When price breaks structure against the current trend for the first time, signaling a potential reversal.
Change of character (CHOCH) is the first break of structure against the prevailing trend. In an uptrend, CHOCH occurs when price breaks below the last higher low. In a downtrend, it occurs when price breaks above the last lower high. Unlike BOS which confirms continuation, CHOCH warns that the trend may be reversing.
CHOCH is one of the earliest signals that a trend is shifting. It helps traders exit positions before a reversal deepens and can provide early entries into the new trend direction. It is a core concept in smart money trading methodology.
A stock is in a strong uptrend with higher highs and higher lows. The last higher low was at $80. When price drops below $80 for the first time, this is a CHOCH — the first sign that buyers have lost control and the trend may be reversing to bearish.
Change of Character (CHOCH): price breaks below the last higher low for the first time, signaling the uptrend may be reversing.