Boot Camp Day 6: Break of Structure
Introduction and Welcome
The instructor welcomes the viewers to boot camp day six and mentions that today's focus will be on trading, specifically break of structure.
Break of Structure
- A break of structure refers to a shift in the trend.
- Trends move in higher highs and higher lows in an uptrend, and lower lows and lower highs in a downtrend.
- A high is formed by a move up followed by a move down, while a low is formed by a move down followed by a move up.
- Highs and lows can be identified using candlestick patterns consisting of two candles.
- It is not necessary for highs and lows to have perfect shapes; they can vary in appearance.
Identifying Highs and Lows on Charts
The instructor explains how to identify highs and lows on charts before diving into the concept of break of structure.
Identifying Highs
- A high consists of a blue candle (move up) followed by a black candle (move down).
- The highest wick between these two candles represents the high point.
Identifying Lows
- A low consists of a move down followed by a move up.
- Similar to highs, the lowest wick between two candles represents the low point.
Examples of Highs and Lows
The instructor provides examples to further illustrate how to identify highs and lows on charts.
Example 1
- A high is formed by a blue candle (move up) followed by a black candle (move down).
- The highest wick between these two candles represents the high point.
Example 2
- A low is formed by a move down followed by a move up.
- The lowest wick between two candles represents the low point.
Break of Structure and Market Structure Shift
The instructor explains how understanding highs, lows, and trends helps identify when a trend breaks and when market structure shifts.
- If an uptrend no longer follows higher highs and higher lows, it indicates a break of structure.
- Understanding highs, lows, and trends is crucial to recognizing changes in market structure.
Timestamps are approximate and may vary slightly.
Understanding Break of Structure
In this section, the speaker explains the concept of a break of structure and its significance in trading.
Break of Structure to the Upside
- A break of structure to the upside occurs when there is a closure of a candle above a previous high.
- The candle body must be above the wick of the high for it to be considered a break of structure.
- Examples are shown on the chart to illustrate this concept.
Break of Structure to the Downside
- A break of structure to the downside happens when there is a closure below a previous low.
- Similar rules apply, where the candle body needs to close below the wick for it to be considered a break of structure.
Identifying Highs and Lows
This section focuses on understanding highs and lows in relation to market structure.
Recent Highs and Lows
- Only the most recent high or low is relevant when determining market structure.
- Previous highs or lows become insignificant once new ones are formed.
Examples of Breaks in Market Structure
The speaker provides examples on the chart to demonstrate breaks in market structure.
Break of Structure to the Upside Example
- An example is shown where an uptrend is followed by a closure below a previous low, indicating a shift in trend.
- Lower highs and lower lows confirm that market structure has broken, establishing a downtrend.
Break of Structure to the Downside Example
- Another example shows an uptrend followed by breaking below a previous low, initiating a downtrend.
- Higher highs and higher lows validate this change in market structure.
Importance of Candle Closures
This section emphasizes the significance of candle closures in determining breaks of structure.
Candle Closures Above Highs or Below Lows
- Wicks going above highs or below lows do not indicate a break of structure.
- A candle closure is required for it to be considered a valid break.
- Examples are provided to illustrate this concept.
Recap and Simplification
The speaker summarizes the key points and simplifies the understanding of breaks in market structure.
Step-by-step Execution
- Identify the trend.
- Determine if there is a break of structure by looking for candle closures above highs or below lows.
- Confirm the change in market structure based on subsequent price action.
By following these steps, one can effectively identify breaks in market structure and potential shifts in trends.
The transcript provided does not include any timestamps beyond 0:14:00 .
New Section
In this section, the speaker discusses the importance of identifying trends and breaks of structure in trading.
Identifying Trends
- When in an uptrend, focus on watching the lows for a break of structure.
- In a downtrend, watch the highs for a break of structure.
- A break of structure occurs when the low (in an uptrend) or high (in a downtrend) gets taken out or closed below.
Break of Structure to Upside
- For an uptrend to turn into a downtrend, there must be a close below the most recent low.
Break of Structure to Downside
- For a downtrend to turn into an uptrend, there must be a close above the most recent high.
New Section
This section provides examples and further explanation of breaks of structure and how to identify them.
Example 1: Break of Structure to Downside
- The most recent low is the key point to watch for breaks of structure.
- Even if there are previous lows that are lower, they become irrelevant once a new most recent low is formed.
- Price closing below both previous lows confirms the break of structure.
Example 2: Break of Structure to Upside
- The same principles apply but in reverse for breaks of structure to upside.
- The highest point between two candles is considered as the high.
- Price closing above both previous highs confirms the break of structure.
New Section
This section emphasizes waiting for candle closures before confirming breaks of structure and changing trends.
Waiting for Confirmation
- To confirm a trend change, wait for daily candle closure above/below the relevant level.
- Candle wicks or formations within consolidation periods do not count as valid highs or lows.
- Patience is required to wait for the necessary candle closure.
New Section
The speaker provides another example of a break of structure and highlights the importance of understanding consolidation periods.
Example 3: Break of Structure on Weekly Timeframe
- The speaker demonstrates a break of structure on the weekly timeframe.
- Consolidation periods can occur without a clear trend, making it important to identify valid breaks of structure.
Conclusion
The transcript discusses the concept of breaks of structure in trading and emphasizes the importance of identifying trends and waiting for confirmation through candle closures. Understanding how to identify valid highs and lows within consolidation periods is crucial for accurate trend analysis.
New Section
In this section, the speaker discusses the concept of break of structure in trading and emphasizes the importance of waiting for confirmation before taking a trade.
Break of Structure
- A break of structure refers to a significant change in price movement that indicates a potential shift in market direction.
- To identify a break of structure, it is necessary to analyze both daily and weekly charts.
- If there is a break of structure to the downside on the daily chart but the weekly chart still shows a bullish trend, it may be considered as just a retracement rather than a true break.
- It is important to differentiate between a break of structure and a liquidity sweep. A wick below a previous low does not necessarily indicate a break if the market continues to move higher.
- Taking trades based on potential breaks without confirmation reduces the probability of success and should be avoided.
- Confirmation requires waiting for the low to close below or above certain levels, depending on the trend direction.
New Section
In this section, the speaker explains how to identify trends and determine when there is a break of structure.
Identifying Trends and Breaks
- To identify trends, observe whether prices are moving up (higher highs and higher lows) or down (lower highs and lower lows).
- In an uptrend, focus on watching for new lows that are made.
- Only recent lows need closure above; older ones can be disregarded.
- A true break of structure occurs when there is a close below the most recent low in an uptrend or above the most recent high in a downtrend.
- It is crucial to pay attention only to these recent points as they indicate shifts in market structure.
New Section
The speaker assigns homework related to identifying breaks of structure and emphasizes the importance of practice.
Homework and Practice
- The homework assignment is to find ten examples of actual breaks of structure.
- Using the checklist provided, it should be relatively easy to spot these breaks.
- Practicing identifying breaks of structure will help improve trading skills and increase the probability of successful trades.
New Section
The speaker discusses the importance of being able to identify actual breaks in structure and differentiate them from fake ones.
Identifying Breaks in Structure
- The speaker mentions the need to develop the skill of spotting actual breaks in structure.
- It is important to be able to distinguish between genuine breaks and fake ones that may deceive someone.
- By practicing and gaining experience, one can become proficient at identifying real breaks in structure.
Importance of Spotting Fake Breaks
- The speaker emphasizes the significance of being able to recognize fake breaks in structure.
- Being able to identify fakes helps improve one's ability to spot genuine breaks more effectively.
- The speaker encourages listeners to aim for 20 examples of both real and fake breaks by the end of their practice.
Timestamps are not available for this section.