In technical analysis within crypto investing, a ‘Break of Structure’ (BOS) signifies a decisive shift in the prevailing market trend, characterized by the price action exceeding a significant prior swing high in an uptrend or falling below a significant prior swing low in a downtrend. This event indicates a potential continuation of the established trend after a retracement or the initiation of a new directional bias.
Mechanism
The mechanism involves the price of a cryptocurrency asset surpassing a key support or resistance level that previously defined the range or direction of market movement. For a bullish BOS, buyers exert sufficient pressure to overcome former resistance, printing a new higher high following a temporary pullback. Conversely, a bearish BOS occurs when sellers drive the price below former support, establishing a new lower low after an upward correction.
Methodology
Traders employ the BOS concept as a component of sophisticated price action analysis, identifying structural points on charts to anticipate market movements and entry/exit points. The methodology involves delineating market structure by observing swing highs and lows across various timeframes. A confirmed BOS serves as a trigger for trend following strategies, option hedging, or risk management adjustments, indicating a shift in market control.
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