CHoCH stands for change of character. It is the first break of structure in the opposite direction of the current trend, and it is read as an early sign that the trend may be changing. In an uptrend, the sequence of higher lows is broken when price closes below the last higher low. In a downtrend, the sequence of lower highs is broken when price closes above the last lower high. This guide shows how to find a CHoCH, how it differs from a break of structure, and how to plan a trade on the retest, with the limits that you should know.
What a CHoCH looks like
Start with an uptrend marked by higher highs and higher lows, as in swing highs and lows. The key level is the last swing low that created the most recent high. When price closes below it, the uptrend sequence is broken for the first time. That break is the change of character.
The word character refers to how price has been behaving. For a while it pushed up and held its pullbacks, and now it breaks a pullback low. That is a change in behaviour. It does not prove that a downtrend has started, only that the old pattern is in doubt.
CHoCH versus BOS
A break of structure goes in the direction of the trend, for example a new higher high in an uptrend, and signals continuation. A CHoCH goes against it and signals a possible reversal. The same price action, a close beyond a swing point, has a different meaning depending on the trend before it. For an overview of both, see what a change of character is.
Trading a CHoCH: worked example
Trading the break itself can be risky, since many CHoCH signals fail. A more careful way is to wait for the retest. After the break, price often rallies back toward the broken level or the last supply zone. You sell if it shows rejection there.
- Entry: 1.0855, after the retest fails.
- Stop loss: 1.0874, above the retest high (19 pips).
- Take profit: 1.0817 (38 pips), a ratio of 1:2.
