The break of structure is a reversal price action pattern that allows you to enter the start of a new trend—with low risk.
Here’s why it works:
Imagine, the market has been in an uptrend over the last 200-candles.
But as you know, the price cannot go up forever. Eventually, the market gets “expensive” which attracts short sellers into the market.
And that’s not all because traders who bought previously will look to take profits which puts additional selling pressure.
Now here’s the thing:
Just because the market is “expensive” or there’s profit-taking doesn’t mean we blindly short the markets because it could expose us to huge risk.
So, what now?
Well, this is where the break of structure comes into play.
1. An uptrend approaching resistance which can be seen on the higher timeframe (you want the resistance area to attract attention from the sellers on the higher timeframe)
2. The price fails to make a higher high but instead, made a lower high (this gives us a reference point to set our stop loss)
3. Go short on the break of swing low or support
And the vice-versa for a long trade.
Here’s why it works:
Imagine, the market has been in an uptrend over the last 200-candles.
But as you know, the price cannot go up forever. Eventually, the market gets “expensive” which attracts short sellers into the market.
And that’s not all because traders who bought previously will look to take profits which puts additional selling pressure.
Now here’s the thing:
Just because the market is “expensive” or there’s profit-taking doesn’t mean we blindly short the markets because it could expose us to huge risk.
So, what now?
Well, this is where the break of structure comes into play.
1. An uptrend approaching resistance which can be seen on the higher timeframe (you want the resistance area to attract attention from the sellers on the higher timeframe)
2. The price fails to make a higher high but instead, made a lower high (this gives us a reference point to set our stop loss)
3. Go short on the break of swing low or support
And the vice-versa for a long trade.
