Market Structure Shift

The rules

1. Downtrend: lower highs and lower lows. Uptrend: higher highs and higher lows.
2. BOS = a body close beyond the last swing in the trend direction. Expect continuation.
3. MSS = a body close beyond the last swing against the trend: the last lower high in a downtrend.
4. A valid MSS comes after a liquidity sweep and with displacement.
5. Wicks do not count. No body close, no shift.
6. Without a sweep before it, treat the break as noise or a deeper pullback.

How to mark it

1. Label the swings: mark each lower high (LH) and lower low (LL), or HH / HL.
2. Mark the last lower high (bearish trend) or last higher low (bullish trend).
3. Wait for price to sweep liquidity on the other side.
4. Wait for a displacement candle to close beyond that marked swing.
5. Plan the entry on the retest of the broken level.

The 1:3 trade

Entry on the retest of the broken lower high. Stop below the sweep low. Target the old high where the downtrend started. Reward is exactly three times the risk.

Before you enter

• Higher-timeframe context supports the new direction
• A clear liquidity sweep happened first
• A displacement candle closed beyond the last swing
• Price retests the broken level before you enter
• Stop beyond the sweep, target the next liquidity

Common mistakes

• Calling every BOS a trend change
• Counting a wick through the level as a shift
• Entering a shift that had no sweep before it
• Chasing the displacement candle instead of waiting for the retest
• Placing the stop at the broken level instead of beyond the sweep

Key terms

• BOS: break of structure in the trend direction
• MSS: market structure shift against the trend
• LH / LL: lower high / lower low, the steps of a downtrend
• Displacement: fast, large-bodied move that shows intent
• Retest: price returning to the level it just broke
• R:R: reward divided by risk; 1:3 means 3R for 1R risked

BOS keeps the trend. MSS changes it, but only after a sweep and only with a body close.