Combining Order Blocks, Fair Value Gaps (FVG), Break of Structure (BOS), and Change of Character

(CHoCH) is a powerful strategy in Smart Money Concepts (SMC). Here’s how these concepts work
together and how you can use them to trade more effectively:

Key Concepts Breakdown

1. Order Blocks (OB):

o Definition: Order blocks are areas where large institutions have placed significant
orders. These blocks act as key levels of support or resistance and often determine
where price will reverse or consolidate.

o On the Chart: They appear as candlestick patterns (e.g., bearish or bullish engulfing)
and often mark the beginning of a strong price move.

o Role: Order blocks are the origin points of significant price moves and can act as
support or resistance when price returns to them.

2. Fair Value Gaps (FVG):

o Definition: Fair Value Gaps are areas where price has moved too quickly, creating a gap
in price action. These gaps often represent inefficient price action, and institutions will
seek to fill them to establish equilibrium.

o On the Chart: FVGs are identified as spaces between candlesticks where no price action
has occurred, typically after strong impulsive moves.

o Role: They act as areas for price to retrace into, where institutions can re-enter
positions or fill orders before continuing the trend.

3. Break of Structure (BOS):

o Definition: A BOS occurs when price breaks a previous swing high or swing low,
signaling that the market is changing direction.

o On the Chart: You’ll notice that after a BOS, the trend will typically continue in the new
direction, and you’ll have a confirmation that the previous trend is no longer valid.

o Role: BOS is used to confirm trend changes and validate if the market structure has
shifted.

4. Change of Character (CHoCH):

o Definition: CHoCH refers to a shift in market sentiment. It occurs when the market fails
to continue the previous trend and instead makes a significant reversal or
consolidation.

o On the Chart: Look for a lower high in a bullish trend or a higher low in a bearish trend.
These are markers that the character of the market is changing.
 o Role: CHoCH indicates that the market psychology is changing, suggesting potential
reversal or the beginning of a new trend.

Strategy: Combining Order Blocks, FVG, BOS, and CHoCH

Step 1: Identifying the Market Trend and Structure

• Start by analyzing the overall market structure. Is the market in an uptrend or downtrend?
Look for higher highs and higher lows in an uptrend or lower highs and lower lows in a
downtrend.

• Watch for CHoCH: In an uptrend, if price starts making lower highs and lower lows, this could
signal a potential CHoCH. Conversely, in a downtrend, if price starts forming higher lows, this
could be the first sign of a trend reversal.

Step 2: Spotting Order Blocks

• Look for Order Blocks after significant price moves. In an uptrend, a bullish order block forms
when price makes a strong move higher and then consolidates or pulls back. In a downtrend, a
bearish order block is formed when price makes a sharp move down.

• Example: If the market has been bullish, look for a bullish order block where price previously
retraced but quickly moved higher. When price revisits this level, it could act as support, where
price might bounce.

Step 3: Identifying Fair Value Gaps (FVG)

• Look for FVGs after a sharp impulse move. FVGs typically appear when price moves too quickly
and leaves a gap in the market structure.

o In a bullish market: Look for FVGs below price, which the market may come back to fill
before continuing higher.

o In a bearish market: Look for FVGs above price, where price may move back to fill the
gap before continuing lower.

• Example: After a bullish order block, if the market creates a gap, expect price to return and fill
the gap before continuing its upward trend.

Step 4: Watching for Break of Structure (BOS)

• BOS Confirmation: After identifying CHoCH, watch for a BOS to confirm the market's new
direction.

o In a bullish trend, after a lower high is formed (indicating a CHoCH), wait for a break
below the previous higher low (a BOS), signaling that the uptrend has ended.

o In a bearish trend, after a higher low is formed, wait for a break above the previous
lower high (a BOS), confirming the end of the downtrend and the start of a potential
reversal.
Step 5: Combining All Concepts for an Entry

• Once you identify a CHoCH, you can then use Order Blocks and FVGs as areas of interest for
retracements.

• Entry: After a BOS confirms the new trend, look for price to either:

o Return to an Order Block or

o Fill an FVG before continuing the new trend.

• Stop Loss and Take Profit:

o Place your stop loss above the Order Block (for a short trade) or below it (for a long
trade).

o Set your take profit at the next support or resistance level, depending on the direction.

Example on the Chart:

1. Trend Analysis: EUR/USD is in a bullish trend. Price is making higher highs and higher lows.

2. Change of Character (CHoCH): Price forms a lower high and then a lower low, signaling a
potential trend reversal.

3. Break of Structure (BOS): Price breaks below the last higher low, confirming the downtrend is
starting.

4. Order Block: After the BOS, price revisits an Order Block (a consolidation area before the
previous move higher), acting as resistance.

5. Fair Value Gap (FVG): There's an FVG created just below the Order Block, and price fills the gap
before continuing lower.

6. Entry: Enter short after the price fills the FVG and starts showing rejection at the Order Block
level.

7. Exit Strategy: Take profit at the next support level where price is expected to reverse.

Summary of What Each Concept Does on the Chart

1. Order Block: Indicates where institutional traders have placed large orders, leading to a
significant price move. These areas act as support or resistance.

2. Fair Value Gap (FVG): Shows where price has moved too quickly, leaving gaps. Institutions will
likely fill these gaps before continuing in the direction of the trend.

3. Break of Structure (BOS): Confirms that the market has shifted direction. A break of the
previous higher low (or lower high) signals that the trend is changing.
 4. Change of Character (CHoCH): Marks the shift in market sentiment, signaling that the trend
might be ending or reversing.

How They Work Together

By combining these concepts:

• CHoCH shows the shift in market sentiment.

• BOS confirms the change in market structure.

• Order Blocks provide key areas where price might react.

• FVGs show where price may retrace to fill inefficiencies before continuing.

Together, they give you an excellent framework to predict trend reversals, retracements, and optimal
entry points.

Let me know if you want to dive deeper into any specific concept or need visual examples using a
charting tool!

To help you understand how to effectively use Order Blocks, Fair Value Gaps (FVG), Break of Structure
(BOS), and Change of Character (CHoCH) together on a chart, I will provide a detailed step-by-step
guide, along with how these concepts interact visually on price charts. Additionally, I'll explain how to
use them in combination to form a trading strategy that can be applied to any market.

Visualizing Order Blocks, FVG, BOS, and CHoCH on the Chart

Step 1: Identifying the Trend and CHoCH

• Trend Identification: Begin by identifying the current trend. Look for higher highs (HH) and
higher lows (HL) in an uptrend or lower highs (LH) and lower lows (LL) in a downtrend.

• Change of Character (CHoCH): A CHoCH occurs when price fails to follow the current trend and
starts to shift. For example:

o In an uptrend, price might form a lower high (LH) instead of a higher high.

o In a downtrend, price forms a higher low (HL) instead of a lower low.

Example: If EUR/USD has been in a strong uptrend, but it now forms a lower high at a significant price
level (e.g., 1.0900), this signals a potential CHoCH.

Step 2: Looking for Break of Structure (BOS)

• Break of Structure (BOS) occurs when price breaks a previous swing point, such as a higher low
in an uptrend or a lower high in a downtrend. This break indicates that the market has shifted
its direction.
 • In our example of EUR/USD, if the price breaks below the previous higher low (e.g., 1.0850),
that confirms the change from the bullish trend to a bearish one.

Step 3: Identifying Order Blocks

• Order Blocks are areas where institutional players place large buy or sell orders, which often
result in a sharp price move. These can be seen as candlestick patterns that show a significant
price action in one direction, followed by consolidation.

o Bullish Order Block: A zone where price moves up sharply and then consolidates or
retraces before continuing higher.

o Bearish Order Block: A zone where price moves down sharply and then consolidates or
retraces before continuing lower.

• In the case of EUR/USD, once the BOS confirms a bearish shift, look for the last bullish order
block where price rallied before the reversal. This area will likely act as resistance when price
retraces.

Step 4: Recognizing Fair Value Gaps (FVG)

• Fair Value Gaps (FVGs) are areas where price moves quickly and creates a gap in price action,
often due to a sharp move caused by news or institutional buying/selling. These gaps often need
to be filled before price continues its trend.

• FVGs appear as spaces between candlesticks where no price action has occurred. After a BOS,
look for FVGs that have been left behind. If price moves toward these FVGs, it may retrace to fill
them before continuing in the direction of the trend.

Example: After the BOS confirming the downtrend, an FVG above the market could be the area where
price might retrace toward, filling the gap before continuing lower.

Step-by-Step Strategy Example Using All Four Concepts

1. Trend Analysis: Start by identifying the trend (bullish or bearish) on a higher timeframe (e.g., 4-
hour chart). In our example, let's say EUR/USD is in an uptrend.

2. CHoCH: Watch for a change of character. In an uptrend, this could be a lower high or a lower
low indicating the market is losing momentum. For example, EUR/USD forms a lower high at
1.0900, signaling a potential reversal.

3. BOS: Wait for a break of structure to confirm that the trend is shifting. EUR/USD breaks below
the previous higher low at 1.0850, which confirms a shift to a bearish market.

4. Order Block: Once the market breaks structure, look for the last bullish order block before the
price drop. This could be at a price level like 1.0900, where price initially rallied before the fall.
This level may now act as resistance.
 5. FVG: Look for a Fair Value Gap (FVG) that was left behind during the sharp move. A gap might
appear between 1.0900 and 1.0920, indicating that price may retrace back to fill the gap before
continuing down.

6. Entry: After confirming the Order Block and the FVG, wait for a price retracement to these
levels. Enter the trade when price reacts at these levels, such as showing rejection at the Order
Block (e.g., 1.0900) or filling the FVG and then rejecting.

7. Stop Loss and Take Profit:

o Set your stop loss above the Order Block (e.g., 1.0925) to protect against a failed
reversal.

o Set your take profit at the next significant support level, say 1.0700, for a favorable risk-
to-reward ratio (e.g., 2:1 or 3:1).

Chart Interpretation: How These Concepts Work Together

On the chart, you would see the following:

1. Trend (Uptrend or Downtrend): Identify the current direction of the market.

2. CHoCH: This marks the first sign of a potential shift in sentiment (lower high in an uptrend or
higher low in a downtrend).

3. BOS: Confirm the trend shift with a break below the previous higher low (for a downtrend) or
above the previous lower high (for an uptrend).

4. Order Blocks: Identify key support or resistance levels where price may react. These are areas
where institutional orders were placed.

5. FVG: Look for gaps created during sharp price movements that need to be filled before the
market can continue in the direction of the trend.

Final Thoughts on How These Concepts Interact

• Order Blocks are powerful because they represent the areas where institutions placed major
orders. If price revisits these zones, it’s likely to react strongly, either bouncing or breaking
through.

• FVGs highlight inefficiencies in price action. They often act as areas of retracement where price
fills the gap before continuing the trend.

• BOS confirms that the market is shifting direction, and CHoCH gives you the warning sign that
this shift may be coming.
Combining these concepts helps you spot high probability trade setups with clear entry, stop loss, and
target levels. This strategy allows you to enter trades with greater confidence and clarity, increasing
your chances of success.

Let me know if you'd like to dive deeper into any of these concepts or see examples in real charts!

To explore the strategy involving Order Blocks, Fair Value Gaps (FVG), Break of Structure (BOS), and
Change of Character (CHoCH) in practice, let me break it down with more detailed steps using visual and
chart-related insights.

Step-by-Step Strategy in Action:

1. Identifying the Trend and Change of Character (CHoCH)

• Trend Identification: The first step is to identify whether the market is in an uptrend or
downtrend. This is done by observing price structure, such as higher highs (HH) and higher lows
(HL) in an uptrend, or lower highs (LH) and lower lows (LL) in a downtrend.

• Change of Character (CHoCH): A CHoCH occurs when there is a shift in the price movement. For
example:

o In a bullish trend, the market starts forming lower highs, indicating weakening
momentum. This can be a potential sign of a reversal.

o In a bearish trend, the market might form higher lows, indicating a potential trend
reversal.

Example: Suppose EUR/USD has been trending up, but price forms a lower high at 1.0900. This may
indicate the start of a potential trend shift.

2. Break of Structure (BOS)

• BOS is confirmed when price breaks a previous swing high or swing low. This break indicates a
potential shift in market structure and confirms that the previous trend has ended.

• After the CHoCH (lower high in the uptrend), wait for a break below the last higher low (e.g.,
1.0850) to confirm that the uptrend has ended and a downtrend has begun.

Example: Once EUR/USD breaks below 1.0850 (previous higher low), it confirms that the market is
shifting from a bullish trend to a bearish trend.

3. Identifying Order Blocks

• Order Blocks are critical levels of price action where institutional orders are likely placed. These
are areas that often create sharp price moves and provide strong support or resistance levels.

• After the BOS, look for the last bullish order block before the down move. This is the last area
where buyers were in control before the trend change.
 • In the case of EUR/USD, if price was moving higher before the reversal and formed a
consolidation at 1.0900 before the drop, this level could act as a resistance zone (bearish order
block).

Example: At 1.0900, price formed a consolidation before the drop, marking it as an order block. When
price retraces to this level, it could potentially reject and resume the bearish trend.

4. Recognizing Fair Value Gaps (FVG)

• Fair Value Gaps (FVG) represent inefficiencies in price action, typically caused by sharp moves.
FVGs occur when there is a gap between candlesticks, with no price action occurring within a
certain price range.

• After a BOS, look for FVGs above or below price. If there’s an FVG left behind after a sharp
move, price may retrace to fill this gap before continuing the trend.

Example: After the BOS, you might notice an FVG between 1.0850 and 1.0900. Price may retrace back
toward this gap to fill it before continuing lower.

5. Combining All Concepts for an Entry

• Entry Strategy: Once you confirm a BOS, look for price to either:

o Retrace to an Order Block (e.g., 1.0900) or

o Fill a Fair Value Gap (e.g., between 1.0850-1.0900).

• Enter the trade once price starts rejecting at these levels, signaling that the trend is continuing.

Example: If EUR/USD retraces to the bearish order block at 1.0900 or fills the FVG and shows rejection
(e.g., candlestick patterns like pin bars or engulfing bars), you can enter the trade short, with a stop loss
above the order block (e.g., 1.0925).

6. Stop Loss and Take Profit

• Stop Loss: Place your stop loss just above the Order Block (e.g., at 1.0925) to protect against a
failed reversal.

• Take Profit: Set your take profit target at the next support level (e.g., 1.0700) to take advantage
of the trend continuation.

Putting It All Together in a Chart

Here’s what it would look like on a chart:

1. Trend: The market has been in a bullish trend but starts showing signs of weakening as lower
highs form.

2. CHoCH: The price forms a lower high at 1.0900, signaling a potential reversal.

3. BOS: EUR/USD then breaks below the previous higher low at 1.0850, confirming the market has
shifted to a bearish trend.
 4. Order Block: After the BOS, look for the last bullish order block at 1.0900, where price rallied
before the reversal.

5. FVG: Price may have left an FVG between 1.0850 and 1.0900, indicating a potential retracement.

6. Entry: Enter the short trade when price reaches the order block or fills the FVG and starts
showing rejection (e.g., bearish candlestick patterns).

7. Stop Loss and Take Profit: Set stop loss above 1.0925 (above the order block) and take profit at
the next support level (1.0700).

By applying these principles consistently, you can start identifying high-probability setups and gain an
edge in your trading.

Would you like more detailed charting examples or a deeper dive into any of these concepts? Let me
know!

To provide a high-quality strategy involving Order Blocks, Fair Value Gaps (FVG), Break of Structure
(BOS), and Change of Character (CHoCH), I'll break down each concept in greater depth and show how
they interact on a chart with clear, practical examples that can elevate your trading approach.

Deep Dive into Key Concepts:

1. Trend Identification and CHoCH

Understanding the trend is critical for identifying the Change of Character (CHoCH). This is your first
signal that a market trend may be reversing. The CHoCH typically happens when:

• In an Uptrend: The price forms lower highs (LH), instead of making higher highs (HH).

• In a Downtrend: The price forms higher lows (HL), instead of making lower lows (LL).

Example: EUR/USD is trending upwards. Price creates a higher high at 1.1000, but the next peak forms
at 1.0900, which is lower than 1.1000, signaling a potential change of character (CHoCH), and the trend
may be losing momentum.

2. Break of Structure (BOS)

A Break of Structure (BOS) is a more definitive signal than CHoCH. It occurs when price breaks below
(for uptrends) or above (for downtrends) a significant level such as a higher low (in an uptrend) or
lower high (in a downtrend). BOS confirms that the market has made a true change in direction.

Example: After the CHoCH, if the EUR/USD price breaks below the previous higher low (1.0850), this
solidifies that the market is shifting to a bearish trend.

Order Blocks (OB) & FVG Explained

3. Order Blocks (OB)

Order Blocks are essentially zones of institutional activity where large buy/sell orders were placed,
often leading to significant price movements. Order Blocks are typically characterized by:

• Bullish Order Blocks: These are formed in an uptrend, typically before a significant price
increase. They are usually marked by an up-move followed by a period of consolidation or
retracement.

• Bearish Order Blocks: These are formed in a downtrend and can often be seen before a major
price drop. It is where price consolidates before moving down.

These order blocks act as areas of support (in a bullish trend) or resistance (in a bearish trend).

Example: If EUR/USD moves sharply higher to 1.0900 before dropping, the price level around 1.0900
would be an order block. When the price retraces to this level, it could act as resistance, signaling a
short trade opportunity.

4. Fair Value Gaps (FVG)

Fair Value Gaps (FVG) are price inefficiencies, where the market has made a sharp move without
offering the opportunity for price action in a certain range. These gaps often get filled before the market
continues in its direction. FVGs occur when a sharp price move creates a space between candlesticks
(i.e., there is no trading activity in that price range).

Example: If EUR/USD has made a sharp move from 1.0850 to 1.0900 and left an unfilled gap between
1.0860 and 1.0890, that’s an FVG. The price may retrace to this level to fill the gap before continuing its
trend lower.

Complete Strategy Example Using All Four Concepts

1. Trend Identification: EUR/USD is in an uptrend, forming higher highs (HH) and higher lows (HL).

2. CHoCH: EUR/USD forms a lower high at 1.0900, which signals a Change of Character—a
potential trend reversal.

3. BOS: Price breaks below the last higher low at 1.0850, confirming that the bullish trend has
ended and a bearish trend has begun.

4. Order Blocks: After the BOS, look for the last bullish order block, which might be at 1.0900 (the
level before the market broke down). This level is now likely to act as resistance.

5. FVG: Price may have left a Fair Value Gap above the market, perhaps between 1.0850 and
1.0900. After breaking structure, the price may retrace to fill the gap, providing a potential entry
point.

Combining the Concepts

 1. Entry Strategy: After confirming the BOS and the order block, wait for the price to retrace to
the order block (1.0900) or fill the FVG (1.0850-1.0900). Look for signs of price rejection at
these levels, such as:

o Candlestick formations like pin bars, engulfing candles, or doji candles showing price
rejection.

2. Stop Loss: Place your stop loss just above the order block (e.g., 1.0925) to protect against a
failed trade.

3. Take Profit: Set your take profit level at the next support zone (e.g., 1.0700) for a good risk-to-
reward ratio.

Real Chart Example:

• Trend: EUR/USD is trending upwards.

• CHoCH: Price forms a lower high at 1.0900.

• BOS: Price breaks below the last higher low at 1.0850, confirming the downtrend.

• Order Block: The bullish order block around 1.0900 becomes resistance.

• FVG: The FVG is between 1.0850 and 1.0900.

When price returns to 1.0900 or fills the gap at 1.0860, look for a bearish rejection pattern to confirm
the entry. Enter a short trade with a stop loss above 1.0925 and a take profit at the next support level.

Conclusion: A High-Quality, Step-by-Step Strategy

By using these concepts together, you're combining market structure (CHoCH, BOS) with institutional-
level price action (Order Blocks and FVGs). This approach allows you to target higher-probability trade
entries with clear risk management. Practicing these strategies in real-time will help you refine your
approach to capturing trend reversals and continuations with precision.

Would you like to see how this strategy could work with specific live charts or need more visual
explanations? Let me know!