Break of Structure in Trading
Introduction
- Presenter: tjr, a day trader with over seven figures in profit at age 22.
- Objective: Teach how to identify a break of structure in the market to take higher probability trades.
- Relevance: Helpful for both new and experienced traders to understand market trends.
Understanding Break of Structure
- Break of Structure: Identifies a trend shift in market structure and can indicate orders being filled.
- Market Movement: Three main trends:
- Uptrend: Higher highs and higher lows.
- Downtrend: Lower lows and lower highs.
- Consolidation: Sideways movement.
Identifying Break of Structure
- Uptrend Break: Occurs when a low is closed below.
- Downtrend Break: Occurs when a high is closed above.
- Consolidation: Many breaks can happen; focus on breakouts above highs or below lows.
- Key Requirement: A break of structure requires a full candle closure, not just a wick.
Practical Examples
- Analyzing Charts: Use candlestick patterns to identify breaks.
- Example of Uptrend Break:
- Monitor the most recent low for closure below.
- Example of Downtrend Break:
- Monitor the most recent high for closure above.
Common Misconceptions
- Wicks are Not Breaks: A wick passing a line is not a break; a full candle closure is required.
- Continuation vs. Break: In an ongoing trend, breaking the same structure is trend continuation, not a new break.
- Recent Lows and Highs: Focus on the most recent ones for structure assessment.
Additional Tips and Warnings
- Break of structure should not be the sole reason to enter a trade — consider context and additional confluences.
- Confluences are more effective when combined into a complete strategy.
Conclusion
- Understanding market structure through break of structure can lead to more informed trading decisions.
- Additional Resources: Free course available for in-depth learning and strategy building.
- Encouragement to review and apply knowledge skillfully to avoid losses.
Note: Save and review these concepts regularly to reinforce understanding and application in trading scenarios. Further learning resources and videos are available for continuous improvement.