BOS and CHOCH Indicator is a market structure indicator that displays bullish/bearish BOS and CHOCH signals with alerts. In the fast-paced world of trading, quick and timely decision-making is paramount. Understanding the market structure can give you a significant edge, whether you’re a day trader, swing trader, or long-term investor.
BOS (Break Of Structure) and CHOCH (Change Of Character) are two indicators gaining traction in the trading community. Designed to highlight significant points in market structure, these indicators can be invaluable tools for traders looking to understand trend direction and strength.
Features of this Market Structure Indicator
Here’s a snapshot of what this Market Structure Indicator offers:
- Alerts for both bullish and bearish CHOCH & BOS market structure
- Option to display only bullish or bearish CHOCH & BOS signals
- Adjustable settings for the number of candles to look back for CHOCH & BOS identification
- Depth setting that allows for the selection of minor to major swing points
- Three types of selectable alerts: CHOCH & BOS, CHOCH only, BOS only
- Alerts delivered via Popup, Push & Email
The utility of these indicators is not just in their individual insights but also in their combined capabilities. The indicator is designed to ensure traders don’t have to constantly monitor the charts, offering real-time alerts for these setups.
How BOS and CHOCH Indicator Keeps You Out of Bad Trades
One of the common pitfalls traders face is the urge to catch the top or bottom of a trend reversal. This is a risky strategy and often results in traders getting stopped out of positions. The BOS and CHOCH indicators can significantly mitigate this risk. If you wait for both CHOCH and BOS to manifest before taking a position, you stand a much higher chance of the trade being successful.
This BOS and CHOCH Indicator can be used on any Forex currency pair and other assets such as commodities, Cryptos, Binary Options, Stock markets, Indices, etc. You can also use it on any time frame that suits you best, from the 1-minute to the monthly charts.
This Market Structure Indicator isn’t a standalone trading indicator System. Still, it can be very useful for your trading as additional chart analysis, to find trade exit position(TP/SL), and more. While traders of all experience levels can use this system, practicing trading on an MT4 demo account can be beneficial until you become consistent and confident enough to go live. You can open a real or demo trading account with most Forex brokers.
What is a CHOCH? – Change Of Character
CHOCH stands for “Change Of Character” and is often the first sign of a possible change in the direction of a trend. It identifies a shift in market sentiment or order flow that could herald a trend change. This is generally marked by significant price action movements atypical of the prevailing trend. For instance, if a pair consistently trending upward suddenly has a significant downward candlestick, it could indicate a CHOCH.
What is a BOS? – Break Of Structure
BOS or “Break Of Structure” refers to the continued order flow in the current trend direction, solidifying it further. This happens when price action breaks past key structural points like support and resistance levels, confirming the strength and continuity of the existing trend.
For example, if a pair in a downward trend breaks a significant support level with substantial volume, it could indicate a BOS event, suggesting that the downward trend is likely to continue.
CHOCH & BOS – A Trend Reversal Pattern
The unique aspect of combining CHOCH & BOS is its utility for identifying trend reversals. While a CHOCH alerts you to the first sign of a possible trend change, the BOS offers higher confirmation of a trend reversal. This sequential occurrence of CHOCH followed by a BOS can be considered a robust trend reversal pattern.
You can customize the alerts to trigger for both BOS and CHOCH by setting the ‘Alert Option’ to ‘Choch and BOS’. This is particularly beneficial for traders looking for the safest trade entry pattern for a trend reversal instead of taking a trade entry based on a CHOCH pattern alone.
The CHOCH and the BOS must occur in that specific order for the alert to trigger. The alert will trigger after the BOS event has been confirmed.
Detailed Alert Mechanisms
Bullish Choch & BOS Alert:
- Triggering Condition: The Choch & BOS Alert triggers when the qualifying candle CLOSES above the previous (BOS) swing-high.
- Trade Preparation: You then mark up the ‘current range’ and WAIT for the price to retrace back into that range. Ideally, this should be into the ‘discount’ region (i.e., past the 50% level) and into a order block.
- Trade Entry: In this case, the trade entry is initiated when the price hits the previous bullish order block.
Bearish Choch & BOS Alert:
- Triggering Condition: The Choch & BOS Alert triggers when the qualifying candle CLOSES below the previous (BOS) swing-low.
- Trade Preparation: You then mark up the ‘current range’ and WAIT for the price to retrace back into that range. The ideal location for this is the ‘premium’ region (i.e., past the 50% level) into a order block.
- Trade Entry: The trade entry is executed when the price hits the previous bearish order block.
Why This Pattern is Safer
By waiting for the CHOCH and the BOS to occur in sequence, you employ the safest trade entry pattern for a trend reversal. This two-step verification process eliminates many false signals that could lead to poor trade decisions. The additional confirmation level provided by the BOS, following a CHOCH, allows for a more accurate and confident trade entry.
Integrating BOS and CHOCH indicators into a trader’s toolkit marks a leap forward in understanding and navigating market structures effectively. These indicators offer insights individually, but when combined, they become an even more potent force for identifying robust trade setups.
By allowing for customizable alerts and outlining specific action plans for bullish and bearish market scenarios, the indicators significantly ease the decision-making process for traders. Whether you’re a novice trader looking to minimize risk or an experienced one aiming to refine your strategies, this Market Structure indicator provides a new layer of sophistication that can help improve your trading performance.