Break of Structure Explained

Summary

This video explains the concept of Break of Structure (BoS) in trading, emphasizing how to identify trend reversals by analyzing candlestick patterns. The speaker highlights the importance of understanding when a structure breaks, based on candle closures above or below significant highs and lows. Viewers are cautioned to avoid impulsive trades and are encouraged to consider context and timing. The speaker also provides practical examples, showcasing correct and incorrect identification of BoS. A free course is offered to help traders develop a solid strategy based on confluences like BoS and liquidity.

Takeaways

• 😀 Break of Structure (BoS) occurs when recent highs or lows are breached by the market, signaling a potential trend change.
• 😀 A candle must fully close above or below the previous high/low for a BoS to be considered valid, not just the wick.
• 😀 In an uptrend, BoS happens when the most recent low is breached to the downside.
• 😀 In a downtrend, BoS happens when the most recent high is breached to the upside.
• 😀 Breaks of Structure should be used alongside other market confluences (such as liquidity and candle patterns) to improve trade accuracy.
• 😀 Avoid impulsive trades by understanding the structure before entering a position; check for break confirmation.
• 😀 Consolidation occurs when price moves within a defined range, and a BoS is confirmed when price breaks out of this range.
• 😀 A key mistake is mistaking a wick beyond the level as a break of structure; only full candle closures are valid.
• 😀 To effectively use BoS, always focus on recent market structure—understanding the most recent high and low is crucial.
• 😀 Always save and revisit educational content before taking high-risk trades, as understanding the market structure is essential to avoid major losses.

Q & A

What is a 'break of structure' in trading?

A 'break of structure' refers to a change in the market's trend, either bullish or bearish, based on price action. It happens when the most recent high or low is broken by the price action, signaling a shift in market sentiment.

How can you identify a 'break of structure' in a candlestick?

A 'break of structure' is identified when the price closes above the previous high in an uptrend or below the previous low in a downtrend. For example, if a candlestick closes beneath a previous low, it signifies a potential bearish trend.

What is the significance of the recent lows and highs in identifying a break of structure?

The recent highs and lows are essential because they serve as the reference points for determining whether a structure has been broken. A break occurs when a candlestick closes above the most recent high or below the most recent low.

Can you break structure if the candlestick just touches the low or high without closing above or below it?

No, a break of structure only occurs when the candlestick closes above the previous high or below the previous low, not just when it touches the level.

What happens when the price breaks structure and moves downward?

When the price breaks structure and moves downward, it indicates a potential bearish trend, and traders may anticipate further price decreases. This shift in trend may present a selling opportunity.

What is the purpose of understanding break of structure for traders?

Understanding break of structure helps traders identify trend reversals and make informed decisions about entering or exiting trades. It prevents traders from making decisions based on unreliable price movements.

Why is it important to save and revisit the video before entering a trade?

It is crucial to revisit the video because it explains key concepts like break of structure, which can help traders avoid making costly mistakes when entering trades, especially in volatile markets.

What kind of strategies does the speaker promote in the video?

The speaker promotes strategies based on confluences, including break of structure. These strategies are designed to help traders form a solid approach to trading by combining various elements that lead to profitable trades.

What is included in the free course offered by the speaker?

The free course covers various confluences in trading, including the concept of break of structure, and how these can be combined to form effective and profitable strategies for trading.

How does the speaker convey their approach to teaching trading strategies?

The speaker offers free educational content, including video lessons and a detailed course, to help traders learn the importance of various trading concepts like break of structure, risk management, and forming profitable strategies.