In this we’ll explore the concept of “Inducement After Break of Structure” in trading, especially in forex and platforms like Binance. Sometimes, after a break of structure (BOS), the price doesn’t take the inducement but keeps moving in the same direction. Understanding this can help you make better trading decisions.
If you’re new to this topic, I recommend first reading about “What is Inducement in Forex – Market Structure” before diving into this guide.
You can also check out my “Inducement After Break of Structure” PDF eBook at fxmarkethours.com for a more detailed explanation.
Key Questions:
- Should you wait for the price to take the inducement created before the break of structure (BOS)?
- Will a new inducement be created?
- How can you identify a new inducement?
What is a Minor Break of Structure?
In a Bullish Market:
In a bullish market, after a major break of structure, the price might move up without taking the inducement and then create a Swing High. You should wait for the price to close above this Swing High. This situation is known as a minor break of structure, where the price high changes, but the overall market structure stays the same.
In a Bearish Market:
In a bearish market, after a major break of structure, the price might move down without taking the inducement and then create a Swing Low. You should wait for the price to close below this Swing Low. This situation is similar but with the price low changing while the market structure remains the same.
What is Inducement After Break of Structure?
Sometimes, after a break of structure (BOS), the price doesn’t pull back to take the inducement and instead keeps moving. If you wait for the price to take the first inducement, you might miss a trading opportunity. In these cases, it’s better to wait for the price to create a new inducement and then act on it. This helps confirm structural highs or lows and provides a clearer trading opportunity.
Inducement After Break of Structure in a Bullish Market:
In a bullish market, the price makes Higher Highs and Higher Lows. When the price breaks a previous high, it’s a break of structure. The valid pullback before this break is called the inducement. If the price doesn’t take this inducement and continues upward, wait for a minor break of structure. Identify the lowest low and highest high in the bullish price leg that broke the swing high, then find the valid pullback within this leg; this is the new inducement level.
Inducement After Break of Structure in a Bearish Market:
In a bearish market, the price makes Lower Highs and Lower Lows. When the price breaks a previous low, it’s a break of structure. The valid pullback before this break is the inducement. If the price doesn’t take this inducement and continues downward, wait for a minor break of structure. Identify the highest high and lowest low in the bearish price leg that broke the swing low, then find the valid pullback within this leg; this is the new inducement level.
Final Thoughts
Understanding “Inducement After Break of Structure” is essential in trading, especially in forex and on platforms like Binance. However, this concept isn’t foolproof. Always combine it with other technical analysis tools and indicators. Market conditions can change quickly, so consider all factors before making trading decisions and always use stop-loss to protect your investments.
