I've been noticing something interesting in the market lately that a lot of traders seem to overlook. It's about recognizing when the market is actually changing its mind, not just taking a quick breather. This is what we call change of character in trading, or CHoCH if you want to sound like a pro at the terminal.

So here's the thing. The market moves in waves, and those waves tell a story. When you see a series of higher highs and higher lows stacking up, that's bullish energy. Buyers are in control, pushing price upward. But what happens when that pattern breaks? That's when things get interesting.

The way I identify a real change of character pattern is pretty straightforward once you know what to look for. First, you need to establish what the current trend actually is. Are we making higher lows and higher highs, or lower lows and lower highs? That tells you the direction. Once you've got that locked in, you're watching for a break of structure. In a bull trend, that means the price finally breaks above a higher high. In a bear trend, it's breaking below a lower low. This is your first signal that something might be shifting.

But here's where most people get it wrong. Just because the price breaks structure doesn't mean the trend has actually reversed. You need to see the price come back and break the recent higher low or lower high depending on which direction you're in. That's the real confirmation. When that happens, you're looking at a genuine change of character in forex and crypto markets alike. The market character has literally flipped.

I've been using this with supply and demand zones for years now, and the confluence is deadly. Here's my approach. Once I confirm a CHoCH pattern has formed, I mark out a supply or demand zone based on the recent wave structure. Then I wait for price to retrace back into that zone. That's where I enter the trade, aligned with the new trend direction.

For stop loss placement, I keep it tight. A few pips above the supply zone if I'm shorting, or below the demand zone if I'm going long. The real edge though is knowing when to exit. I don't use fixed take profit levels. Instead, I watch for the counter-trend CHoCH to form. When the opposite change of character pattern shows up on the chart, that's my signal to close and take profits.

The risk-reward on these setups can be massive, especially when a big trend reversal happens. You catch a major directional move right from the start. But here's the reality check. This only works in clean market conditions. When price is choppy and ranging, the probability drops significantly. You need to be selective about which setups you take. Backtest it, understand the market conditions where this works best, and you'll see why this is one of my favorite technical approaches.