Master CHOCH In 20 Mins! ( Change Of Character )

Summary

The video script explores the concept of 'change of character' in market trading, where the control shifts between buyers and sellers, leading to potential reversals. It delves into three types of changes: internal to internal, external to external, and external to internal, using examples to illustrate each. The speaker emphasizes the importance of observing market trends, understanding price reactions at range extremes, and waiting for confirmation of a character change before making trading decisions. The script concludes with advice to focus on mastering one type of change of character for effective trading.

Takeaways

• 📈 Change of character in trading refers to a shift in market control from sellers to buyers or vice versa, indicating a potential reversal in the market trend.
• 🔄 The concept involves three types of changes: internal to internal, external to external, and external to internal, each representing different market dynamics and reversal patterns.
• 📊 Internal to internal change is identified when the price, after being in a bullish or bearish trend, reverses at the range extreme instead of continuing the trend, signaling a shift in control.
• 📉 External to external change occurs when the market price breaks through both the discount and premium range extremes, indicating a strong change in momentum and potential trend reversal.
• 🔄 External to internal change is characterized by the price breaking above or below the range after being in a bearish or bullish trend, suggesting an intention to move in the opposite direction.
• 📝 Traders are advised to wait for confirmation of a change of character, such as a break of structure or a return to the initial range, before making trading decisions.
• 🤔 The importance of looking to the left of the chart to understand past patterns and identify which type of change of character occurs more frequently in the current market conditions is emphasized.
• 🚫 A caution against anticipating a change of character too early, such as after an initial break of structure, is highlighted, as markets have evolved and require more confirmation.
• 🛑 The significance of waiting for the full absorption of liquidity at key levels before confirming a change of character and looking for trading opportunities is underlined.
• 🔢 Fibonacci levels are used to identify range extremes, which are critical in determining potential entry points after a confirmed change of character.
• 💡 The script suggests focusing on mastering one type of change of character motion due to the complexity of monitoring all three and the limitations of human traders compared to robots.

Q & A

What is the definition of 'change of character' in the context of market trading?

In market trading, 'change of character' refers to a shift in the order flow where the control of the market transitions from buyers to sellers or vice versa. It signifies a reversal point in the market dynamics.

How does a change of character manifest in the market?

A change of character is evident when there is a shift in market control. For instance, if sellers have been dominating and then buyers start to take over, or if buyers have been in control and sellers enter the market, causing a bearish trend.

What are the three types of changes of character discussed in the script?

The script discusses three types of changes of character: internal to internal change, external to external change, and external to internal change.

What is an internal to internal change of character?

An internal to internal change of character occurs when the price is in a bullish trend but instead of continuing to break structure, it reverses at the range extreme, indicating a shift from buyers to sellers or vice versa.

Can you explain the concept of 'range extremes' in the context of internal to internal change?

In the context of internal to internal change, 'range extremes' refer to the discount and premium levels within a trading range. The price reacts from these levels, and a change of character is indicated when the price rejects from the premium and breaks the structure, leading to a reversal.

What is the significance of a price rejecting from the premium in an internal to internal change?

A price rejecting from the premium in an internal to internal change signifies that the buying power is not strong enough to continue the upward movement. This rejection often leads to a reversal where sellers start to dominate the market.

What is an external to external change of character in trading?

An external to external change of character happens when the market price breaks the structure on both the discount and premium sides of the range, absorbing the liquidity and then changing direction, indicating a significant shift in market control.

Why is it advised to wait for full confirmation of a change of character in the market?

Waiting for full confirmation of a change of character is crucial because markets can be unpredictable. Early anticipation can lead to false signals. It's safer to wait until the price breaks the initial range or the range that previously had the sweep, confirming the change in market control.

What is the difference between an external to internal change of character and an external to external change of character?

An external to internal change of character occurs when the price breaks the external range and then comes back into the internal range, indicating an intention to go up. In contrast, an external to external change of character involves the price breaking both the discount and premium levels of the range before changing direction, showing a more aggressive shift in market control.

Why is focusing on one type of change of character recommended for traders?

Focusing on one type of change of character is recommended because it simplifies the trading strategy and reduces the cognitive load on the trader. It allows for a more targeted approach and can lead to better decision-making, especially in dynamic market conditions.