What is Market Structure in Crypto Trading?

Market structure refers to how price moves in a trend. Traders use Break of Structure (BOS) and Change of Character (CHOCH) to identify trend continuation or reversal.

Key Concepts:

• Break of Structure (BOS): When price closes beyond a key level (higher high or lower low), confirming trend continuation.
• Change of Character (CHOCH): When price closes beyond a previous higher low (in an uptrend) or lower high (in a downtrend), signaling a potential trend reversal.

Bullish Market Structure (Uptrend)

1. A higher high forms, establishing an uptrend.
2. Bullish BOS occurs when a candle closes above the previous higher high, confirming upward momentum.
3. Higher lows form, reinforcing the bullish trend.
4. Higher lows form, reinforcing the bullish trend.
   Another Bullish BOS confirms trend continuation.

Note: If price only wicks above the higher high without closing, BOS is not confirmed, signaling a potential false breakout.

Bearish Market Structure (Downtrend)

1. CHOCH occurs when price closes below the recent higher low, indicating a shift in trend.
2. Lower high forms, confirming early bearish signs.
3. Bearish BOS happens when price closes below the previous lower low, confirming a downtrend.
4. The trend continues downward with lower highs and lower lows.

Key takeaway: CHOCH is the first sign of a possible reversal, while BOS confirms the trend direction.

Trading Strategy: How to Use BOS & CHOCH

• Use BOS to confirm trend continuation before entering trades.
• Look for CHOCH as an early warning of potential reversals.
• Combine market structure with indicators (like moving averages or RSI) for better trade accuracy.

Why Market Structure Matters

Understanding BOS and CHOCH helps traders:
✅ Identify high-probability trade setups.
✅ Avoid false breakouts and market traps.
✅ Improve risk management and stop-loss placement.