Break of structure trading means watching for price to close beyond a meaningful swing high or swing low, then reading that break as either trend continuation (BOS) or a first warning of reversal (change of character, or CHoCH). Both labels come from “smart money concepts” teaching, and in our experience they are new names for the highs and lows traders have read for a century.
Quick answer: what is the difference between BOS and CHoCH?
A break of structure (BOS) is a close beyond a swing in the direction of the trend, such as a new higher high in an uptrend. A change of character (CHoCH) is the first close beyond a swing against the trend, such as an uptrend closing below its last higher low. BOS suggests continuation; CHoCH is only a warning.
Where BOS and CHoCH come from
BOS and CHoCH are retail jargon, popularised by online smart money concepts (SMC) courses and TradingView indicators. There is no exchange, regulator or textbook that defines them, so two indicators can label the same chart differently.
The ideas underneath are much older. Charles Dow set out the core of it more than a century ago. Trends made of rising highs and lows are one of them, as our guide to Dow Theory and the roots of trend analysis explains.
So we treat BOS and CHoCH as labels for the market structure we already teach, not as a separate method.
Mapping the jargon onto market structure
If you already know how to read highs and lows, you already know BOS and CHoCH. Our guide on how to identify market structure covers the full sequence; the table translates the labels.
| SMC label | Classic description | What it tells us |
|---|---|---|
| BOS in an uptrend | Close above the last higher high | Trend still intact |
| BOS in a downtrend | Close below the last lower low | Trend still intact |
| CHoCH | First close through the last higher low (or lower high) | Warning: trend may be ending |
| Market structure shift | CHoCH followed by a new lower high (or higher low) | Reversal more likely |
| Internal structure | Swings inside one larger pullback | Lower-timeframe detail only |
The labels add nothing that clear highs and lows do not already show. Their value, if any, is that they force you to name what price has just done.
Defining a swing so the break means something
The hardest part of break of structure trading is deciding which swings count. Mark every small wiggle and you will see a “break” every hour.
Chart reading has always had this problem. Andrew Lo and colleagues at MIT, in Foundations of Technical Analysis, describe pattern identification as often “in the eyes of the beholder” and built an automated, rule-based way to find patterns instead. You do not need their maths, but you do need a fixed rule.
A simple rule we use
- Swing high: a candle whose high is above the highs of at least two candles either side.
- Significant swing: one that produced a move at least as large as the recent average pullback.
- Break: a candle body closing beyond the swing, not just a wick.
- One timeframe: label structure on the chart you trade, with bias from the one above.
Wicks through obvious swings are common because orders gather there. Our article on why price seems to hunt stops explains why a quick poke beyond a high often reverses.
How to trade a change of character
The most common beginner error is selling the first CHoCH in an uptrend. A single close below a higher low often turns out to be a deep pullback, and the trend resumes.
We treat CHoCH as the start of a checklist, not an entry. The full reversal process is in our guide to spotting the start of a new trend; in short:
- Note the CHoCH. Price closes through the last higher low. Stop looking for longs.
- Wait for a lower high. The next rally should fail below the previous high.
- Mark the base that rally fails from. The last up candle before the drop is what SMC calls an order block; we treat it as a supply area.
- Look for a reaction there. A rejection candle at that area comes before any entry.
- Plan the stop and size first. The stop goes beyond the lower high, and size comes from that distance.
Fast moves away from that base sometimes leave a gap, covered in our guide to fair value gaps and imbalance.
Timeframes: whose structure is breaking?
Structure is always relative to a timeframe. A CHoCH on the 15-minute chart can be an ordinary pullback inside a daily uptrend, and SMC’s “internal structure” is mostly this point.
We read the higher timeframe first and only act on lower-timeframe breaks that agree with it; our guide to top-down multiple timeframe analysis shows the routine. A lower-timeframe CHoCH against the higher trend is usually a pullback to buy, not a reversal to sell.
Worked example: from CHoCH to a planned short
All figures are hypothetical. On a £5,000 account we risk 1% per trade, which is £50. A currency pair is rising on the 4-hour chart, with higher lows at 1.0800 and 1.0905 and a high at 1.0990.
- The BOS: earlier, a candle closed at 1.0965, above the previous high of 1.0950, confirming the uptrend.
- The CHoCH: after topping at 1.0990, price closes at 1.0890, below the 1.0905 higher low.
- The lower high: price rallies to 1.0955, prints a bearish rejection candle and fails below 1.0990.
- The plan: sell at 1.0950 with a stop at 1.0995, so 45 pips of risk, or about £1.11 per pip. The target is 1.0860, the low of the CHoCH leg, 90 pips away.
If price closes back above 1.0990 instead, the CHoCH was a pullback and we take the £50 loss. CFDs and spread bets are leveraged, so a fast market can gap through a stop and cost more than planned; see how much to risk per trade before sizing anything.
Common mistakes with BOS and CHoCH
- Counting wicks as breaks. A wick beyond a swing that closes back inside is often a trap; our guide to bull and bear traps covers what usually follows.
- Labelling tiny swings. Lower timeframes produce endless breaks that mean little without a fixed swing rule.
- Entering on the break candle. Chasing a large break candle often means a wide stop and a poor price; see how to avoid false breakouts.
- Trusting one indicator’s labels. Different swing settings draw different labels on the same chart, so check them against your own rule.
Frequently asked questions
Is CHoCH the same as a market structure shift?
Usage varies. Many traders use the terms interchangeably, while others call it a shift only once a lower high (or higher low) has followed the CHoCH. We prefer the stricter version.
Does a wick count as a break of structure?
We require a candle body close beyond the swing. Wicks through obvious highs and lows are common and often reverse, so a close is the more reliable test.
Do BOS and CHoCH work?
We know of no published study that tests them as defined by SMC courses. They describe trend continuation and trend failure, which are useful to read, but they are not an edge on their own.
Which timeframe should I use for break of structure trading?
Use the timeframe you trade for entries and the one above it for bias. The 4-hour and daily charts give fewer, more meaningful breaks than the 5-minute chart.
Next steps
Structure only makes sense with candle reading and levels around it, so start with our complete guide to price action trading.
Discovering the beginning of new trends and the filters and trigger process we use are both part of our price action trading course, and the basics section is free to start.
This article is for education only and is not financial advice. Trading leveraged products such as CFDs and spread bets carries a high risk of losing money.
