Boot Camp Day Six: Trading - Break of Structure

Introduction

• Topic: Break of Structure in Trading
• Purpose: Prepare for understanding liquidity in the next session.
• Prerequisite Knowledge: Candlesticks and Trends.

Understanding Break of Structure

• Definition: Shift in trend direction.
• Trend Movements:
  • Uptrend: Higher highs and higher lows.
  • Downtrend: Lower lows and lower highs.
• Candle Identification:
  • High: Move up followed by a move down.
  • Low: Move down followed by a move up.
  • Consists of two candles (one up, one down for highs; one down, one up for lows).

Identifying Highs and Lows

• Highs:
  • Up candle followed by a down candle.
  • High determined by the highest wick of the two candles.
• Lows:
  • Down candle followed by an up candle.
  • Low determined by the lowest wick of the two candles.

Break of Structure

• Break of Structure to Upside:
  • Occurs in a downtrend.
  • A candle closes above the high.
• Break of Structure to Downside:
  • Occurs in an uptrend.
  • A candle closes below the low.
• Importance of Closures:
  • Wicks above highs or below lows do not indicate a break unless a full candle closes past these points.

Identifying Breaks and Trends

• Process:
  1. Identify the trend (uptrend or downtrend).
  2. For uptrends, watch for closures below lows.
  3. For downtrends, watch for closures above highs.
  4. Focus on the most recent highs and lows for determining breaks.

Practical Examples

• Real Breaks: Candle closures past highs or lows.
• Fake Breaks: Wicks crossing but no full candle closure.

Homework

• Task:
  • Find 10 examples of real breaks of structure.
  • Find 10 examples of fake breaks of structure (e.g., wicks).
• Objective: Practice identifying true and false break of structure situations.

End of Day Six Lecture on Trading - Break of Structure

• Prepare examples for the next class on liquidity.