What it looks like
The market has been making lower highs and lower lows. Then a candle closes above the most recent swing high (a local peak with lower highs either side). That close is the CHoCH. The last swing low before the break becomes the line that must hold.
What it means
For the first time the sellers failed to defend their last swing high. It is the earliest sign the fall may be over, and it is often wrong the first time, which is why the trade waits for proof that buyers can hold a pullback.
How to trade it
- 1
Spot the first close above the last swing high in a market that was making lower highs. Do not buy that break.
- 2
Wait for a pullback. If it holds above the last swing low, buy as price turns back up.
- 3
Put the stop below the last swing low.
- 4
Target one to two times the stop distance, or the next ceiling above.
- 5
Example: on the gold 1 hour chart price closes above the last swing high after a fall, then pulls back and holds 12 points above the last swing low. You buy with a stop about 13 points away and aim for 13 to 26 points.
A close below the last swing low.
Where it works best
After a long fall into a floor that matters, such as the previous week's low, on 15 minute charts and higher.
WickSpeak finds the bullish 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
- Buying the break itself, when the first CHoCH is often wrong.
- Calling a break a CHoCH when the market was not actually making lower highs.
- Setting the stop under the broken high instead of below the last swing low.
Related patterns
Questions traders ask
What is a change of character in trading?
It is the first close beyond a swing point against the current trend. A bullish CHoCH is the first close above a swing high in a downtrend, an early sign it may be ending.
Is a CHoCH a reliable reversal signal?
It is the earliest sign, and it is often wrong the first time. That is why WickSpeak's rule is to wait for a pullback that holds above the last swing low.
What comes after a bullish CHoCH?
Ideally a pullback that holds above the last swing low, then a bullish break of structure as the new uptrend makes a higher high.
What proves a bullish CHoCH wrong?
A close below the last swing low. The downtrend has then carried on.