SMT Divergence
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Market structure shift (MSS)

The moment the trend changes sides, and the three stages of a high-probability MSS.

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03 · Structure04 · BOS

How it differs from a BOS

The BOS confirms continuation. The market structure shift (MSS) marks a change in market structure, a clear break in price dynamics. It is the moment the market goes from a bullish sequence to a bearish one, or the other way around.

Market structure shift: the significant HL gives way and the uptrend turns into a downtrend
HL1 is the last low before the local high. That is the low that has to break to call the MSS, not HL2.

The MSS is the moment one of the highs or lows holding the trend together breaks, signalling a change of intent.

  • Uptrend (HH and HL): an MSS forms when a significant HL breaks to the downside.
  • Downtrend (LL and LH): an MSS forms when a significant LH breaks to the upside.
Tip

The significant high or low is the one that comes right before the local high or local low. That is why we wait for HL1 to break, not HL2, before calling the MSS.

This point is essential. If you struggle to identify the significant high or low, play with your timeframes until the picture is clear. If in doubt, move on.

The three stages of a high-probability MSS

A quality MSS is a complete institutional sequence, usually made of three elements:

  1. 1Liquidity grab (liquidity sweep): liquidity is taken beyond a previous swing high or swing low, to get the fuel needed for the reversal.
  2. 2Impulse and displacement: the resulting impulse is strong enough to create a clear displacement.
  3. 3Break and close: the break of the opposite significant high or low must come with a candle close beyond the level.
Liquidity sweep, displacement, then a close above the level: the three stages of an MSS
Two schools: a close above the candle body (MSS1), or above the wick (MSS2). I use the body; the wick serves as my confirmation.

As with the BOS, there are two schools of thought. For some, a close above the candle body is enough (MSS1). Others wait for a close above the wick (MSS2). Personally, I use the body; a close above the wick is my confirmation.

Key point

The BOS confirms the strength and continuation of a trend, while the MSS is the first warning of an imminent shift in institutional intent. Understand both breaks and you can anticipate the move instead of chasing it.

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Beat the Market with SMT Divergences

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