn't matter if you have the best indicator in the world. If you buy when the structure is Bearish, you will lose.
The market speaks to us in two ways:
1. "I am continuing" (BOS).
2. "I am turning around" (CHOCH).
In this guide, we will break down the DNA of price movement and learn how to spot the exact moment a trend dies and a new one is born.
1. What is BOS (Break of Structure)?
BOS stands for Break of Structure. It signals Trend Continuation.
In an Uptrend, the market makes Higher Highs (HH) and Higher Lows (HL).
When price breaks above the previous HH and closes there, it confirms that the buyers are still in control.
- Signal: Keep looking for Buys.
- Invalidation: If price fails to break the high, the trend might be weakening.
2. What is CHOCH (Change of Character)?
CHOCH (sometimes called MSS or Market Structure Shift) signals Trend Reversal.
It is the first time the market violates the rules of the trend.
The Anatomy of a Reversal:
- Market is in an Uptrend (Making Higher Highs and Higher Lows).
- Price hits a major Resistance (Daily/H4).
- Price pulls back and Breaks the Last Higher Low.
- This is the CHOCH. The character has changed from Bullish to Bearish.
3. Internal vs. Swing Structure (The Trap)
This is where beginners get wrecked.
The market is fractal (trends inside trends).
- Swing Structure: The major moves visible on the H4 chart. (Strong).
- Internal Structure: The small moves visible on the M15 chart inside the H4 leg. (Weak).
The Mistake: Traders see a CHOCH on the M5 chart and think the whole Daily trend is reversing.
The Reality: The M5 pullback is just creating a Higher Low for the Daily trend to continue.
Rule: Only trust a CHOCH if it happens at a Higher Timeframe POI (Point of Interest).
4. Wick vs. Body Close
Does a wick count as a break?
- BOS (Continuation): We prefer a Body Close. If it's just a wick, it might be a fakeout.
- CHOCH (Reversal): Aggressive traders accept a Wick break, but Conservative traders wait for a Body Close.
5. Why Trends Fail (The Sweep)
Sometimes price makes a BOS, but then immediately reverses. Why?
Because that "High" wasn't a structural point; it was Liquidity.
This is why you must combine Structure with Liquidity.
If price makes a BOS but hits no higher timeframe zone, be careful. It might be a Manipulation (Judas Swing).
6. Trading with the Trend vs. Counter Trend
- Pro Trend: You enter on a pullback after a BOS. (High Probability).
- Counter Trend: You enter after a CHOCH. (Lower Probability, requires more skill).
Final Thoughts
Market Structure is the map.
BOS tells you the road is straight. CHOCH tells you there is a U-Turn ahead.
Master identifying these two signals, and you will never be on the wrong side of the market again.
Learn where to place your entry after the CHOCH: Order Blocks Explained