Break of structure (BOS): what it is, and how to test it

Market structure is the order of swing highs and swing lows. Higher highs and higher lows make an up structure; lower highs and lower lows make a down structure.

A break of structure, often written BOS, is the next close past the last swing in the same direction as that structure. Its opposite, a break against the structure, is called a change of character.

Bullish break of structure (the long side). Bearish is the mirror image.

1. The structure is up: the last confirmed swing high is above the one before it, and the last confirmed swing low is above the one before it.
2. This bar closes above the last confirmed swing high, and the bar before closed at or below it.

When is it known? A swing high is a bar whose high is above the 3 bars before it and not exceeded by the 3 bars after it, so it is only confirmed 3 bars later. A break can only be measured against swings already confirmed when the bar closes.

• Bullish break of structure. In an up structure, a close above the last swing high.
• Bearish break of structure. In a down structure, a close below the last swing low.

In QuantLogic, every time the idea happened is laid out with the data points around it, so you can see where it held and where it didn't:

• Using a swing that was not confirmed yet. On a finished chart the swing is clear; at the moment of the break it may not have been.
• Picking the swing size after seeing the result. QuantLogic uses the same 3-bar swing everywhere, so the rule cannot be bent to fit.
• Testing only the bullish side in a rising market. Check the bearish breaks too.