Many people lose money not because they got the direction wrong, but because they don’t know whether the trend has actually changed.
In SMC, there are two key signals for identifying a structural reversal:
🔹 BOS (Break of Structure): Price breaks the previous high (in an uptrend) or previous low (in a downtrend), confirming that the trend is continuing. Smart money is driving the move, so trade in the direction of the trend—don’t go against it.
🔹 CHoCH (Change of Character): Price breaks a key swing point in the opposite direction, shifting the structure from bullish to bearish, or bearish to bullish. This is the first sign that smart money may be changing direction. It’s not confirmation—it’s a warning.
The most common mistake retail traders make: treating CHoCH like BOS. They bet on a reversal as soon as the first hint of a turn appears, only to get shaken out by smart money as price continues in its original direction.
Real-world example — BTC is currently at $80,520:
Since the uptrend began at $69,000 in early November, every pullback has formed a BOS (continuously making higher lows). Until the trend actually changes, follow the BOS; only start considering a reversal when a CHoCH appears—not the other way around.
What to watch now: If BTC breaks below the $78,000 swing low and a CHoCH signal appears, only then is the uptrend structure in doubt. Until that level breaks, pullbacks are opportunities to go long, not signals to go short.
Remember: BOS = the trend is speaking; just follow it. CHoCH = smart money is hinting at something; listen closely.
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🌿 Zhao, not to be named | Not financial advice
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