Perfect CHoCH Entry Setup

Introduction to CHoCH

CHoCH stands for “Change of Character,” a term used in technical analysis to signify a shift in market structure from bullish to bearish (or vice versa). It often represents a potential reversal point or the beginning of a new trend, making it a critical area for traders to analyze.

In trading, a perfect CHoCH setup provides clear indications of supply and demand zones, liquidity pools, and inefficiencies. Traders use this to find optimal entry points for buying or selling while minimizing risk.

Description of the Diagram

1. HTF Demand Zone (High Time Frame Demand)
   • Highlighted in green at the bottom of the chart.
   • This zone represents a strong area where buyers dominate, creating potential support.
   • The liquidity pool and stop losses are located here (point 1), representing areas where retail traders may have stop orders.
2. Break of Structure (BOS)
   • Points where the previous high/low is broken, indicating shifts in market structure.
   • The BOS occurs multiple times, first on the downside and later on the upside, showing transitions in trend.
3. Major and Minor CHoCH
   • A Minor CHoCH (point 2) occurs in the middle of the structure, signifying a potential smaller reversal.
   • A Major CHoCH occurs later, confirming a significant shift in the market’s character.
4. Unmitigated Supply Zone
   • Highlighted in red at the top.
   • This zone marks a strong area of resistance where sellers dominate, and the price is likely to reverse or face difficulty moving higher.
5. Inefficiency
   • Represented by a shaded green area (point 5).
   • This refers to price gaps or imbalances in the market that the price tends to revisit and “fill” before continuing in its direction.
6. LTF Demand Zone (Lower Time Frame Demand)
   • A smaller demand zone (green) appears near the bottom, showing where price reacts to create a higher low before moving upward.
7. Entry Point and Liquidity Pool
   • Point 6 indicates the entry zone for a long trade as the price retraces to the LTF demand zone.
   • The liquidity pool represents areas where stop losses are placed, often targeted by institutional players to create momentum.

How to Use This Setup

• Identify Zones: Mark the HTF demand/supply zones and look for liquidity pools.
• Wait for CHoCH: Watch for a minor CHoCH to signal a possible reversal, then wait for confirmation from a major CHoCH.
• Trade Entry: Enter trades at the LTF demand zone after the inefficiency is filled, with stop losses below key structural points.
• Target: Aim for the next supply zone or unmitigated areas for profit-taking.

This setup emphasizes patience and precision, helping traders align with institutional activity and avoid common retail mistakes.