A CHoCH (Change of Character) entry setup is a popular trading concept that signals a shift in market structure. A perfect CHoCH entry setup has the following key elements:
1. Market Structure Shift
- Price should be trending in one direction (bullish or bearish).
- A CHoCH happens when price breaks a key structural level (higher low in an uptrend or lower high in a downtrend).
2. Confirmation via Liquidity Sweep
- The best CHoCH setups occur after liquidity is taken (e.g., stop-hunting above a high or below a low).
- A false breakout followed by a strong move in the opposite direction strengthens the signal.
3. Break of Key Level with Momentum
- A strong impulsive move (large candle or high volume) breaking a structural point adds conviction.
- Weak breakouts with small candles or wicks may lead to fakeouts.
4. Retest for Optimal Entry
- After the CHoCH, price should ideally retest the broken structure or an imbalance zone.
- Retest into a fair value gap (FVG), order block (OB), or demand/supply zone increases accuracy.
5. Confluence Factors
A perfect setup aligns with:
- Higher Timeframe Bias – Matches the trend on H1/H4/Daily.
- Volume Confirmation – Increased volume supports the move.
- Divergence – RSI, MACD, or OBV divergence adds confidence.
6. Clear Stop-Loss & Take-Profit
- SL placed below (for buys) or above (for sells) the structure break or order block.
- TP at key liquidity zones, previous structure points, or Fibonacci levels.
A CHoCH entry with liquidity grab, strong momentum, retest, and confluences is the ideal setup.