Market Structure is a foundational Smart Money Concepts indicator that automatically identifies swing points and marks the two most important structural events: Break of Structure (BOS) and Change of Character (CHoCH). Instead of manually tracking highs and lows, Cluster Terminal detects them algorithmically and labels every structural break in real time.
Core Concepts
Swing Points
The indicator uses a fractal-based algorithm to detect swing highs and swing lows. A swing high is a candle whose high is higher than the highs of the surrounding candles (controlled by swingLength). A swing low is the inverse.
These swing points form the skeleton of market structure — connecting them reveals the trend.
Break of Structure (BOS)
A BOS occurs when price breaks through a previous swing point in the direction of the existing trend. It confirms that the current trend is continuing:
- Bullish BOS: Price breaks above a previous swing high during an uptrend. Higher high confirmed.
- Bearish BOS: Price breaks below a previous swing low during a downtrend. Lower low confirmed.
Change of Character (CHoCH)
A CHoCH occurs when price breaks through a swing point against the current trend direction. It is the first signal that the trend may be reversing:
- Bullish CHoCH: During a downtrend, price breaks above a previous swing high. The sequence of lower highs is broken.
- Bearish CHoCH: During an uptrend, price breaks below a previous swing low. The sequence of higher lows is broken.
CHoCH is the earliest warning of a potential trend reversal. However, a single CHoCH is not confirmation — wait for follow-through or confluence from order flow indicators before committing to a reversal trade.
Swing Detection Settings
| Parameter | Description | Default |
|---|
| swingLength | Number of bars on each side of a candle required to confirm it as a swing point. Higher values detect only major swings and reduce noise. Lower values capture minor swings for granular structure. | 5 |
| breakDetection | How a structural break is confirmed: close or wick. | close |
Break Detection Modes
The breakDetection parameter significantly affects signal behavior:
| Mode | Behavior | Use Case |
|---|
| close | Structure is broken only when a candle closes beyond the swing level. More conservative — avoids false breaks from wicks. | Swing trading, higher timeframes |
| wick | Structure is broken when any part of the candle (including wicks) trades beyond the swing level. More sensitive — catches breaks earlier. | Scalping, fast markets |
Using close mode eliminates many false breakouts where price wicks through a level but closes back inside. This is the recommended setting for most traders.
Display Settings
BOS Appearance
| Parameter | Description | Default |
|---|
| showBos | Enable BOS labels and lines on the chart. | true |
| bosLineColor | Color of the BOS horizontal line. | #3b82f6 |
| bosLineWidth | Thickness of the BOS line in pixels. | 1 |
| bosLineStyle | Line style: solid, dashed, or dotted. | dashed |
| bosLabelShow | Display “BOS” text label at the break point. | true |
| bosLabelSize | Font size for the BOS label. | 11 |
CHoCH Appearance
| Parameter | Description | Default |
|---|
| showChoch | Enable CHoCH labels and lines on the chart. | true |
| chochLineColor | Color of the CHoCH horizontal line. | #f59e0b |
| chochLineWidth | Thickness of the CHoCH line in pixels. | 1 |
| chochLineStyle | Line style: solid, dashed, or dotted. | dashed |
| chochLabelShow | Display “CHoCH” text label at the break point. | true |
| chochLabelSize | Font size for the CHoCH label. | 11 |
Swing Points Appearance
| Parameter | Description | Default |
|---|
| showSwingPoints | Display dots at detected swing highs and lows. | true |
| swingBullColor | Color for swing low dots (support). | #22c55e |
| swingBearColor | Color for swing high dots (resistance). | #ef4444 |
| swingDotSize | Diameter of swing point dots in pixels. | 6 |
Zigzag Display
| Parameter | Description | Default |
|---|
| showZigzag | Draw a zigzag line connecting consecutive swing points. Useful for visualizing the overall structural flow. | false |
| zigzagColor | Color of the zigzag line. | #9ca3af |
| zigzagWidth | Thickness of the zigzag line in pixels. | 1 |
Alert Rules
Market Structure supports the following alert events:
| Event | Fires When |
|---|
| bos_bullish | A bullish Break of Structure is confirmed (price breaks above swing high in an uptrend). |
| bos_bearish | A bearish Break of Structure is confirmed (price breaks below swing low in a downtrend). |
| choch_bullish | A bullish Change of Character is detected (downtrend structure broken to the upside). |
| choch_bearish | A bearish Change of Character is detected (uptrend structure broken to the downside). |
Set alerts for CHoCH events only — they are rarer and more actionable than BOS events. A CHoCH alert gives you time to prepare for a potential reversal setup.
Practical Usage
Choosing Swing Length
The swingLength parameter defines how “major” the detected swing points are:
| swingLength | Effect | Best For |
|---|
| 2–3 | Captures minor swings, many BOS/CHoCH labels. Noisy but granular. | Scalping on 1m–5m |
| 5 (default) | Balanced detection. Captures intermediate structure. | Intraday on 5m–1H |
| 8–15 | Only major swing points. Fewer but more significant structural breaks. | Swing trading on 1H–Daily |
Reading Structure in Context
Market structure tells you who is in control:
- Series of bullish BOS = buyers are in control, trend is up. Look for longs at pullbacks.
- Series of bearish BOS = sellers are in control, trend is down. Look for shorts at rallies.
- CHoCH appears = control is shifting. The first CHoCH is a warning, not a signal.
- CHoCH + BOS in new direction = trend has likely reversed. Now look for entries with the new trend.
Confluence with Other Indicators
- Order Blocks: A CHoCH followed by a return to an order block at the break level is a classic SMC entry setup.
- FVG: A BOS often creates an FVG in the process. The FVG then becomes a re-entry zone on pullback.
- Absorption Alpha: Absorption at a swing high/low that subsequently produces a CHoCH confirms that institutions were active at that level.
Common Pitfalls
- Trading CHoCH in isolation: A single CHoCH in a strong trend is often a temporary fake-out. Wait for confirmation.
- Swing length too low in ranging markets: Very low
swingLength in a sideways market produces constant BOS/CHoCH flips. Increase swingLength or focus on higher timeframe structure.
- Ignoring multi-timeframe structure: A CHoCH on the 5m chart is meaningless if the 1H structure is still strongly trending. Always check at least one timeframe higher.
Market Structure is a directional framework, not a standalone entry signal. Use it to determine trend bias, then time entries with order flow tools like delta, imbalance, and absorption.