what is Change of Character (CHoCH) strategy in forex trading
CHoCH means “change of character”, and it is a very reliable and simple strategy for identifying the points at which the market wants to change its trend. Using this technique, we can easily find out whether the market has changed direction or not.
As you know, in order to correctly analyze the market and to be profitable in the market, we must be able to correctly identify the direction of the trend on the chart. Also, when the market changes its cycle and trend, we need to be able to recognize it quickly so that we can open correct positions in the direction of the trend. CHoCH is considered to be one of the best price action strategies because we can make very large profits using this strategy, and this strategy also has a high win rate .
How does Choch (change of character) appear on the chart?
CHoCH is divided into 2 categories, CHoCH in the downward trend and CHoCH in the upward trend.
CHoCH in the downward trend
When the market trend is bearish and the market makes lower lows and highs, and the price reaches a support area and cannot break it, and then makes a higher high than its previous high, the CHoCH has occurred and we can expect the direction of the trend to change and the price to increase.
CHoCH in the upward trend
And as for CHoCH in uptrends, for example, suppose we are in an uptrend and the price is making higher highs and lows, and we reach an important resistance in the chart, then the price makes a lower low than its previous low, at this CHoCH moment happens.now we can expect the price to enter a bearish trend and decrease.
Now consider the following example
Photo from TradingView
In the picture above, we have an upward trend that has made higher highs and lows, and then the price compresses and forms a resistance zone, then the price makes a lower low than its previous low, and it is at this point that we say that a ‘change of character’ has occurred in the chart. As you can see, the price enters a downtrend after the CHoCH and we can take profit on this downtrend by opening sell positions at suitable points.
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