What it looks like
The market has been making higher highs and higher lows. Then a candle closes below the most recent swing low (a local trough with higher lows either side). That close is the CHoCH. The last swing high before the break becomes the line that must hold.
What it means
For the first time the buyers failed to defend their last swing low. It is the earliest sign the rise may be over, and it is often wrong the first time, so the trade waits for sellers to prove they can cap a bounce.
How to trade it
- 1
Spot the first close below the last swing low in a market that was making higher lows. Do not sell that break.
- 2
Wait for a pullback. If it holds below the last swing high, sell as price turns back down.
- 3
Put the stop above the last swing high.
- 4
Target one to two times the stop distance, or the next floor below.
- 5
Example: on the US30 15 minute chart price closes below the last swing low after a rise, then bounces and stalls 50 points below the last swing high. You sell with a stop about 55 points away and aim for 55 to 110 points.
A close above the last swing high.
Where it works best
After a long rise into a ceiling that matters, such as the previous day's high, on 15 minute charts and higher.
WickSpeak finds the bearish change of character automatically on any chart and names it on the candles that made it. It writes what it is, how to trade it and what proves it wrong right on the chart. Playbook can use it, or any of the 146 patterns, as a condition alongside up to 12 conditions on any of 12 timeframes, and backtest the play on past candles with your costs.
Common mistakes
- Selling the first break, which is often wrong.
- Ignoring a strong higher timeframe uptrend that the small break barely dents.
- Placing the stop at the broken low instead of above the last swing high.
Related patterns
Questions traders ask
What does a bearish CHoCH mean?
It means an uptrend has made its first close below a swing low. It is the earliest warning the rise may be over, but not proof.
How do you trade a bearish change of character?
Wait for a pullback that holds below the last swing high, then sell with a stop above it. Do not sell the break itself.
What is the difference between a bearish CHoCH and a bearish BOS?
A bearish CHoCH is the first break down in an uptrend. A bearish BOS is a break down in a market already falling, confirming the fall.
What cancels a bearish CHoCH?
A close above the last swing high. The uptrend has then resumed.