Change of Character (CHoCH) Explained
CHoCH indicates a change in the current market structure
A Change of Character (CHoCH) indicates a change in the current market structure, suggesting that the current trend is likely to reverse or lose momentum.
- A bullish CHoCH indicates that the current market structure will shift from bearish to bullish, leading to an increase in price.
- A bearish CHoCH indicates that the current market structure will shift from bullish to bearish, leading to a decrease in price.
The CHoCH is not as strong an indication of trend reversal as the CHoCH+, but it still provides useful insights into the future directional momentum of the price.
How to Locate a Change of Character (CHoCH)
Bullish vs Bearish CHoCH formation comparison
A Change of Character (CHoCH) is formed when a Break of Structure (BOS) fails to form. This failure signals a shift in the order flow, indicating a reversal of an asset's trend.
Bullish CHoCH
Bullish CHoCH: L → LH → LL → HH (breaks previous LH)
A bullish CHoCH is formed when a low (L) occurs, followed by a lower high (LH), then a lower low (LL), and finally, a higher high that breaks the previous lower high.
Bullish CHoCH Formation Pattern: L → LH → LL → HH (breaks previous LH)
Bearish CHoCH
Bearish CHoCH: H → HL → HH → LL (breaks previous HH)
A bearish CHoCH is formed when a high (H) occurs, followed by a higher low (HL), then a higher high (HH), and finally, a lower low (LL).
Bearish CHoCH Formation Pattern: H → HL → HH → LL (breaks previous HH)
Trading Using a CHoCH
A CHoCH is interpreted as an entry or exit point for a position. It signals a directional change in the market trend: bullish to bearish or bearish to bullish.
- A trader in a bullish position may use the formation of a bearish CHoCH to exit their long position.
- Traders who are short may use the formation of a bullish CHoCH to cover their position and go long.
Common Strategy Using a CHoCH
Trading strategy: CHoCH + Order Block entry
After a CHoCH forms, market sentiment has shifted, and a trader can have a trend bias. For example:
- If a bearish CHoCH forms, a trader can start to look for shorting opportunities.
- It is best to enter on trend pullbacks into pivotal market areas such as a bearish Order Block (OB), Supply Zones, or a Resistance Area.
- When the price retraces to these areas following a bearish CHoCH, you can open a short position, expecting sellers to be aggressive like they were previously when these areas were formed.
The Theory Behind CHoCH
A CHoCH occurs when a Break of Structure (BOS) is broken:
- For a bullish BOS, this occurs when a lower low (LL) is formed.
- For a bearish BOS, this occurs when a higher high (HH) is formed.
A BOS indicates that the order flow is still strong for the current trend. A bullish BOS means that there are more buyers than sellers at the current higher prices. The higher low (HL) for a bullish BOS is a demand area: price fell to that area then moved back up, signaling waiting buyers at that price.
When the price falls past the previous higher low (HL), it means that there are no longer buyers waiting at that price, signaling that something has changed in the market and that the asset is no longer desirable at that high price. This CHoCH for the asset signals a directional change in trend for the price.
CHoCH vs CHoCH+
Why Is It Called a Change of Character?
It is called a Change of Character (CHoCH) because the market structure's "character" has changed. A change of character occurs when a Break of Structure (BOS) had previously formed but fails to form again. The change — that the BOS is failing to form — signals a change in market structure.
What Timeframe Is Best for a CHoCH?
Change of Characters (CHoCH) are typically used on intraday time frames:
- 30-minute and higher intraday time frames — to see larger trend shifts
- 5-minute or 15-minute — for a scalping style
Summary
- ✅ A CHoCH signals a trend reversal or loss of momentum
- ✅ It forms when a BOS fails to continue
- ✅ Use it as an entry or exit point
- ✅ Best combined with Order Blocks, Supply/Demand Zones, and FVGs
- ✅ Works best on intraday timeframes
Happy Trading! 🚀