However, accurately identifying these structures requires a deep understanding of Smart Money Concepts (SMC), including Break of Structure (BOS), Change of Character (CHOCH), and Inducement.
How to Identify Higher Highs in a Bullish Market?
While prices generally create higher highs in a bullish market, not all of them are considered structural highs. Here's a guide to identifying valid Higher Highs (HH):
- Start by identifying Inducement (IDM).
- After detecting Inducement, wait for the price to form a swing high and pullback to sweep the Inducement.
- When the price collects the Inducement, the last swing high before the collection is considered the valid Higher High.
These conditions confirm a true structural Higher High. Each time the price breaks a Higher High (known as a Break of Structure - BOS), look for Inducement sweeps to reconfirm the Higher High.
How to Identify Higher Lows in a Bullish Market?
Similarly, not every low in a bullish market is a valid Higher Low. Follow these steps to confirm a valid Higher Low (HL):
- Look for swing lows forming during Inducement sweeps by the price.
- After the swing low is formed, the price must rise and break the previous high. The last swing low before this break is then marked as a valid Higher Low.
Conditions to Confirm a True Structural Higher Low: Identify Higher Lows by finding an upward Break of Structure (BOS) and liquidity sweeps to confirm their validity.
How to Identify Structural Lows After a Bullish CHOCH?
To identify a structural low after a bullish Change of Character (CHOCH):
- Mark the lowest low created before the CHOCH.
- When the market transitions from bearish to bullish, this lowest low of the bearish trend is marked as the structural low because it signifies the beginning of the bullish trend.
After every Break of Structure, locate Inducement sweeps and the subsequent upward BOS to confirm the Higher Low.
How to Identify Structural Highs After a Bullish CHOCH?
A CHOCH signifies a change of character. Therefore, mark the Higher Highs accordingly when the market transitions from a bearish to a bullish trend. To identify a structural high after a bullish CHOCH:
- Detect Inducement (IDM).
- Wait for a swing high to form.
- After the swing high is formed and the price sweeps the Inducement, the last swing high is marked as the valid structural high.
Find the Inducement sweeps after every Break of Structure to confirm the Higher High (HH).
Can We Mark a Higher High and Higher Low Without Inducement Sweeps?
No. An Inducement Sweep (IDM Sweep) is essential to validate a Higher High. Furthermore, to confirm a Higher Low, both Inducement Sweeps (IDM Sweep) and an upward Break of Structure are required.
Conclusion
Higher Highs (HH) and Higher Lows (HL) in a bullish market are crucial indicators of market strength and the tendency for an uptrend to continue. Understanding concepts such as Break of Structure (BOS), Change of Character (CHOCH), and Inducement is essential for accurately identifying these key points, as not every high or low on the price chart is inherently valid and requires confirmation
