Before order blocks and fair value gaps, there is market structure. It's the foundation of Smart Money Concepts: without it, all the other tools float in a vacuum. Two ideas structure this reading: BOS and CHoCH.
Structure, in one sentence
An uptrending market draws higher highs and higher lows; a downtrending one, lower highs and lower lows. Reading structure means following this sequence of highs and lows to know who controls the market — buyers or sellers.
BOS — Break of Structure
The Break of Structure (BOS) is a continuation: price breaks the last high (in an uptrend) or the last low (in a downtrend) in the direction of the current trend. A BOS confirms the dynamic continues. It's the sign that structure holds.
CHoCH — Change of Character
The Change of Character (CHoCH) is a first sign of reversal: price breaks, for the first time, a level in the opposite direction to the trend — for example, in an uptrend, price takes out a previous low instead of making a new high. The CHoCH doesn't guarantee a reversal, but it signals that the market's "character" is changing.
BOS vs CHoCH: the mental table
- BOS = the trend continues. Confirmation in the direction of the move.
- CHoCH = the trend may reverse. First warning against the trend.
- In practice: a typical sequence is CHoCH (alert) → confirmation → new structure → BOS (continuation of the new trend).
Why this order matters
The most solid SMC traders don't look for zones first — they read structure first, then look for an order block or FVG aligned with that structure. Reversing the order (looking for zones with no context) is the number-one cause of false signals. Structure answers "which direction am I working in?"; zones answer "where exactly?".
Structure and automation
Market structure lends itself well to an algorithmic definition (following highs and lows is a rule, not an intuition), which makes it a natural building block for an Expert Advisor. That's one reason our bots reason in structure first. But, as always: a system's discipline is not a promise of results. For the logical next step, read how a bot stays adaptive.
Revisit the basics with order blocks, liquidity and the trading glossary.
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