Full transcript
Intro and Why SMC Market Structure Matters
0:00If you struggle with knowing whether a trend
0:01is likely to continue or reverse,
0:03this is the video for you because in this
0:05video, I'm sharing a 100% mechanical way
0:07to know whether a trend is likely to
0:09continue or you're about to get that
0:10reversal, helping you stay on the right
0:12side of the market.
0:13So if you're new here, my name is Justin
0:15Bennett, founder of Daily Price Action,
0:17Forex Trader since 2007, full-time trader
0:19since 2011.
0:20All right, so in this video, we are talking
0:22about SMC market structure.
0:24Okay, so for some of you, this could be
0:25familiar.
0:26For others, this is going to be brand new. Now,
0:28for those of you who this where this is
0:30brand new, I want to start with some basic
0:31concepts here.
0:34And even if you know SMC market structure
0:35and you're familiar with it, I urge you to
0:37pay attention here even through this part
0:39because
0:39you might learn something new. Okay. So
Internal vs. External Highs & Lows
0:41looking at this blank chart, right, let's
0:43start here because before we get into an
0:45actual chart, I want to explain what
0:47defines
0:48a market uptrend, downtrend, and
0:50consolidation,
0:51and also those key terms that we need to
0:52know in order to put this method into
0:54practice.
0:55So the very first thing, let's go ahead and
0:57draw out some very simple lines here.
0:58So we're going to draw,
1:00first of all, an uptrend up here.
1:01So higher highs and higher lows.
1:02Most of us are very familiar with that.
1:04And then we also have
1:06a
1:06consolidation period.
1:07So these are essentially
1:09the
1:09three things that a market can do.
1:11You can either get consolidation like this
1:12where the market just goes sideways, you
1:14can have an uptrend, or you can have the market
1:17moving in a downtrend.
1:18So lower highs and lower lows.
1:20So most of us are familiar with this.
1:22Now, what you might not be familiar with
1:24are terms
1:25like internal and external highs and lows.
1:28So let's discuss that for a moment before
1:30we get into a couple of SMC terms that you
1:32need to know.
1:33So the first one is going to be the fact that
1:36in any given timeframe, you're going to
1:37have internal timeframes.
1:39Now, with the exception, obviously, of the
1:40one-minute chart, although you could even
1:41make the case
1:42that the one-minute chart has the
1:43one-second chart if your platform has it.
1:46But really for most timeframes, you are
1:47going to have
1:48internal timeframes.
1:49So in other words, you are going to have a
1:52case where you have these external highs
1:54and lows.
1:54So if we assume for a moment that this is
1:57an hourly timeframe, so these highs and lows
1:59are on the hourly chart.
2:00So within this, what you're going to have
2:02is you're going to have lower timeframe
2:04highs and lows along the way.
2:05So it's going to look something like this,
2:07really choppy.
2:09and very kind of almost erratic right in
2:12this within this trend.
2:13So what this is showing you here
2:16is these
2:17internal highs and lows right here fit within
2:20this hourly trend.
2:21Remember, this is our hourly trend.
2:23So this right here, these highs and lows
2:25could be something like a 5 minute.
2:27So you're going to have these internal
2:28highs and lows along the way.
2:30So these are all internal and these up here
2:33that you see are external.
2:36So in terms of market structure, this is
2:38really, really critical.
2:38In terms of market structure,
2:40you always want to pay attention to the
2:42external highs and lows.
2:43So all of this through here, if this is an
2:45hourly timeframe, all you're looking at are
2:47these hourly highs and lows.
2:49We don't really care about what's happening
2:51here in the middle.
2:52So the only thing that's going to
2:54give us a directional bias on the hourly
2:56time frame
2:56are those highs and lows that are occurring
2:58on the hourly time frame, not the
3:00five-minute, not the 15-minute, OK?
3:02So that's the very first thing to
3:03understand.
3:03The same thing goes for a downtrend and
3:05even consolidation.
3:06You have external highs and lows, and you
3:08have those internal highs and lows as well.
3:10So you have something like this here
3:12within this trend.
3:14So if this is an hourly chart, you have
3:15highs and lows that develop through here.
3:17Something like this,
3:18obviously a little bit messy, but just
3:20getting my point across here,
3:21where you have these highs and lows on the
3:23hourly, and then you've got these internal
3:25highs and lows.
3:25So this internal structure within this
3:28external structure, the only thing we care about
3:30in terms of market structure when we're
3:32looking at SMC
3:33is going to be these external highs and lows.
How to Choose a Time Frame
3:35So another way to say that
3:37is if you are on an hourly time frame, and
3:39this is a question that I get a lot, where
3:41if you're on the hourly time frame,
3:42everybody says, well, what about the 15
3:44minute? What about the 5 minute? How do we
3:45account for all these different time
3:46frames?
3:47Because you could essentially have a
3:49market,
3:49and you do have a market in this case that
3:51isn't an uptrend on the hourly.
3:53However, on the five-minute, it could be in
3:55a downtrend
3:56within this leg.
3:57So people ask, well, how do you account for
3:59all of that? And my answer is always pick a lane.
4:01Pick a timeframe
4:02and use that timeframe and forget
4:04everything else. Now,
4:05you could have multiple timeframes, and in
4:07fact, you probably should,
4:09and I do, with regard to identifying a
4:11directional bias
4:12and then also refining your entries.
4:14So you can have multiple timeframes, but
4:16what you don't want to do is get in this
4:18endless loop of trying to identify every
4:20single timeframe and the highs and lows on
4:22those timeframes because you will drive
4:23yourself absolutely crazy.
4:25So
4:25just pick a lane, pick a timeframe.
4:27In my opinion, the hourly is a great place
4:29to start because it's going to give you a
4:31couple of opportunities every week, but
4:32it's not such a low timeframe where you're
4:34going to get a lot of noise.
4:35And that's the second thing I want to talk
4:36about here
4:37is that if you try to identify something
4:39like this, the highs and lows,
4:41on a five minute time frame, what you're
4:42going to notice is that you're going to
4:43have a lot of noise.
4:44You're going to have a lot of noise
4:46to the point where it becomes difficult to
4:47try to define
4:49what the market is doing at any given time.
4:51So I think the hourly, maybe a 30 minute
4:52time frame is a great place.
4:54The four hour is also a great place,
4:55although you're going to get less
4:56opportunities if you're on the four hour
4:58or daily time frames.
4:59Okay, so we've talked about the three
5:01things that markets can do.
5:02They can either trend higher, trend lower,
5:03or consolidate.
5:04And we've also discussed external highs and
5:06lows versus internal highs and lows.
5:08We want to use these external highs and lows.
Break of Structure & Change of Character
5:10Now, another thing we need to discuss here
5:12before we get into an actual chart
5:14is going to be,
5:15are going to be two terms, two SMC terms
5:17called the breakup structure and change of
5:19character.
5:20Okay, so let's bring up the text tool here
5:23and write these out so you guys can become
5:24really familiar with it.
5:25So we have breakup structure
5:27and this is going to be abbreviated as BOS, okay?
5:31So we have breakup structure and the second
5:33one is going to be
5:35a change of character, okay?
5:37So next is going to be change of character,
5:40and this is abbreviated by CHOCH.
5:44All right.
5:45So we have break of structure, change of
5:47character.
5:47Now, if you're not familiar with SMC, this
5:50might sound a little bit odd, because
5:51if you first hear break of structure, what
5:53you're thinking is,
5:54that that is a break of a trend. Okay.
5:57In other words, you have
5:59a structure being an uptrend and it's a break.
6:01However, that is not the case.
6:03So a break of of structure here
6:05is actually a trend continuation. Okay.
6:08So break of structure is trend
6:10continuation.
6:11The idea being that when you have the market
6:14actually breaking a
6:15high, so in this case, we have this uptrend
6:16on the hourly, you have the market breaking
6:18that high.
6:19This is the break of structure right here.
6:21So break of structure, meaning that within
6:23this uptrend
6:24You have the market consolidating back here,
6:27and then you have the break of structure
6:29and that continuation.
6:30Okay, so breakup structure equals a trend
6:32continuation.
6:33So therefore we can say that a change of
6:35character
6:36is a trend
6:37reversal.
6:38Okay, now.
6:40Change of character sounds odd, right? When
6:42you first hear this, you're going to think
6:43that's a really strange name for a trend
6:46reversal
6:47until you realize that there are two
6:48characters in the market. So
6:50we have
6:51a bull and a bear, right? Two characters in
6:53any market.
6:54And so a change of character is literally
6:55going from a bull to a bear or a bear to a bull.
6:58So
6:58once you understand that, change of
6:59character takes on a whole new meaning.
7:01So we have trend continuation, trend
7:03reversal.
7:05So let's talk about these two in terms of this
7:08chart over here, these drawings that we've made,
7:10and identify what is a break of structure,
7:13what is a change of character.
7:14So in this case right here, we have this
7:17high within an uptrend.
7:18So as soon as we close above this high, and
7:20this is key,
7:21you have to close above this high.
7:22So if this is an hourly chart, you have to
7:24get an hourly close above this level.
7:27And we'll look at a real chart here in a
7:29moment on the EUR/USD, but for now, I want
7:30to stick with this because it's just very simple
7:33to help you guys grasp these terms.
7:35So this right here, you need an hourly
7:37close above this high back here.
7:39If it's a wick, it does not count.
7:40And so you need that close above.
7:42This is a breakup structure or BOS. Okay?
7:45And the only thing that this tells us, this
7:47is not a key level.
7:48For those of you coming from price action,
7:50you're going to be tempted
7:51to treat these levels that we're going to
7:53draw within the chart above
7:55as key levels.
7:56In other words, you're going to look at
7:57this and Say the market's breaking out, I
7:58want to buy against this, and that is not
8:00what you want to do because in most cases,
8:02what you're going to get is the market
8:04actually dropping below here,
8:06back down here into
8:08discount or inefficiencies that build up
8:09down here,
8:10and then continuing within this trend.
8:13We'll talk about that more
8:14in later videos.
8:15This video specifically is just defining
8:18SMC market structure and how to use breakup
8:20structure
8:21and a change of character to make sure
8:22you're staying on the right side of the
8:23markets.
8:24So we have this breakup structure here.
8:26Let's go ahead and label this so we stay clear.
8:28So breakup structure, BOS.
8:31So again, same thing up here.
8:32You can see where we had the close above
8:34this high.
8:34And the only thing that this is telling us,
8:36this is not a breakout.
8:38This is not a breakout.
8:39This is simply the market just telling us
8:40that buyers remain in control.
8:43So I don't want you guys thinking that this
8:45is a breakout, again, in the sense that we
8:46have a break and you want to buy against
8:48this level,
8:49because in a lot of cases, again, what
8:50you'll see is the market will drop well
8:52below it back here into some
8:53inefficiencies.
8:54to clean up the liquidity that was left
8:56behind during this move and then continue
8:58in that direction.
8:59So if you start thinking of these as
9:00breakouts
9:01and buying against these levels, you're
9:02gonna get yourself in trouble.
9:04So
9:05breakup structure, breakup structure. Now,
9:07let's talk about for a moment a change of
9:09character.
9:10And obviously the same thing applies here
9:11for this downtrend
9:13where you have the lows down here.
9:15This would be a bearish breakup structure
9:16where you get the market actually closing below
9:19this low back here, so bearish breakup
9:21structure here and also bearish breakup
9:23structure here.
9:24Okay.
9:24So again, this just tells us that sellers
9:27are in control back here
9:28and that buyers are in control up here.
9:30That is the only thing that we're doing here.
9:32Okay.
9:32Now let's talk about a change of character.
9:34How does that look?
9:36So if we take this here as our uptrend
9:38and we map out something like this, let's
9:40say we get the pullback here, the market
9:41comes up, makes
9:42a
9:43lower high, although it doesn't have to,
9:45but this is a stronger reversal signal,
9:47which I'll explain in future videos as well. But
9:50this right here, okay, if you get something
9:52like this,
9:53What happens here is on the way up, you're
9:55marking these levels
9:57and you're saying, okay, these are the
9:58levels that buyers have to defend,
10:00right? Because it's an uptrend, you don't
10:01want to see the market
10:02closing below these lows.
10:04Okay, so it didn't hear, it didn't hear.
10:05We got the bullish break of structure,
10:07buyers are in control,
10:08and the same thing back here.
10:10So we had this low right here.
10:12We had a break of structure on this high.
10:15So we had the close above.
10:17And then what we had is sellers taking over
10:20and closing
10:21the market below
10:23this low back here.
10:24Now here's an important part
10:26is that any change of character
10:28has to originate from
10:30the low or
10:31the last low in this case that produced the
10:33break of structure.
10:34So in other words,
10:35this last break of structure was up here.
10:37Okay, so this high,
10:38if we take this and follow this back to the
10:40last low, it was this one.
10:42Okay, so this change of character right
10:44here, once we close below,
10:46this is the low we have to use.
10:47It's the last low
10:48that triggered the break of structure. Okay,
10:50so this right here,
10:52Let's just keep it clean here and label
10:54this as our change of character.
10:57So that's our change of character.
10:59This right here tells us that sellers are
11:00now in control,
11:01and we want to be looking for shorts only.
11:04So shorts only here against inefficiencies
11:06once we get that change of character.
11:08Back here, buys only because we know buyers
11:10are in control.
11:12And the same thing down here.
11:13Let's go ahead and run through this here
11:14quickly before we get into a chart.
11:16So let's say we have the market putting in
11:18a retracement here, puts in a higher low,
11:21and again, it doesn't have to.
11:23And here's, okay, actually, you know what?
11:24This is a good
11:25stopping point because
11:27what happens a lot of times is this,
11:29right? So if you'll notice here,
11:31we have
11:32this high back here.
11:33And again, when the market's trending
11:35lower, what you can do, especially when
11:36you're practicing this stuff,
11:38is just draw
11:39horizontal levels.
11:40And you'll see this in the euro
11:41chart above once we run through this.
11:44But just draw your horizontal levels right
11:45in a downtrend like this
11:47and say, okay, these are the levels that
11:49sellers have to defend.
11:50As long as we're doing that and we're
11:52producing these breakup structures,
11:54then sellers are in control.
11:56Now,
11:56as soon as we get a breakup above this,
11:58buyers are in control.
11:59However, what tends to happen
12:01is in this case, if you have this low right
12:03here that doesn't take out this one, that
12:05doesn't close below,
12:06what happens is a lot of traders start to
12:08use this high.
12:09And they look at this and they say, okay,
12:11this is a change of character.
12:12Now,
12:13it could work out, okay, that could be,
12:16however, technically speaking, this is not
12:18the high
12:19that you should be using.
12:20And the reason for that, it goes back to
12:22the fact that any change of character
12:24has to originate
12:25from, in this case, the high that produced
12:28the last breakup structure. So,
12:29in other words, if we look here at this,
12:32okay, so this
12:33breakup structure right here, if we move
12:34this over,
12:35right, copy this over, this was our last
12:37breakup structure.
12:37We got the close.
12:39below this low right here.
12:41Okay, so we close below here.
12:43This high up here was the high that
12:45produced the last break of structure.
12:46Therefore,
12:47this is the high that you need to mark out,
12:49not this stuff here.
12:51And this goes back to what we discussed
12:52earlier about external highs and lows and
12:54internal highs and lows.
12:55All of this right here is internal.
12:58It's all internal to
13:00this right here, this high
13:02and this low.
13:03If you notice, all of these right here,
13:05this high, this low,
13:07this high, this low, all of this is
13:09internal to this high up here and this low
13:11down here.
13:13So that's very important that you have to,
13:15anytime you're dealing with a change of
13:16character,
13:17it has to originate from, in this case, the
13:19last high
13:20that produced the last break of structure.
13:23So
13:23if we walk this forward here, let's finish
13:25this up, and then we'll get into a EUR/USD.
13:28real chart
13:29to explain this. So
13:30if
13:30in this case, we were to get the move above here,
13:33like this,
13:34then that right there is your change of
13:36character.
13:37Okay, so the change of character
13:39actually happens over here, not within this.
13:41So this right here now becomes our change
13:44of character, okay?
13:45Because you could have, in this case, you
13:47could have had the market do this,
13:49and you think that this high right here is
13:50the change of character, and the market's
13:52flipping bullish, and then it could have
13:53just continued lower, okay?
13:56So it's very important to confirm this with
13:58these external highs and lows and not the
14:00internal highs and lows.
14:01Okay, so let's go ahead and move on now and
14:03look at a real example here, a real chart
14:05on the Euro-USD.
14:06We're going to use the hourly timeframe
14:08just because I do think it's a great
14:09timeframe to use, especially if you're
14:11learning this stuff, because
14:12the issue is if you drop too low of a
14:14timeframe, then you're going to get a lot
14:15of noise.
14:16It's going to be difficult to determine
14:18what those external highs and lows are.
EURUSD SMC Walkthrough
14:20So even this right here, and by the way,
14:22I'm not cherry picking this.
14:23literally the last couple of months of the
14:25Euro USD price action. So
14:27you could do this on any chart, any time
14:29frame it works.
14:29But again,
14:30I do
14:31suggest that when you're learning this stuff
14:33to kind of stick to the hourly or above,
14:35you could drop to the 30 minute or even 15,
14:37but again, the lower you go, the more noise
14:39you're going to have in the chart.
14:40Okay, so let's go ahead and play this
14:41forward now.
14:42And as we do this, I'm going to go ahead
14:44and mark out these highs and lows.
14:45So here we have a downtrend clearly, right?
14:47We have a downtrend here in the Euro USC.
14:48So during this time frame, what we would do
14:50is we would go ahead and just look
14:53at these highs and lows to determine.
14:56right, when we have the break of structure
14:58or the change of character.
14:59So in this case here, you can see that we
15:01do have a break of structure off of this
15:03low down here.
15:04So off of this low, we have a break of
15:06structure, right? And this is a bearish
15:08break of structure because we are in a
15:09downtrend.
15:10Okay, so this is the high up here that has
15:12to be defended.
15:13Now, as soon as we get a breakup structure,
15:15okay, so this is great now that we're real
15:17time here because you can see we had the
15:18breakup structure, the close below that
15:20confirmed that sellers remain in control.
15:22Now, at this time too, what you can do when
15:24you're learning this stuff
15:25is you can go ahead and draw out a
15:28horizontal line off of
15:29this high up here now.
15:31And the reason
15:32for this is because this is the move right here.
15:34This is the high that triggered
15:36this breakup structure, okay, the downside.
15:39So if we play this forward now,
15:41Let's see what we get here.
15:42Okay, so the Euro is coming up now.
15:45and testing that high.
15:46And what you can see right there, guys,
15:48this is really important because this right
15:50here, this close above
15:51is a change of character.
15:53So again, we have the last high that
15:56produced the last break of structure.
15:58So if we have
15:59this low down here that produced the break
16:01of structure, we follow this back to the
16:02last high,
16:03it's this one right here.
16:05And if you'll notice too, this isn't just
16:07a fluke or
16:09getting lucky in this case, because if
16:11you'll notice during this downtrend,
16:12What you can see here is that we had a
16:13series of lower highs and lower lows.
16:16Okay, so the market never did this before.
16:18If you'll notice, all of these highs up
16:20here are lower highs.
16:21This right here is really the first higher
16:24high within this downtrend.
16:27Okay, so this right here, the close above.
16:29is our change of character.
16:31So let's go ahead and label that to keep
16:33things straight here.
16:34So change of character here.
16:35I'm going to remove this for now to keep
16:37things clean.
16:38So
16:39that is our change of character.
16:40Now, at this point, we know
16:41that within this downtrend, buyers are
16:43starting to take control.
16:44The keyword there is starting, though,
16:46because there are no guarantees in the
16:47market ever, even if you have full
16:49confirmation.
16:51But in this case, we have the start of a
16:53potential reversal.
16:55So at this point, if you were looking for
16:57shorts during this downtrend,
16:58this would be a good time to pause and say,
17:00okay, wait a second.
17:01Buyers are starting to take control.
17:02We're seeing some strength now in this
17:04market.
17:04This was a pretty aggressive move up.
17:06And we also closed above this high, right?
17:08That last high that produced the breakup
17:09structure.
17:10So at this point, if you were shorting, you
17:12probably want to stop,
17:13right? Not financial advice, but that's
17:15always the best thing to do here when you see
17:17the market finally starting to turn.
17:19And so with this now, and again, here's
17:22where traders get themselves in trouble
17:23because they look at this as a breakout and
17:25they think, okay,
17:26if we close above here,
17:28then I want to buy against this high.
17:30And that nine times out of 10 is going to
17:32get you in trouble.
17:32And that's not what we want to do here.
17:34In future videos, I will talk about
17:36entry methods and how to use this
17:39really the same method in order to confirm
17:40entries.
17:41But that's not really the way to go here
17:43because if you start doing that, what
17:45you're going to find is that inefficiencies
17:46build up along the way
17:48and the market has a way of coming back
17:49here and tagging these inefficiencies down
17:52here before moving higher.
17:54So if we go ahead and play this out now,
17:56and again, this right here, guys, it's
17:57important too, this change of character,
17:59the only thing this close above this high
18:01tells us
18:02is that buyers are starting to take
18:03control.
18:03That is it.
18:04This is not a key level in the market.
18:06Yes, it is off of this high, but the only
18:07thing this serves right now
18:09is just to tell us that buyers are starting
18:11to take control.
18:12Let's go ahead and play this forward now
18:13and see what we get.
18:15So here we have the market dropping down
18:17here and this is what I mean that we're
18:18dropping down there into those sell side
18:20inefficiencies that developed
18:21along this move. Okay,
18:23so now we have the move back up here and
18:26before we get there, I'm also going to
18:29draw a level off of this high.
18:31Okay, because this now becomes.
18:32the high that the market has to break out
18:34in order to give us that first higher high.
18:36We've had the change of character back
18:38here, but we want to see that
18:39confirmation that buyers are truly taking
18:41control.
18:42And if you'll notice here, we move up and
18:45test the level a couple of times, don't
18:46break through.
18:47And this right here, this wick
18:49does not count.
18:50The wick does not count because we're on
18:51the hourly timeframe.
18:52This was an hourly wick.
18:53We did not close a candle above this.
18:55Okay, so let's go ahead and keep moving
18:57forward. Okay.
18:57And on that candle right there,
18:59what you can see here is that we finally
19:01got the close above.
19:02Okay, so we got the close above here.
19:03So this now is a break of structure.
19:06Okay, because now we're bullish, right? We
19:08have the change of character back here,
19:09break of structure once we close above.
19:11So this right here too, as soon as we get
19:13this close,
19:14what we can do is go back to the last low
19:17that produced this.
19:18So we had the close above up here.
19:20This was the low.
19:21that produced that break.
19:23Okay, so this is the low now
19:24that you want to see the market hold above.
19:26You do not want to see the euro closing an
19:28hourly candle below this low here.
19:31Okay, so if we now map this out, so this is
19:33our low now that we've had the breakup
19:35structure that buyers have to defend.
19:37Okay, so we have the break of structure.
19:38Let's play this forward and see what we get.
19:40Okay, so moving forward,
19:42you can see we're kind of consolidating
19:43here a little bit.
19:44We did drop below that break of structure,
19:46but again, these are not key levels.
19:47All this is serving is just to tell us
19:49that the market is in an uptrend, buyers
19:52are in control. Now,
19:53once we had this too, I should have mapped
19:54this out earlier, but
19:56once we had that break of structure, this
19:57becomes our new high, right? So this is now
19:59the new high that buyers have to break above.
20:01And what you'll notice back here is that we
20:03did not close above it here.
20:04We wicked above.
20:05We didn't quite close above here.
20:07We did close above through here.
20:09So once we have this,
20:10once again, buyers are in control.
20:12That's the only thing this is telling us.
20:13It is not a key level in future videos.
20:15I'll get into
20:16areas of interest, how to define those, and
20:18also where to enter
20:20into trends like this. Okay.
20:22So breakup structure right there.
20:23And once we have that breakup structure, we
20:25can move this level up because once again,
20:27in an uptrend, this is now the low that
20:30buyers have to defend.
20:31And the reason we know that it's this low
20:33is because, again, this was our new breakup
20:35structure here.
20:36If we move back from this,
20:37okay, this was the last low.
20:39So this is the low that buyers have to
20:40defend now.
20:41So moving forward, let's see what we get.
20:43Okay, so we're pulling back now into
20:45inefficiencies down here, right? And now
20:47that we've had a pullback,
20:48right, this high up here becomes the level
20:51to watch.
20:51Okay, now what defines A pullback for me is
20:53I want to see at least a few candles
20:55pulling back.
20:56I mean, ideally, you want to see a few
20:57candles in a row pulling back on the
20:58hourly.
20:59So in other words,
21:00you want to see at least,
21:01three or four, ideally even like 5.
21:03And here we had four
21:05red candles right here on the hourly
21:06pulling back.
21:07So once I have that,
21:08I know that this is now kind of my high to
21:10watch within this trend.
21:11where we could get an additional breakup
21:13structure or
21:14we could get a reversal materializing from this.
21:17But that becomes the high now to watch
21:19for the Euro USD.
21:20So moving forward, we're just
21:22consolidating, going sideways.
21:23We don't have a breakup structure. And now
21:25what you'll notice is that we have this big,
21:28big sell off here from the Euro.
21:29Now here's a great point as well, because
21:32all of this sideways consolidation, the
21:34thing to remember is that the low that
21:36produced the last breakup structure, so the
21:37last BOS
21:39was this right here.
21:40So this area through here Once we closed above,
21:43that was the last breakup structure within
21:44this uptrend.
21:45So if we track back to the last low, now
21:48you could technically
21:49use this one.
21:50However, what you'll notice is that we only
21:52had one, two candles pulling back.
21:54So for me, that's a little bit too shallow.
21:56It's a little too shallow for me to call this
21:59the low that buyers have to defend.
22:01Okay.
22:01Although in this case, it would have worked
22:03out because you would have had a change of
22:04character over here.
22:05And then you can see we got a lower high.
22:07But for me, if I'm trading this real time,
22:09you know, just full transparency, I'm
22:11looking at this low down here
22:12because again, this pullback isn't quite
22:14enough.
22:14It's a little too shallow for me to use
22:16this low.
22:16I'm looking at this low right here that
22:18produced this breakup structure. Okay.
22:21So this is the low that buyers have to
22:23defend.
22:23They failed over here.
22:24You can even see where we got the bounce
22:26right here on this candle,
22:27but they failed right here, making this a
22:29bearish change of character.
22:30Okay.
22:31So we flipped from bullish to bearish.
22:33So if we label this here as a change of
22:36character,
22:36this is where sellers started to take over.
22:39Because notice back here,
22:40we did wick above it, just barely.
22:43On this candle right here, we wicked above,
22:44we didn't close above.
22:45So this was the high, we wicked above, we
22:47got a lower high, we broke down,
22:49breaking this low over here, giving us that
22:51change of character.
22:53So if we play this forward now, let's see
22:55what we get here from the euro.
22:57So we have the change of character, we know
22:58that sellers are starting to take control.
23:01or regain control, really.
23:02And so if we move this forward, you can see
23:04where, and again, if you had treated this
23:06as a key level and you were trying to short
23:07against this,
23:08you would have gotten yourself in trouble
23:09because this right here probably would have
23:11stopped you out.
23:11And so that's not what we want to do.
23:13All this is serving.
23:14The only purpose of this is to tell us that
23:15sellers are taking control.
23:17So playing this forward, you can see we got
23:19a continuation.
23:20Now, once we had this move up, what you'll
23:22notice here is that we had one, two, three,
23:24four candles.
23:26One, two, three candles on the bullish side.
23:28So this right here serves as our
23:30retracement.
23:31Okay, now I'm pointing that out because
23:32then this becomes the high
23:34that sellers have to defend.
23:36And we know that this is the high sellers
23:38have to defend because we now have a
23:40bearish
23:41breakup structure.
23:41Okay, so this low down here got taken out.
23:43So this was the low that sellers had to
23:46take out.
23:47order to confirm
23:48a continuation.
23:49Okay, so this was a bearish breakup
23:51structure right here.
23:52This is the high now that sellers have to
23:54defend.
23:54Okay, so once we play this forward, let's
23:56see if we get a retracement here.
23:59And you can see that we did get a few
24:01candles here pulling back.
24:02Okay, so for me,
24:03this qualifies, right? We had three candles
24:05right here pulling
24:06back into the
24:07This sell-off, so three bullish candles,
24:10this lowdown here now is the level that
24:12sellers have to break.
24:13And you can see where we did get that.
24:15So
24:16if we take this here, move it down off of
24:18this low, again, the reason I'm using this
24:20low now is because we did have
24:22a retrace into this sell-off.
24:24We had three candles here,
24:26so that qualifies.
24:27This is now my low.
24:28You can see we had a breakup structure.
24:31So once we have that, all we do is we take
24:34this high up here,
24:35we move it down.
24:37off
24:37of this high.
24:38Now, here's
24:39where it gets a little bit tricky because
24:41you could say, okay, well, it could be this
24:42high right here because this produced the
24:44breakup structure or this one up here.
24:46Personally, I like to keep it conservative.
24:48I like to say
24:49that, you know what, if buyers are going to
24:51take control again,
24:52I want to see them take out this high, not
24:54necessarily this one.
24:55Okay? So that now is the high that sellers
24:57have to defend.
24:58And we now have a new breakup structure,
25:00giving us
25:00the indication that sellers remain in
25:02control.
25:03So again, during this entire time,
25:05following this right here, this change of
25:06character back here,
25:07this told us that we wanted to start
25:09looking for shorts on strength.
25:11So shorts through here, obviously back here
25:13when the market was in an uptrend, we
25:14wanted to be looking for buys only.
25:16So this just helps you stay on the right
25:18side of the market.
25:19And you'll see here as I play this forward
25:21that we do get the continuation down here.
25:23And then we have, let's see a pullback here
25:25that qualifies as a pullback right there
25:26because again,
25:28On the hourly timeframe, we have multiple
25:30green candles here in a row, okay?
25:32So that means that this low now
25:35becomes the level sellers have to take out
25:36for a breakup structure, and they do.
25:38So we take this here, copy this down, off
25:41of this low, we have a new breakup
25:42structure.
25:42Again, sellers remain in control.
25:44Now that we have this here, we can take
25:46this level up here
25:47and drag it off of this high.
25:49Again, I'm using the...
25:50conservative level here, which is this high
25:52up here, not this one.
25:54And that can matter in some cases, guys,
25:56because you could get the market actually,
25:57you know, closing above here, but not
25:59closing above here. So
26:00I would have to see buyers take out this
26:02high back here.
26:03Now that we've had that bearish breaker
26:05structure to really confirm that buyers are
26:06regaining control.
26:08Okay, so playing this forward, you can see
26:09where we got the move up.
26:11And this right here, we have one, two, not
26:13quite what I need.
26:14However, if you'll notice back here, we did
26:16have a few
26:17green candles.
26:18Now we pretty much went sideways there,
26:19but that could still be be a significant
26:21low there for the euro.
26:23And it would be enough that in real time, I
26:25would plot a level off of this one here
26:27just because
26:28things are getting pretty tight here for
26:30the euro.
26:31But that's also kind of what we've seen
26:32here this year.
26:33So it kind of matches the price action
26:34we've seen.
26:35So this is now the low that sellers have to
26:37take out to give us a bearish break of
26:39structure.
26:39And you can see right there, we did it. Okay.
26:41So we got the close below.
26:43We have a break of structure. Okay.
26:45And you can notice too,
26:46this high never got taken out.
26:48Right.
26:48So this is just a series
26:50of of lower highs here for the euro.
26:52We never took out this high back here.
26:54Sellers remain in control, breakup
26:55structure back here,
26:56breakup structure now over here.
26:58So sellers remain in control.
27:00So again, this just tells us that we want
27:02to be looking for shorts only right now.
27:04So let's play this forward and see what we get.
27:07Now right there,
27:08you can see that we did get a few green
27:10candles.
27:11So what I can do is I can drag this now off
27:15of this low down here.
27:17And this becomes now the level the sellers
27:19have to break in order to confirm a new
27:21break of structure.
27:22So playing this forward now, let's see what
27:24we get here from the euro.
27:26We go sideways for a bit.
27:27We test that level.
27:28We do not close below.
27:29We wick below it.
27:30But remember, this is not enough
27:31to confirm a break of structure.
27:33We need to close below.
27:34Now, what you're going to notice here is
27:36that we do have the euro moving above these
27:38highs over here.
27:38So consolidation through here,
27:40and we had the euro breaking above.
27:42Now, this could be kind of hinting at
27:45a reversal, okay?
27:46But in terms of SMC market structure,
27:48though, what you have to see
27:50is you would really have to see, in my
27:52opinion,
27:53this high back here taken out.
27:55And the reason for that is, again, we go
27:57back to the last high that produced the
28:00breakup structure, right? We had three up
28:02candles here.
28:03Okay, so I can use this high.
28:04We had the breakup structure to the
28:06downside on this candle.
28:07So if we track back from this low here,
28:09again, remember, we didn't have a breakup
28:11structure over here, so we can't use this high.
28:13So this was our breakup structure.
28:15This is the low here.
28:16So if we track back to the last high, it's
28:18this one right up here.
28:20So really, even though you have the market
28:22taking out these highs,
28:24technically, for this to be a true change
28:25of character,
28:26we would have to, if the euro had closed
28:28below here,
28:30right? close below this low,
28:31then you could use this high.
28:33But because we didn't do that, this is our
28:35last low.
28:35This is the last high that produced that.
28:37Okay, so hopefully that makes sense.
28:39This is really the level now
28:40that buyers have to take out.
28:42Okay.
28:42So let's play this forward and see what we get.
28:45And you can see we are rallying up here
28:47toward the level and right there we did
28:48close above.
28:50So
28:50even this right here, even this small
28:53close above, you can see this is right off
28:54of that high.
28:55Even this close above right here tells us
28:57that buyers are now in control. So
28:59this tells us right here that we are now
29:01looking for buys because this tells us that
29:03buyers are regaining control.
29:05So this becomes our change of character,
29:08right?
29:08And this down here was never a breakup
29:10structure because we did not close below.
29:12Okay, so bullish change of character right
29:14there, telling us that buyers are starting
29:16to take control.
29:17And let's play this forward and see what we get.
29:19Now, in this case,
29:20we really probably didn't get much of a
29:22pullback, if I remember correctly.
29:23And this does happen sometimes where,
29:26and I'll talk about this in future videos, but
29:28when you get a market doing this,
29:30eight times out of 10, maybe nine times out
29:32of 10 even,
29:33you get the market pulling back here into
29:35areas like this.
29:36before moving higher.
29:37And I remember this actually at the time, I
29:39was looking for buys down here against this
29:41area of interest,
29:42and we just didn't get it in this case.
29:43And that does happen from time to time.
29:45But the point here is that this right here,
29:48identifying this kind of market structure
29:50here and identifying our change of
29:51character, breakup structure, all of that
29:53off these highs and lows,
29:54this right here would have told us that
29:56we're no longer looking for shorts.
29:57We're no longer looking for shorts.
29:59And just think about how much trouble that
Summary and Closing Notes
30:01could keep you out
30:03of.
30:03If we take a look here and go back and just
30:05look at what we've done so far, you can see
30:07that this back here, okay, so let's map
30:09this out.
30:09This back here
30:11was the bullish change of character right here.
30:13So this meant that we were looking for
30:15buys, right? Look at where this occurs
30:17within this downtrend.
30:19Now over here, we had the
30:21bearish change of character over here,
30:23right? So from uptrend over here to
30:26downtrend, right?
30:27Right?
30:27So change of character from here.
30:29Again, change of character from right over here.
30:32We confirm it right here.
30:33So bearish this entire time
30:35and then bullish over here. Okay?
30:37So you can kind of see guys how this is
30:39incredibly, incredibly
30:41significant and can really help you stay on
30:43the right side of the market.
30:44And if we play this forward.
30:46You'll notice that the market does go into
30:48an uptrend from here.
30:49So higher highs and higher lows.
30:50It does get kind of choppy, but
30:52again, if you were a buyer and you were
30:53looking for buys here,
30:54then you would be on the right side of the
30:55market following this bullish change of
30:57character.
30:58So you can do this in any market.
31:00It works in any market on any timeframe.
31:02But again, I really do advise to stick with
31:04the hourly, maybe four hour timeframe.
31:06You could drop down to the 30 minute
31:08timeframe, but I really would not try to do
31:09this on the five minute.
31:11Stay on those
31:12somewhat higher timeframes when you're
31:13starting out because it's going to provide
31:15less noise on the chart and just it easier
31:16to go through this.
31:17So if you enjoy this content, subscribe to
31:19the channel, also smash that like button
31:21because I have a lot more SMC content like this
31:24coming out every single week.