Before going toward core concept of inducement after break of structure you should have knowledge about minor break of structure.
What is Minor Break of Structure?
(I) In Bullish Market
After major break of structure when price moves up without sweeping inducement and makes a Swing High
You have to wait for price to close above that swing high.
This scenario, known as a minor break of structure, results in a shift of the price high while the rest of the market structure remains unchanged.
(II) In Bearish Market
After a major break of structure, when the price moves down without sweeping inducement and forms a Swing Low, you need to wait for the price to close below that swing low.
This scenario results in a shift of the price low while the rest of the market structure remains unchanged.
What is Inducement after Break of Structure?
As we discussed earlier price sometime continues its move after break of structure and it does not pull back to sweep inducement.
In this scenario if we wait for the price to sweep the first inducement then we not get the trading opportunity.
So we wait for price to create a new inducement and then grab it.
After that we can look for trading opportunity and structural highs/lows will also be confirmed.
(I) Inducement after BOS in Bullish Market
As you know in bullish market structure price makes Higher High and Higher Low, When price breaks the previous high its called break of structure and the Valid Pullback before the BOS level is marked as inducement.
But if price does not grab it and continues to move bullish then we wait for a minor break of structure to find a new inducement.
When a minor break of structure happen mark the lowest low and highest high of bullish price leg which broke the swing high.
Now find a Valid Pullback in that bullish price leg and it will be the inducement level.
In this way you can look for each new inducement whenever price moves up without sweeping the inducement.
(II) Inducement after BOS in Bearish Market
In a bearish market structure, the price makes Lower High and Lower Low. When the price breaks the previous low, it is called a break of structure, and the valid pullback before the BOS level is identified as inducement.
If the price continues to move bearish without grabbing the inducement, we wait for a minor break of structure to identify a new inducement.
When a minor break of structure occurs, mark the highest high and lowest low of the bearish price leg that broke the swing low.
Next, identify a Valid Pullback within that bearish price leg, which will serve as the inducement level.
This approach allows you to look for each new inducement whenever the price moves down without sweeping the previous inducement.
Final Thoughts
It’s important to mention here that while market structure can provide valuable insights yet they are not foolproof and should be used in conjunction with other technical analysis tools and indicators. Additionally, market conditions can change rapidly, so it’s essential to consider other factors before making trading decisions and always use stop loss to keep your equity safe.
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What is Minor Break of Structure?
(I) In Bullish Market
After major break of structure when price moves up without sweeping inducement and makes a Swing High
You have to wait for price to close above that swing high.
This scenario, known as a minor break of structure, results in a shift of the price high while the rest of the market structure remains unchanged.
(II) In Bearish Market
After a major break of structure, when the price moves down without sweeping inducement and forms a Swing Low, you need to wait for the price to close below that swing low.
This scenario results in a shift of the price low while the rest of the market structure remains unchanged.
What is Inducement after Break of Structure?
As we discussed earlier price sometime continues its move after break of structure and it does not pull back to sweep inducement.
In this scenario if we wait for the price to sweep the first inducement then we not get the trading opportunity.
So we wait for price to create a new inducement and then grab it.
After that we can look for trading opportunity and structural highs/lows will also be confirmed.
(I) Inducement after BOS in Bullish Market
As you know in bullish market structure price makes Higher High and Higher Low, When price breaks the previous high its called break of structure and the Valid Pullback before the BOS level is marked as inducement.
But if price does not grab it and continues to move bullish then we wait for a minor break of structure to find a new inducement.
When a minor break of structure happen mark the lowest low and highest high of bullish price leg which broke the swing high.
Now find a Valid Pullback in that bullish price leg and it will be the inducement level.
In this way you can look for each new inducement whenever price moves up without sweeping the inducement.
(II) Inducement after BOS in Bearish Market
In a bearish market structure, the price makes Lower High and Lower Low. When the price breaks the previous low, it is called a break of structure, and the valid pullback before the BOS level is identified as inducement.
If the price continues to move bearish without grabbing the inducement, we wait for a minor break of structure to identify a new inducement.
When a minor break of structure occurs, mark the highest high and lowest low of the bearish price leg that broke the swing low.
Next, identify a Valid Pullback within that bearish price leg, which will serve as the inducement level.
This approach allows you to look for each new inducement whenever the price moves down without sweeping the previous inducement.
Final Thoughts
It’s important to mention here that while market structure can provide valuable insights yet they are not foolproof and should be used in conjunction with other technical analysis tools and indicators. Additionally, market conditions can change rapidly, so it’s essential to consider other factors before making trading decisions and always use stop loss to keep your equity safe.
INTERESTED IN DIVING DEEPER INTO THESE CONCEPTS? Connect with me and I will guide you through
