How to Spot Trend Reversals Early (Before CHoCH)

What if I told you there’s a way to spot trend reversals early, before any change of character (CHoCH) even shows up on your price chart?

That’s what I want to walk you through in this post.

This isn’t about predicting tops or bottoms, and it’s not about chasing reversal patterns like double tops, double bottoms, or a head and shoulders pattern.

It’s about identifying trend reversals by watching how price action and market sentiment start to change before the current trend fully breaks down.

I’ll use EURUSD as the main example here, but this applies to any market, any trading style, and any chart timeframe.

I’ve used this approach for years, and it shows up across markets more often than most traders realize.

What Most Traders Get Wrong About Trends

Most traders are taught to view trends in a very clean, textbook way: higher highs and higher lows mean an upward trend, and lower highs and lower lows signal a downtrend.

In theory, that works, but real price movements rarely behave that cleanly for very long.

Instead of smooth pullbacks, the stock price or currency pair usually moves back and forth, creating a narrow range at times, building buying pressure and selling pressure before price moves again.

That’s why many traders who wait for obvious reversal signals or classic chart patterns often end up late to a new trend.

Why I Focus on Distribution, Not Support and Resistance

When a market trends, it usually distributes around a midpoint rather than respecting exact key support or resistance levels.

Price pushes above that midpoint, then moves in the opposite direction, over and over again, which is why trends often look messy on a price chart.

Because of that, I don’t focus solely on precise levels or traditional technical analysis.

Instead, I look at areas where price is distributed on both sides of the midpoint, which tells me more about what market participants are doing.

I call this a distribution channel, and it helps me focus on behavior rather than guessing at reversal trades.

I label moves above the channel midpoint as “buy-side distribution,” and moves below as “sell-side distribution.”

Because markets are mean-reverting, moves to one extreme or the other tend to result in a move back to the mean, or average price of the trend.

I’m not buying the bottom of the channel or selling the top.

I’m watching how price behaves around it to see if the prevailing trend is starting to lose control.

How I Set Up the Distribution Channel

I use a basic parallel channel tool that’s available on every trading platform, whether you’re looking at hourly charts or higher time frame setups.

There’s nothing fancy about it, and the tool itself isn’t the trading strategy.

I set it up as a band instead of exact lines because trends expand and contract, especially during periods of increased volatility.

As the prior trend develops, the channel naturally widens, which gives you a realistic area to observe how price moves.

The settings matter far less than how price reacts once it starts trading inside or outside the channel.

What I Mean by Acceptance

When I talk about acceptance, I’m not talking about a single wick, a breakout point, or one candle briefly poking through a level.

Acceptance occurs when multiple candles close above or below the channel. Simple enough.

If you have to debate whether it’s real, it’s probably not a true reversal or meaningful trend change.

Acceptance is simply an early clue that the market may be approaching a turning point.

Using This in a Downtrend

Let’s say the market is in a clear downtrend with lower prices and consistent downtrend signals.

If price starts showing acceptance above the top of the distribution channel, that’s a change in behavior.

It does not mean the market has formed a true reversal or that you should immediately trade in the opposite direction.

It means the selling pressure that drove the prior trend may be fading, and it’s time to reassess your trade setups.

In many cases, this happens well before price breaks an external high or confirms a new direction.

Why This Does Not Replace Market Structure

If you’re using Smart Money Concepts, market structure still matters.

External highs, external lows, and clear price breaks are still required to confirm a trend change.

This tool doesn’t replace structure, technical indicators, or other multiple signals you may use.

It simply adds context by showing when something that existed before is starting to shift.

That said, acceptance above or below a channel usually precedes a change of character, often by dozens of pips.

So, if you’re looking for a simple way to spot trend reversals even before CHoCH, this is it.

The Same Concept Works in Uptrends

This works the same way during an upward trend.

When price shows acceptance below the bottom of the distribution channel, it’s often an early sign that buying pressure is weakening.

At that point, I’m no longer interested in buying, even if the stock’s price trend hasn’t officially changed yet.

I pause, wait, and let the market show whether a potential reversal or deeper pullback is coming.

How Acceptance Showed Up 100 Pips Before the CHoCH

In this example, EURUSD showed bullish acceptance above the distribution channel well before the change of character was confirmed.

You can see that the euro started closing above the top of the channel and stayed there, not just for one candle, but for multiple candles.

That’s the key difference.

This wasn’t a wick or a quick breakout that failed.

It was the market accepting higher prices and changing its behavior, even though the structure hadn’t officially shifted yet.

At this point, we still hadn’t taken out the external high, so there was no confirmed CHoCH.

But the selling pressure that controlled the prior trend was already fading.

That acceptance occurred roughly 100 pips before the actual change of character appeared on the chart.

This is exactly how I use this tool.

It’s not a signal to buy.

It’s an early warning that the prior trend may be losing control and that continuing to sell is no longer sensible.

When the CHoCH finally came, it confirmed what price behavior had already told us.

That’s the value here.

You’re not predicting the reversal. You’re recognizing that something has changed before most traders are forced to react.

How OTE Fits Into This

After acceptance shows up, the price often pulls back into the Optimal Trading Entry (OTE), which many traders already use in their technical analysis.

OTE doesn’t cause the reversal, but it often aligns with market reversals once behavior has already shifted.

The order matters here: behavior changes first, structure confirms later, and entries come last.

Best Timeframes to Use

I don’t recommend using this on very low time frames because price noise increases and signals become less reliable.

I’ve found the best results on hourly and 4-hour charts, where acceptance tends to carry more weight.

Once you go lower, you’ll see more false reversal patterns and fewer clean signals.

Why This Belongs in Your Toolbox

This approach isn’t about calling exact tops, bottoms, or chasing patterns like triple tops or inverse head and shoulders.

It’s about avoiding bad trades and protecting yourself as the current trend weakens and a new one begins.

If you’ve been buying and see acceptance against you, you pause.

If you’ve been selling and see acceptance against you, you do the same.

That early change in behavior can help keep you on the right side of the market, even before a change of character occurs.

Final Thoughts

You’re not trying to outsmart the market or force reversal trades.

You’re learning how to read price action, market sentiment, and price movements so you can spot when control may be shifting.

Structure will always confirm a true reversal later.

This just helps you identify potential reversals earlier, before many traders realize the market has already started moving in a new direction.

Trade well.