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.
As we can see from the first image in each schematic we have 2 Changes of Character; there will always be one in Phase A when we experience the stopping of the trend and we enter a non-trending environment and the second one after Phase C where we enter a trending environment once again and we can see the new trend emerging. The first ChoCh is represented by the rally/reaction from SC to AR or BC to AR and it will be the most significant rally/reaction against the trend. We confirm this and the stopping action with the next event, the secondary test which may come as an HL or LL test but it confirms the stopping action. The price might or might not deliver multiple PS/PSY points before the real Change of Character occurs; The Choch can also retrace 100% back to the PS/PSY or even more.
As we can see above, all these rallies from Sc to Ar represent a ChoCh regardless of how much it retraced or how many PS points we have; even in the last scenario where the PS is missing completely we can observe a clear ChoCh; we have a rally which is the most significant rally and the secondary test confirms the stopping of the trend and concludes Phase A. While the bulk of the volume will be found around the PS and SC the rally itself in general should be done with an increase in volume and spread.
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 )
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 )
* ChoCh is represented on our chart by the rally from SC to AR or from BC to AR.
* 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).
* 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).
I think that's all for now, I'm me - you're you, see you around!
Arigato!
Arigato!
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