How to Trade ChoCh
24th Apr • 8 min read
Table of Contents
ChoCh – Change of Character
So what is choch, and how do we apply it to Forex trading? At its simplest, choch refers to a change in character of the market. For example, if we see an uptrend in the Forex market, characterized by higher highs and higher lows, this means that the overall trend remains bullish. However, when a new high is formed and then impulsively broken to the downside, this could signal that the bullish trend might be coming to an end, and that a possible choch transition may be happening.
Understanding this concept can help Forex traders identify potential shifts in market trends, allowing them to make more informed trading decisions. By watching for these changes in market behavior and reacting accordingly, traders can potentially improve their chances of making successful trades in the Forex market. Thus, while choch might seem like a complex or esoteric concept at first glance, it simply refers to a shifting character of the Forex market over time – one that all Forex traders should be aware of as they seek to maximize their trading potential.
Graphical examples
In the examples below, we can see the bearish example, is creating HH, then the HL is broken creating a Supply zone. The bullish example, is simply the opposite way round.
You will noticed, that when the last HH is formed (bearish) or last LL is formed (bullish) before the actual change of character happens, I mark the break of structure as ChoCh! the reason for this, is because this break of structure is crucial for this to play out. If it doesn’t we may end up in a consolidating market or stuck in a liquidity grab. However, if the break of structure does occur, it can signal a major shift in the market, and provide an opportunity for traders to make a profit. Therefore, it is important to keep an eye on structural breaks in the Forex market.
Bearish ChoCh
Bullish ChoCh
Live example
Now lets have a look at what all this looks like on a real chart.
Forex trading can be a complex and daunting task for those who are new to the market. The market rarely ever looks like the clean diagrams that are often used to illustrate it, so trying to spot this on the charts can be a little tricky at first.
One of the key things that separates successful traders from unsuccessful ones is the ability to correctly identify changes in market conditions. In the example to the left, we can see a chart example of a bearish change of character. Before the HH was formed, we had a break of structure to the upside, then the change of character breaking structure to the downside as it breaks past the HL.
When the HL is broken, the first bullish break of structure is then labelled ChoCh. The Supply zone that has broken past the HL, is the zone we look to enter our trade on, providing this zone meets all of our rules, as mentioned in our ‘Supply and Demand‘ blog. By correctly identifying these changes in market conditions, we can give ourselves a much better chance of success in our Forex trading endeavours.
ChoCh made easy YouTube
In this video I’ll be breaking down, how to trade ChoCh in the forex markets.
I’ll be covering some of the best trading strategies that work for beginners as well as more advanced traders. The goal is not just to teach you how but also show you by example so it’s easy to understand.
If you’re looking for a way to make some sense of ChoCh, then you’ve come to the right place. In this video, I’m going to break down the entire process step by step so that you can use this confidently in the market.
As anyone who has dabbled in Forex trading knows, it is critical to backtest and test your strategies on a demo account before putting any live funds at risk. While the promise of big profits might be enticing, it is important to remember that Forex markets are highly volatile and unpredictable, so there is no way to guarantee success without first doing your research and testing your strategies.
By performing rigorous backtests and monitoring the performance of your trades on a demo account, you can assess the potential profitability of your approach and refine your strategy until you are ready to go live. With this step-by-step process, you can be sure that you are making calculated and informed decisions every time you enter into a Forex trade. So don’t get caught up in hype or speculation – always make sure to backtest and test on a demo before going live with real money!
This article is for informational purposes only, and should not be considered financial advice.
