Three abbreviations show up in every Smart Money breakdown, and there is more confusion around them than substance. Here they are in order, no formulas.
Market structure is the sequence of highs and lows: HH (higher high) and HL (higher low) in an uptrend, LH and LL in a downtrend. As long as the sequence holds, the trend is considered intact.
- IDM (inducement): a false move that clears stops and pending orders before the real move. A large player needs liquidity to fill into, and this move creates it.
- CHoCH (change of character): the first break in the sequence, a signal the current trend is in question. Reversal-leaning, but not yet confirmed.
- BOS (break of structure): a break in the direction of the new trend, confirming the shift and that structure continues the new way.
The usual order: IDM clears liquidity, then CHoCH breaks the old structure, then BOS confirms the new one. Not every CHoCH turns into a BOS, some reversals fizzle out halfway, so an entry is built on more than one signal: structure plus a point of interest (Order Block, FVG) plus confirmation.
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