L5.1 — Break of Structure vs Change of Character: The Critical Difference
A Break of Structure (BOS) is a continuation signal: price breaks the last swing high in a bullish trend (or last swing low in a bearish trend), confirming that the existing trend structure is intact. A Change of Character (CHOCH) is a reversal signal: price breaks the most recent swing low in a previously bullish structure, suggesting that the trend may be ending and a new bearish structure is beginning.
The distinction matters because they imply opposite trade directions. A BOS in a bullish trend is a reason to look for continuation longs on the next pullback. A CHOCH in a bullish trend is a reason to stop taking longs and start watching for short setups as the new bearish structure develops. Treating them the same destroys the directional filter that makes structure analysis useful.
The rule for both: confirmation requires a candle close beyond the relevant swing point. Wicks do not count. A CHOCH signal on a wick is a potential liquidity sweep, not a structural reversal. Wait for the close before updating your structural read.
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