It is a break of structure, no; It's an internal break of structure, it's the inside bar that produced the break of structure, oh I got it: it is a rally that occurs on a full moon... Hopefully, in this little article, I will be able to demystify this event for you and bring some clarity. The Change of Character or ChoCh refers to the trading environment and this event marks the transition from one environment to another. I found this picture on the internet shared by Wyckoff Analytics which is a perfect example and also this is a great opportunity, for me to mention these guys because I can't recommend them enough if Wyckoff is what interests you. Also, I bet you did not know that the Wyckoff article from schoolstockcharts was put together by Roman & Bruce from Wyckoff Analytics and some charts were edited by Hank.; just saying...
* this cycle is another one of these things too simple that we overlook but this cycle occurs on all time frames from the daily candle to the 1 min and lower.
I want you to think about how can you implement this in your trading and think about how useful would be to know when you enter a TR or you are about to get out of one. In other words, the first ChoCh will deliver the stopping action and set the range of your schematic and the second ChoCh serves as a timing tool for our entries where we can note that absorption has occurred and now we can see once again a new trend emerging. A very simple and yet very powerful concept. The PS/PSY ( preliminary support, and supply) are previous attempts to stop the trend which always fail.
The second ChoCh is characterized by an increase in spread increase result and demand emerging; we should start seeing an increase in volume in rallies which produce internal breaks of structure which will deliver HH and HL with a diminishing volume signature. It will be the most significant rally since the stopping action has occurred in Phase A .
keynotes :
* ChoCh is the transition from one environment to another and back ( trending->consolidation- >trending )
* the secondary test confirms the change of character and the stopping action and concludes phase A.
* Phase A always STOPS the trend.
I feel we covered the whole Phase A with this second article since we also talked about the AR and ST and the whole phase. The Automatic Response ( AR), Rally for an accumulation and Reaction when we talk about distribution, occurs after the BC or SC and will set the maximum or minimum of the schematic. As an exercise one can go into the charts and find as many phase A as possible and study each one of them by observing the relationship between these events and volume. If you have any questions, that's what the comments are for; you can also join our Discord. (link in sidebar).
Arigato!