How to Read Market Structure: BOS, CHoCH, and Trend Analysis

If you struggle to determine whether a trend is likely to continue or reverse, you are likely misreading market structure. Without a clear understanding of structure, every bullish or bearish candle that pops up on your chart can feel like a trading signal, leading to confusion, overtrading, and blown prop firm evaluations.

Everything in Smart Money Concepts (SMC) trading—from Order Blocks to Fair Value Gaps—is built on the foundation of market structure. If you misread the structure, you will enter the wrong trades at the wrong times.

In this guide, we will walk you through exactly how to read SMC market structure using simple, mechanical rules that work on any timeframe. No indicators, no guesswork—just structural shifts, BoS, CHoCH, and clean charts.

What is Market Structure?

Market structure is simply the way price moves in a series of highs and lows. It tells you who is in control of the market: buyers or sellers.

• Uptrend: A series of Higher Highs (HH) and Higher Lows (HL). Buyers are in control.
• Downtrend: A series of Lower Lows (LL) and Lower Highs (LH). Sellers are in control.
• Ranging (Consolidation): Price moves sideways between equal highs and equal lows. Neither side is in control.

While this sounds simple in theory, real-world charts are messy. Retail traders often get confused by internal structure—the small fluctuations that occur between the major external highs and lows. To filter out this noise, SMC traders rely on two specific structural events: Break of Structure (BoS) and Change of Character (CHoCH).

Break of Structure (BoS): The Trend Continuation

A Break of Structure (BoS) is a trend continuation signal. It confirms that the current market direction remains intact.

• Bullish BoS: If the market is in an uptrend and the price successfully closes above a previous Higher High, that is a bullish BoS.
• Bearish BoS: If the market is in a downtrend and the price successfully closes below a previous Lower Low, that is a bearish BoS.

The "Body Close" Rule

One of the most critical rules in reading BoS is that wicks do not count. You must wait for a full candle body to close beyond the previous structural level.

If the price simply wicks above a high and then closes back below it, that is not a BoS; that is a liquidity sweep (a stop hunt). By waiting for a body close on your specific timeframe (e.g., a 1-hour close on a 1-hour chart), you avoid false breakouts and stay aligned with the true trend.

Change of Character (CHoCH): The Trend Reversal

A Change of Character (CHoCH) signals a potential trend reversal. It is the first indication that the market is shifting control from buyers to sellers, or vice versa.

• Bearish CHoCH: If the price has been making Higher Highs and Higher Lows (an uptrend), but then suddenly drops and closes below the last external Higher Low, that is a bearish CHoCH. The market's character has flipped from bull to bear.
• Bullish CHoCH: If the price has been making Lower Lows and Lower Highs (a downtrend), but then suddenly rallies and closes above the last external Lower High, that is a bullish CHoCH. The market's character has flipped from bear to bull.

A CHoCH often occurs right before the price returns to fill a Fair Value Gap (FVG) or tap into an Order Block. This is where the highest-probability SMC trading setups are found.

How to Confirm a Real CHoCH (Not a Fake One)

This is where the majority of retail traders fail. A valid CHoCH must break the specific swing point that produced the last BoS.

If you pick the wrong swing point, you will misread the structure every time. Internal highs and lows (the minor fluctuations within a larger leg of price action) do not count. They live inside the bigger structure and are designed to create confusion.

If the price breaks an internal low, it is simply a pullback. If it breaks the external low that caused the last major high (the BoS), that is a true Change of Character.

Combining BoS and CHoCH for Prop Firm Trading

Reading market structure is not about predicting the future; it is about reacting to confirmed institutional intent. Here is how you apply BoS and CHoCH to pass your Next Level Funded evaluation:

1. Define the Higher Timeframe Trend (BoS): Look at the 4-hour or 1-hour chart. Are you seeing a series of bullish or bearish BoS? This establishes your directional bias.
2. Wait for the Pullback: Allow the price to retrace into a premium/discount zone, targeting a higher timeframe Order Block or FVG.
3. Look for Lower Timeframe Confirmation (CHoCH): Drop down to the 15-minute or 5-minute chart. Wait for a CHoCH that aligns with your higher timeframe bias. (e.g., If the 4-hour trend is bullish, wait for a bullish CHoCH on the 15-minute chart after a pullback).
4. Execute the Trade: Enter on the newly formed lower timeframe Order Block that caused the CHoCH, targeting the next major liquidity pool or BoS level.

Master Structure, Master the Market

Once you can accurately read BoS and CHoCH, the market stops looking like random chaos and starts looking like a highly organized delivery of price. This structural clarity is exactly what you need to succeed as a prop firm trader.

At Next Level Funded, we reward traders who possess this level of discipline and structural understanding. We provide the ideal environment to execute your SMC strategy, featuring raw spreads, zero hidden consistency rules, and on-demand payouts.

Whether you want to prove your skills in our traditional 1-Step Evaluation or bypass the challenge entirely with our Instant Funding models starting at $10, we have the capital ready for you.

Stop guessing market direction. Read the structure, wait for the CHoCH, and trade up to $200,000 in funded capital today.

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