A break of structure (BOS) is a candle closing beyond the last swing high in an uptrend, or the last swing low in a downtrend, which traders read as the trend continuing. Its counterpart, a change of character (CHoCH), is the first break against the trend, past the swing the trend was protecting, and is read as an early warning of a reversal.
In short
- Market structure is the sequence of swing highs and swing lows. Higher highs and higher lows make an uptrend; lower highs and lower lows make a downtrend.
- A break of structure breaks a swing in the direction of the trend. A change of character breaks the protected swing the other way, such as the last higher low in an uptrend.
- Most traders count a break only when a candle body closes beyond the swing. A wick through the swing that closes back inside is usually treated as a liquidity sweep.
- Structure depends on the timeframe. A bearish CHoCH on the 15-minute chart can be an ordinary pullback on the 4-hour chart.
- On a $25,000 Classic account, a 20-pip stop on 1.25 lots of EUR/USD risks $250, a fifth of the $1,250 daily loss limit.
What is market structure in trading?
Market structure is the pattern of swing highs and swing lows a chart makes. Higher highs with higher lows define an uptrend, and lower highs with lower lows define a downtrend. Swings that overlap with no clear sequence define a range, where structure breaks mean little.
A swing high is a peak with lower prices on both sides. Many traders use a fixed rule: a candle whose high is above the highs of the two candles on each side of it. A swing low is the reverse. Others only count a swing once price has pulled back from it by a minimum amount. Pick one rule and keep it, because two traders with different swing rules will mark different breaks on the same chart.
Some swings matter more than others. Say EUR/USD rallies to 1.0920, pulls back to 1.0860 and rallies again. The 1.0920 high is the level a break of structure would cross. The 1.0860 low is the protected low (some teachers call it the strong low): the higher low the uptrend depends on. While price stays above it, the uptrend's sequence is intact.
What is a break of structure?
A break of structure is a candle body closing beyond the most recent swing point in the direction of the trend. In an uptrend that is a close above the last swing high, making a new higher high. In a downtrend it is a close below the last swing low. Traders read it as confirmation that the trend is still running.
Bullish break of structure
Using the EUR/USD swings above, a 4-hour candle closes at 1.0941, 21 pips above the 1.0920 high. That is a bullish BOS. The rally then tops at 1.0980, the new swing high. The 1.0860 low stays the protected low, and traders now wait for price to pull back before buying.
Bearish break of structure
Say GBP/USD is falling, with a lower high at 1.2780 and a swing low at 1.2700. A 4-hour candle closing at 1.2688 is a bearish BOS. The 1.2780 high becomes the protected high, and sellers look for a rally back toward 1.2700 to sell into.
SMC traders also separate external structure, the main swings on the timeframe you trade, from internal structure, the smaller swings inside each leg. Breaks of external structure set the bias. Breaks of internal structure, which are far more frequent, are mostly used to time entries.
BOS vs CHoCH: what is the difference?
A BOS breaks a swing in the direction of the trend and signals continuation. A change of character breaks the protected swing against the trend and is the first sign the trend may be ending. In an uptrend, a close above the last high is a BOS, and a close below the last higher low is a CHoCH.
| Break of structure (BOS) | Change of character (CHoCH) | Market structure shift (MSS) | |
|---|---|---|---|
| Direction | With the trend | Against the trend | Against the trend |
| The swing it breaks | The latest high in an uptrend, low in a downtrend | The protected low in an uptrend, high in a downtrend | A short-term swing, usually right after a liquidity sweep |
| What traders read | The trend continues | The trend may be ending | A reversal attempt with force behind it |
| How it is used | Bias, then wait for a pullback | Stop buying (or selling), wait for proof | An entry trigger on a lower timeframe |
A CHoCH is an early warning. Price often breaks the protected low and then turns back up, so many traders wait for the first BOS in the new direction, a lower low after a lower high, before treating the trend as changed.
Market structure shift is ICT's term. It usually describes a CHoCH on a short timeframe that follows a liquidity sweep and comes with displacement: a fast move that often leaves a fair value gap. Many traders use CHoCH and MSS for the same thing.
Do wicks count as a break of structure?
Most structure traders say no. They count a break only when a candle body closes beyond the swing, because a wick that pokes through and closes back inside shows the market rejected those prices. That wick is often a liquidity sweep: the stops beyond the swing were triggered and price returned.
On the EUR/USD chart, suppose a 4-hour candle wicks to 1.0927, above the 1.0920 high, and closes at 1.0913. That is not a BOS. If the next candles had fallen and closed below 1.0860, the wick would have been a sweep of buy-side liquidity before a bearish CHoCH. Here, two candles later, a candle closes at 1.0941 and confirms the break. The liquidity sweep guide covers the wick case in detail.
The close has to be on the timeframe you are reading. A 15-minute close above 1.0920 is a 15-minute break, which says little about the 4-hour chart until a 4-hour candle closes there too. Some traders also ignore a close only a pip or two beyond the swing and want a full-bodied candle. Whatever rule you choose, write it down and apply it to every chart.
Which timeframe should you use for break of structure?
Structure exists on every timeframe, and each one can tell a different story. A common approach is to read the trend on the 4-hour or daily chart, then use breaks on the 15-minute or 5-minute chart to time entries in that direction. A lower-timeframe break against the higher-timeframe trend is usually just a pullback.
In the EUR/USD example, the 4-hour chart is in an uptrend after the BOS at 1.0941. When price pulls back from 1.0980, the 15-minute chart turns bearish and makes its own CHoCH and BOS on the way down. A trader reading only the 15-minute chart would sell, while on the 4-hour chart this is the pullback buyers were waiting for.
Higher timeframes produce fewer swings, which more traders watch, but wider stops, because the protected low is further away. Lower timeframes give tight stops and many more false breaks. Using both lets you take direction from the slow chart and the stop from the fast one.
How do you trade a break of structure?
In BOS trading, the common plan is to wait for a break in the higher-timeframe trend, let price pull back toward the level it broke, and enter when a lower timeframe turns back in the trend's direction. The stop goes beyond the pullback low or the protected low, and the target is the latest swing high or the next pool of liquidity.
After a bullish BOS, traders look for the pullback to reach one of a few areas. The broken high itself often acts as support on a retest. An order block, the last down candle before the move that broke structure, is another. So is a fair value gap left by that move, or anything below the midpoint of the leg, which SMC calls the discount half. When two of these sit at the same price, traders give the area more weight.
For the stop, you have a choice. Below the protected low is the structural stop: wide, and hit only if the uptrend fails. Below the lower-timeframe pullback low is tighter and allows a bigger position, but it is hit more often. The worked example puts numbers on both. Our Smart Money Concepts course covers order blocks, premium and discount, and how to combine them in one plan.
What does a break of structure trade look like with real numbers?
Here is a long trade on EUR/USD after a bullish BOS on the 4-hour chart, sized for a $25,000 account risking 1% per trade, which is $250. One standard lot of EUR/USD moves $10 per pip. The example compares a plan built on the 4-hour chart alone with one that times the entry on the 15-minute chart.
- Read the 4-hour structure. EUR/USD has a higher low at 1.0860 and a swing high at 1.0920. A candle wicks to 1.0927 and closes at 1.0913, which does not count. Two candles later one closes at 1.0941: a bullish BOS. Price tops at 1.0980.
- Mark the pullback area. The leg from 1.0860 to 1.0980 is 120 pips, so its midpoint is 1.0920, the same price as the broken high.
- The 4-hour plan: buy limit at 1.0922, stop at 1.0852 (8 pips below the protected low), 70 pips of risk. $250 divided by (70 × $10) is 0.36 lots. The target is 1.0970, 48 pips away, so the trade risks about $252 to make about $173.
- The 15-minute plan: price pulls back to 1.0916. On the 15-minute chart, the last lower high of the pullback is 1.0931, and a candle closes at 1.0935, a bullish CHoCH. You buy on a retest at 1.0930.
- Set the stop at 1.0910, 6 pips under the 1.0916 pullback low. That is 20 pips of risk.
- Set the target at 1.0970, 10 pips short of the 1.0980 high. That is 40 pips, a reward to risk of 2:1.
- Size it. $250 divided by (20 pips × $10 per pip per lot) is 1.25 lots, so each pip is worth $12.50. At the target you make 40 × $12.50 = $500. At the stop you lose 20 × $12.50 = $250.
| Plan | Entry | Stop | Pips at risk | Size for about $250 | Reward to 1.0970 |
|---|---|---|---|---|---|
| 4-hour structure only | 1.0922 | 1.0852 | 70 | 0.36 lots | 48 pips, about 0.7:1 |
| 15-minute CHoCH entry | 1.0930 | 1.0910 | 20 | 1.25 lots | 40 pips, 2:1 |
Those figures are before costs. Simulated trades carry trading costs, as they would on a live account: a commission when a trade opens and when it closes, a price markup on some symbols, and holding costs on positions kept overnight.
The 15-minute plan pays better when it works, and its stop sits inside the 4-hour pullback, so it will be hit more often than the 4-hour stop. The idea behind both trades fails only if a 4-hour candle closes below 1.0860, a bearish CHoCH.
How this works on CMC Funded
On a $25,000 Classic account the daily loss limit is $1,250 on the first day, 5% of that day's starting equity, and the maximum loss floor is $22,500. The $250 trade above uses a fifth of the daily limit, so five full stop-outs in one day reach it, before costs. On a $25,000 Direct account the limit is $1,000 and the floor $23,500, so four stop-outs reach it.
The limit is measured on equity, so open positions count against it at every price, wicks included. Your structure rules can ignore a wick, and the daily loss limit does not. Three longs on EUR/USD, GBP/USD and AUD/USD built on the same weak-dollar read, each risking $250, can all move against you in one sharp dollar rally. Near their stops that is up to $750 of floating loss at once, 60% of the Classic limit and 75% of the Direct one, and it counts even if the 4-hour candles close back above your levels.
The limit is worked out afresh each day as a share of your equity at the start of that day, so it moves with your account: larger after a good day, smaller after a losing one. An unused allowance does not carry over, and reaching the limit ends the account with no warning stage. The daily loss and maximum loss lesson explains how the two limits work together.
Trades built on 4-hour structure often last more than a day. Holding overnight and over the weekend is allowed, with holding costs. There is no time limit, so you can wait for a BOS that meets your rules. For scale, the Classic Phase 1 profit target is 8%, or $2,000 on $25,000: four of the $500 winners above with no losses.
Common mistakes
- Marking every small wiggle as a swing. Use one swing rule and one structure timeframe, or you will find a BOS on every chart.
- Counting wicks as breaks. Wait for a body close on the timeframe you are reading.
- Reversing at full size on the first CHoCH. Treat it as a reason to stop trading the old trend, and wait for a BOS in the new direction before trading the new one.
- Letting a 15-minute break override the 4-hour trend. Lower-timeframe breaks against the main trend are usually pullbacks.
- Buying the close of the BOS candle. On the EUR/USD chart that is 1.0941, with a stop below the protected low at 1.0852, 89 pips away.
- Moving a tight stop to the protected low after entry. On the 1.25-lot trade above, with the stop moved from 1.0910 to 1.0852, the loss becomes 78 pips × $12.50 = $975 instead of $250: most of a $1,250 Classic daily limit and almost all of a $1,000 Direct one.
Questions traders ask
Is break of structure an ICT concept?
The idea is older than ICT. Reading a trend as a sequence of higher highs and higher lows comes from Dow Theory. Michael J. Huddleston's ICT teaching, and the smart money concepts that grew from it, gave the breaks their current names (BOS, CHoCH and MSS) and linked them to liquidity, order blocks and fair value gaps.
What happens after a break of structure?
Usually a pullback. After a bullish BOS, price often comes back toward the broken high, an order block or a fair value gap before it continues. Sometimes it keeps going without a pullback and leaves you behind. And sometimes the pullback goes too far, breaks the protected low and turns into a change of character.
What is the win rate of break of structure trading?
There is no reliable figure. Any quoted win rate depends on the swing rule, the timeframe, whether wicks count, where the entry and stop go, and how the trades were exited, so it says little about your own rules. With a 2:1 target you need to win more than one trade in three, before costs, to come out ahead.
Can an indicator mark BOS and CHoCH for you?
Yes. Charting platforms have scripts that find swings with a fixed rule, such as a set number of candles on each side, and label each break as BOS or CHoCH. They make your labels consistent. They also change their labels when you change the setting, and some count wicks, so check their rule against your own.
Next steps
The Academy lesson on break of structure and change of character has you label swings and breaks on practice charts. Size each trade from its stop with the position size calculator, and read the daily and maximum loss limits on the rules page.
You can compare the Classic and Direct routes on the challenges page.