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Break of structure

Price closing beyond the most recent significant swing point in the direction of the existing trend, confirming that the trend is continuing.

In an uptrend, a break of structure is a close above the prior swing-high. In a downtrend it is a close below the prior swing-low. It is a continuation event: the trend just proved itself again.

Traders use it as a filter. If you only take long setups after a bullish break of structure, you are refusing to guess at bottoms and instead waiting for the market to show a direction. The cost is that you enter later and give up the first part of every move.

The term comes from the market-structure school of price action and is often confused with change-of-character, which is the opposite: a break against the trend. Keeping the two straight matters, because one means keep going and the other means be careful.

Related: change-of-character, market-structure, swing-high, swing-low, displacement

See it drawn

Original diagrams for the ideas on this page. Illustrative, not real market data.

Trend structure: higher highs against lower lowsTwo zigzag price paths side by side; the left one steps upward with each peak and trough above the last, the right one steps downward with each peak and trough below the last.UPTRENDhigher highs, higher lowsHHHHHHHLHLHLDOWNTRENDlower highs, lower lowsLHLHLHLLLLLLHH higher high, HL higher low, LH lower high, LL lower low.
How a trend is built. A trend is just a sequence of turning points. While each peak and each dip sits above the one before it the market is trending up; once both start landing below the previous ones the structure has turned down.

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