Lesson 2 of 7 · 8 min
Break of structure and change of character
Label swings as higher or lower highs and lows, tell a break of structure (BOS) from a change of character (CHoCH), and see how the rule you choose changes the labels.
By the end you'll be able to
- Label swings as higher highs, higher lows, lower highs and lower lows
- Tell a break of structure (BOS) from a change of character (CHoCH) using a written rule
- Show how the break rule and the swing size change the labels on the same chart
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Price pokes above the last high and falls back. One trader calls it a break of structure, another a change of character, a third a stop run. Without a written rule, all three can claim to be right.
Breaks, in order
Illustrative EUR/USD H1, swings marked with 2 candles on each side and breaks counted on closes.
Once the swings are marked, label each one against the one before it of the same type: a higher high (HH) or lower high (LH), a higher low (HL) or lower low (LL). HH and HL together describe an up trend; LH and LL a downtrend.
A break of structure (BOS) is price going beyond the latest swing point in the direction of the current structure: above the last swing high in an uptrend, below the last swing low in a downtrend. It says the trend has made another step.
A change of character (CHoCH) is the first break in the other direction: below the last higher low in an uptrend, or above the last lower high in a downtrend. Some teachers call it a market structure shift (MSS). It is one data point. Ranges often produce a CHoCH in each direction within a few days.
Write the rule down
The labels depend on choices you make before looking:
- Swing size. N candles on each side, from the previous lesson.
- What counts as a break. A candle close beyond the level, or any wick beyond it.
- Which swing is “the” level. This course uses the most recent confirmed swing high and low.
Teachers differ on all three, which is why two SMC channels can label the same chart differently. Each version is a rule, and a rule can be tested.
Try it
The same chart as above with the full rule applied. Change the swing size or the break rule and watch the labels and the count change.
Switch the break rule to “Wick beyond” and candle 18’s spike becomes a BOS. Then switch back to “Close beyond”, try 1 candle each side, and watch the CHoCH move from candle 19 back to candle 16.
Quick check
Quick check
Question 1 of 4
Swings: HL 1.0800, HH 1.0860, HL 1.0820. A candle closes at 1.0866. What is it?
Question 2 of 4
Same swings. Later a candle closes at 1.0815. What is it?
Question 3 of 4
A candle's wick goes beyond the last swing high, but it closes below. Under a close rule, what is it?
Question 4 of 4
Why do two SMC teachers often label the same chart differently?
Go deeper: Market Structure in Forex: BOS and CHoCH Explained · How to Identify a Trend: Highs, Lows and Market Structure · Breakout Trading in Forex: How to Avoid Fakeouts · Lesson: Trends