Market Structure CHoCH/BOS (Fractal) [LuxAlgo]

20 ביוני 2023

The Market Structure CHoCH/BOS (Fractal) indicator is an experimental take on classical market structure, whereas fractal patterns are used for their construction instead of swing points.

Compared to utilizing swing points for highlighting market structure like our Smart Money Concepts indicator, fractal-based market structure can appear as more adaptive, however, it can also be more restrictive when it comes to returning swing points which can cause the indicator to miss reversals in some cases.

If enabled from within the settings, users can see support and resistance levels returned from the detected market structure with breakouts highlighted on the chart. Alongside this feature, an additional dashboard showing the structure to fractal structure percentage is also provided.

🔶 SETTINGS

• Length: Length of the fractal patterns to detect.
  

🔹Style

• Bullish Structures: Show bullish structures.
  
• Bearish Structures: Show bullish structures.
  
• Support: Show support levels.
  
• Resistance: Show resistance levels.
  

🔹Dashboard

• Show Dashboard: Show structure to fractal percentage dashboard on the chart.
  
• Location: Location of the dashboard on the chart.
  
• Size: Dashboard size.
  

🔶 USAGE



Market structure is commonly used to determine trend direction by using price positions relative to prior swing points. Using fractal patterns to determine market structure can allow users to obtain shorter, more frequent structure labels.

Market structure is commonly classified as follows:

• Change of Character (CHoCH), also referred to as Market Structure Shift (MSS)
  
• Break of Structure (BOS), also referred to as Market Structure Break (MSB)
  

Change of Characters indicate a shift in the market trend, confirming trend reversals. Break of Structures on the other hand occur once a trend is already determined, confirming new higher highs/lower lows.



Using higher length values allow users to detect longer-term fractals, thus highlighting longer-term market structures. The image above detects fractal patterns made of 7 candles, even if the increment is only of 2 bars this significantly reduces the amount of detected market structure labels.

The result obtained by utilizing fractals and higher settings can be a more dynamic view of market structure, however, as seen in the image above this can introduce very significant delay compared to utilizing pure swing points.

🔹Support/Resistance



The indicator also returns support/resistance levels constructed from the market structure, these levels are obtained similarly to order blocks, finding the minimum on the interval of a bullish market structure and the maximum of a bearish market structure.

Price reaching a support/resistance level can be expected to bounce from it. Once a level is broken, the support/resistance level will no longer extend, and a circle will be displayed highlighting the break.

While utilizing this script for fractal-based market structure, these levels can be useful to ensure all swing points are still considered by the user with the possibility of the indicator missing reversals due to its calculation not being based on swing points themselves.

🔹Dashboard

The dashboard reports the structure to fractal percentage, that is the amount of bullish/bearish market structures relative to the total amount of detected bullish/bearish fractal patterns.

This allows us to see how often a detected fractal pattern is used to display a market structure.

🔶 DETAILS

🔹Fractals



In the context of technical analysis, Fractals refer to specific patterns that exhibit self-similarity at different scales or timeframes.

The most commonly known fractal pattern consists of a consecutive sequence of candles (more commonly 5), with the central candle being the lowest (in case of a bullish fractal) or highest (in case of a bearish fractal).

A bullish fractal has candles on the right side of the central candle with increasing lows, while candles on the left side have decreasing lows.

A bearish fractal has candles on the right side of the central candle with decreasing highs, while candles on the left side have increasing highs.

🔶 RELATED SCRIPTS

🔹Smart Money Concepts

🔹Market Structure Trailing Stop

🔹ICT Concepts