Break of Structure

A break of structure occurs when the price moves beyond a previous significant swing high or swing low, confirming a continuation or a shift in the trend. This event is a critical signal for traders as it indicates that the market has enough momentum to push through established support or resistance levels.

A break of a swing high in an uptrend validates the continuation of the trend, while a break of a swing low suggests a potential reversal. These breaks are often accompanied by an increase in volume, indicating strong participation.

In the context of market microstructure, a break of structure can trigger a cascade of stop-loss orders, further fueling the price move. It is a fundamental indicator used to define the health and direction of the market.

Traders often wait for a retest of the broken level to confirm the validity of the move.