You're Trading Break of Structure (BOS) WRONG — Transcript

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1. 0:00This here is not a break of structure.
2. 0:02And let me show you why this could be
3. 0:03killing your trading. A lot of traders
4. 0:05would mark this as their break of
5. 0:07structure. By doing so, they place their
6. 0:10protective low down here. So, as price
7. 0:14approaches this protective low, you
8. 0:16might look for a long, place your stop
9. 0:18loss below it, and target higher prices.
10. 0:21Then, the trade fails and you blow your
11. 0:23account. So, let me show you how to fix
12. 0:25this. We only consider it a break of
13. 0:27structure when price pulls back and then
14. 0:29creates a higher high. First, we need a
15. 0:32swing high, which we have here. Then,
16. 0:34price needs to pull back inside the
17. 0:36previous high, making this a valid swing
18. 0:38low. In this case, however, this swing
19. 0:42high fails to pull back into the
20. 0:44previous high. That means this is not a
21. 0:46break of structure, and this is not a
22. 0:48valid pullback. So, I can see that this
23. 0:51is actually my last break of structure,
24. 0:54making this my real protective low. And
25. 0:56as you can see, price respects this low
26. 0:59and goes on to make a higher high. Okay,
27. 1:01this is actually very clever, and I
28. 1:03haven't really thought of break of
29. 1:04structures in that way. Regardless, this
30. 1:06is still a break of structure, but for a
31. 1:09strong, valid break of structure, I like
32. 1:12this concept. I like the idea of
33. 1:14retesting a previous high and holding
34. 1:16that previous high, because that's just
35. 1:18market structure 101 when it comes to
36. 1:19uptrends and downtrends. Let's just
37. 1:21build that, look at the setups, and see
38. 1:22if it's actually valuable. So, using
39. 1:24Quant inside of Vela charts here, I was
40. 1:26able to build a really awesome indicator
41. 1:29for
42. 1:29identifying this exact setup.
43. 1:31Essentially, what it looks for is a
44. 1:32valid pullback, as you can see here,
45. 1:35retesting a previous high after a
46. 1:38certain amount of minimum bars. Five
47. 1:39minimum bars have to occur [music] in
48. 1:41that pullback for it to be valid. Now,
49. 1:43once a valid pullback occurs, that break
50. 1:44of structure technically is invalid
51. 1:46until you break that recent high or low,
52. 1:48depending on which direction. If we
53. 1:50continue forward, you can see we get a
54. 1:51very nice push off of that valid
55. 1:54pullback. So, from here, I honestly
56. 1:56would want you to take a long somewhere
57. 1:58inside that area, stop below the low,
58. 2:00and maybe even target a full breakout.
59. 2:03In this case, we could go even up to a
60. 2:04two to one here. Let's see if we get
61. 2:06that breakout. We get a really strong
62. 2:08push through that breakout there. Valid
63. 2:10pullback reaction makes a valid BOS.
64. 2:13Valid pullback reaction valid BOS
65. 2:16continuation. Goodness gracious, these
66. 2:18setups are pretty solid. Honestly, this
67. 2:20concept for actually validating a trend
68. 2:22continuation or even a break of
69. 2:24structure is way stronger than I thought
70. 2:26it. And this indicator that we built
71. 2:27with Quant that I'm using on Vella
72. 2:29charts is actually really strong. If you
73. 2:31want to try it out for yourself, just
74. 2:32comment BOS and I'll send you a link. Or
75. 2:34you can open Lux Algo's charting
76. 2:36platform called Vella, go up to
77. 2:38indicators, and then go to Lux Algo on
78. 2:41the library, and it's going to be right
79. 2:42up here at the top.