Market structure: break of structure (BOS) and change of character (CHoCH)

By AnalytikCapital · Updated October 3, 2026

Market structure is the sequence of swing highs and swing lows that defines a trend. A break of structure (BOS) is a break of the latest swing in the trend's direction and confirms continuation; a change of character (CHoCH) is the first break against the trend and is read as an early sign that the trend may be reversing.

What are swing highs and swing lows?

A swing high is a bar whose high stands above the highs around it; a swing low is a bar whose low sits below the lows around it. How many bars “around it” is a choice. One bar on each side gives a three-candle fractal that reacts quickly and finds many swings. More bars on each side give fewer, larger swings.

A swing is only known after the bars to its right have closed. Until then it is a candidate, and a tool that draws it earlier will sometimes have to erase it.

What AnalytikCapital’s engine does. It uses the three-candle fractal: a swing high must be strictly higher than the one candle on each side, a swing low strictly lower. A swing becomes usable only once the candle after it has closed, so swings never repaint.

How do HH, HL, LH and LL describe a trend?

Each new swing is compared with the previous swing of the same kind:

An uptrend is a series of higher highs and higher lows; a downtrend is a series of lower highs and lower lows; anything else is a range. This is not an SMC invention: classical technical analysis draws market trends the same way. Dow theory held that a trend lasts until a definitive signal ends it, and admitted that its own followers often disagree on which reversal is real. BOS and CHoCH are SMC’s names for that same question. In the engine, a swing exactly equal to the previous one gets no label; equal highs and lows are handled as liquidity instead.

What is a break of structure (BOS)?

A BOS is a break of the latest swing in the direction of the trend: price taking out the last high in an uptrend, or the last low in a downtrend. It confirms that the trend is still working. ATAS describes it as a continuation pattern, which is the common reading.

What is a change of character (CHoCH)?

A CHoCH is the first break against the trend. In an uptrend, the swing that matters is the last higher low: the low that had to hold for the sequence of higher lows to continue. When price breaks below it, the character of the move has changed. The mirror applies in a downtrend with the last lower high.

A CHoCH is an early warning, not proof of a new trend. The usual next step is to wait for a BOS in the new direction.

Where does the market structure shift (MSS) fit?

This is where naming diverges most. Three readings are common:

1. MSS as ICT’s word for CHoCH. Comparisons such as Phidias Propfirm’s list MSS as the ICT term and BOS and CHoCH as the community SMC terms for the same family of events.
2. MSS as a forceful CHoCH. Some educators, for example Trading Wyckoff’s guide, say MSS and CHoCH break the same level and differ only in how: a soft break is a CHoCH, a break with large-bodied candles (displacement) is an MSS.
3. ICT’s own usage. In Episode 3 of his 2022 mentorship, ICT says he uses “break” and “shift” largely interchangeably, prefers “shift” for intraday moves that need not become multi-day trends, and ties the shift to a prior run on liquidity: price first takes stops above a high, then breaks a short-term low.

ATAS frames MSS as a reversal signal, BOS as continuation, and warns that false breakouts of swings are often mistaken for an MSS.

What AnalytikCapital’s engine does. It follows reading 2. A counter-trend break is labeled MSS when the breaking candle’s body is larger than 1.5 times the 14-period average true range, and CHoCH otherwise. A break in the trend’s direction is a BOS, and the first break out of an undetermined market is a BOS that sets the trend. The engine does not require a prior liquidity sweep for an MSS; sweeps are tracked separately, so you can see both on the chart.

What is internal structure?

Inside every large leg there are smaller swings. Many SMC traders split structure into internal (the small swings inside the current leg) and swing structure (the larger highs and lows that define the leg). ICT uses a related idea, internal range liquidity: short-term highs and lows, or imbalances, inside the leg price is retracing.

No standard defines how large a swing must be to count as “swing” rather than “internal”, so two tools rarely agree. The Smart Money engine tracks one level of structure per chart, built from the three-candle fractal on the timeframe you chose. For larger structure, analyze a higher timeframe. The Elliott Wave engine handles nested structure separately, through its three degrees.

Candle close or wick: what confirms a break?

The disagreement is partly about what a wick through a high means. In ICT’s Episode 3 example, price running above a high does not need to close above it: the run itself takes the stops, and the shift is confirmed afterwards when a short-term low breaks. In that reading, a wick through a level and back is a liquidity event, not a continuation.

What AnalytikCapital’s engine does. A structure break needs a candle close beyond the swing level. A wick alone never counts as a break. When a wick runs through a tracked liquidity level (equal highs or lows, or the previous day or week extreme) and the candle closes back inside, it is recorded as a sweep instead. See liquidity pools and session killzones.

What are the limits?

• The swing definition decides everything. A different fractal size produces a different sequence of HH, HL, LH and LL, and therefore different breaks, on the same chart.
• Ranges produce whipsaws. In sideways markets, breaks alternate in both directions and each one is “confirmed” until the next.
• Labels are descriptive. A CHoCH or MSS describes what already happened. It does not say how far the new move will go.

The methodology page shows how a fresh structure break and the Elliott count must agree before AnalytikCapital publishes a plan.

Educational content, not financial advice. Trading involves substantial risk of loss.