Break of structure and change of character
- Tell a continuation break from a reversal signal
- Avoid treating every break as a reversal
- Wait for the retest
Two kinds of break
Break of structure (BOS): price closes beyond the last swing in the direction of the trend — a new higher high in an uptrend. It confirms continuation.
Change of character (CHoCH): the first close beyond a swing against the trend — in an uptrend, a close below the protected higher low. It is the first warning of a reversal, not a reversal yet.
After a change of character
A reversal needs the opposite structure to build: after the CHoCH, a lower high forms on the bounce, then a lower low. Many traders wait for that lower high and enter there, with the stop above it. Shorting the CHoCH candle itself often means selling the low.
Breaks fail too
Closes beyond a swing by a hair, on low volume, that reverse straight back are failed breaks — often liquidity grabs (next lesson). A strong break closes clearly beyond the level, ideally with a larger body and higher volume, and does not immediately return inside.
Check yourself
1. In an uptrend, a close above the last swing high is…
- A change of character
- A break of structure (continuation) ✓
- A reversal
2. After a change of character down, where do many traders enter a short?
- On the CHoCH candle close
- At the lower high that forms on the bounce ✓
- At the next all-time high
Terms in this lesson
- Break of structure (BOS)
- A close beyond the last swing in the trend's direction — continuation.
- Change of character (CHoCH)
- The first close beyond a swing against the trend — an early reversal warning.