An uptrend makes higher highs and higher lows; a downtrend makes lower highs and lower lows. When price in an uptrend breaks above the last swing high, that is a BOS, confirming the trend. When it breaks below the last higher low instead, that is a CHoCH, an early warning that the trend may be changing. Both terms come from price-action trading and smart money concepts.
Example
On the four-hour chart, ETH makes higher highs at $3,000, $3,150 and $3,300, with higher lows at $2,850 and $2,980 in between. The push above $3,150 to $3,300 was a BOS. Price then falls below $2,980, the last higher low before that high: that is a CHoCH, and the uptrend on this timeframe is now in question.
Why it matters
Structure gives an objective way to define trend and bias, and logical places for stops: below the last higher low for longs and above the last lower high for shorts. Recording the structure at entry in your journal shows whether you trade with the trend or against it.
Common mistake
Mixing timeframes. A CHoCH on the five-minute chart can be a normal pullback inside a daily uptrend. Decide which timeframe sets your bias and which one you use for entries.
FAQ
- What is the difference between BOS and CHoCH?
- A BOS breaks a swing point in the direction of the trend, confirming it. A CHoCH breaks one against the trend, the first sign that it may be changing.
- Does a CHoCH mean the trend has reversed?
- Not on its own. It is an early warning. Many traders wait for a new lower high, or higher low in a downtrend, and a further break before treating the trend as reversed.
- Do I need a candle close for a BOS?
- Many traders require a candle body to close beyond the swing point so that wicks do not count. Pick one rule and apply it consistently.