Liquidity, BOS, and CHOCH: The trilogy that every trader must master

Tired of losing trades without knowing why? Today we break down three game-changing concepts in spot trading: liquidity, structure break (BOS), and character change (CHOCH). Although they sound technical, they are simple if you see them this way.

Liquidity: The water of the market

Liquidity is not magic; it is simply all the pending buy and sell orders in the order book. Think of it this way: if there are 10 cows for sale and 10 buyers each with $1,000, that is liquidity. More buyers or sellers = stronger market.

Why does it matter? Because when you trade in an area with high buying liquidity, your orders are executed more easily and the price moves with less friction.

BOS: When the trend continues forward

The structure break (BOS) occurs when the price breaks a previous high after a pullback of at least 5-7 candles. It is not just breaking any resistance; it is breaking after the market “breathes”.

In practice: If you see a BOS forming, it means that the bullish trend is likely to continue. Adjust your stop-loss before the recent low and let the profit run.

CHOCH: The trend investment

This is the most important: when the market stops making higher highs and starts making lower lows, the trend has changed. It first breaks the recent low, then creates a lower high than the previous one. That is CHOCH.

In practice: If you detect CHOCH, move your stop-loss to the new low. This move avoids larger losses over 70% of the time ( although sometimes you get trapped ).

The formula: Analyze + Validate + Execute

1. Do your technical analysis (Order Block + FVG from the previous article)
2. Verify that there is liquidity in your entry zone
3. When trading, use BOS/CHOCH to know when to continue or exit.
4. In your take-profit, check the liquidity: if there is a lot, take profits; if it's low, it may continue to rise.

Quick Update: BTC at 64,000 USD

Currently, BTC is trading around 64,000. A pullback to 62,400-63,200 is expected before bouncing back to 69,900. The detailed analysis will come after Powell's speech today at 10:55 PST.

The key: Combine liquidity + BOS + CHOCH and your spot trades will make much more sense.