Swing vs. Correction: Reading Waves Within a Trend

Real charts are not the clean straight lines you see in textbooks. They are more like continuous waves.

• There are sections that stretch out in a major direction.
• In between, there are pullbacks and corrections.
• Sometimes, there are sections that just move sideways like a box.

The important question is always:

"Is the movement I'm seeing right now the main swing (impulse) of the trend, or is it a correction stuck inside it?"

Once you can distinguish this:

• You can decide where and how to use the Support & Resistance levels created in S/R Basics.
• You can connect the Higher/Lower Timeframe structure covered in Timeframes more naturally.

1. Intuitive Definition of Swing and Correction

Let's start with very simple definitions.

• Swing (Impulse) → A wave that extends relatively long in the direction of the trend. → The section that can be seen as the "protagonist" of this movement.
• Correction (Pullback) → A temporary retracement/breather that occurs between swings. → A "resting movement" that does not deny the direction of the protagonist.

Tap to zoom

As shown above:

• The waves extending upward (A, C) are Upward Swings (Trend Direction).
• The sections retracing downward briefly in between (B) are Correction Waves (Pullbacks).

The key point here is:

A correction is not a "new trend in the completely opposite direction" but a "breather within the existing trend."

It is important to define in your own system how deep a correction can go before it denies the existing trend.

2. Swing Structure Within Uptrends and Downtrends

The same principle applies to downtrends.

• Uptrend:
  • Moves extending upward = Upward Swing
  • Moves coming down relatively short = Downward Correction
• Downtrend:
  • Moves extending downward = Downward Swing
  • Moves retracing upward relatively short = Upward Correction

Tap to zoom

What matters in viewing swings and corrections is Relative Size and Direction.

• Uptrend Example:
  • Moves up by 100 points, 120 points, 90 points.
  • Retraces by about 30-40 points in between. → In the big picture, the Upward Swing is still dominant.
• Downtrend Example:
  • Waves going down largely are repeated.
  • Even if a bounce occurs, if it fails to retrace most of the previous drop. → In the big picture, the Downward Swing is dominant.

The question of "how much retracement denies the trend" will be covered in Risk Management and Strategy along with specific systems. For now, consider this the stage of building the "eye to distinguish the role of waves."

3. Where Do We Draw the Line Between Swing and Correction?

In reality, you can't cut waves as cleanly as measuring with a ruler. However, if you don't set any criteria, it becomes very difficult to judge "where the correction ends and where the trend reversal begins."

Basically, three perspectives are often used together.

3-1. Depth of Price (How much did it retrace?)

In an uptrend:

• If it retraces less than half of the previous upward swing and goes up again:
  • Highly likely to be a correction.
• If it retraces most of the previous swing or breaks below it:
  • It can be seen as a trend reversal or at least invalidation of the previous upward swing.

Similarly in a downtrend, look at how much it retraced upward.

3-2. Length of Time (How long did it last?)

As covered in Timeframes, you must look at the Time Axis along with price changes.

• Swings are usually movements where multiple candles continue.
• Corrections are often retracements that end in a relatively short time.

Of course, there are exceptions, but the perspective that:

"A correction that retraces deeply and lasts for a long time might no longer be a simple correction"

is important.

3-3. Relationship with Support & Resistance

As seen in S/R Basics:

• Major Support & Resistance Zones become candidate areas for where the wave might proceed.

For example:

• An upward swing ends near an upper Resistance Zone.
• The subsequent price retraces deeply to a lower Important Support Zone.

This movement could be a simple correction, or the start of a new downward swing.

Conversely:

• If a correction stops at a mid-level support zone (based on higher timeframe)
• With decreasing volume
• And then an upward swing continues

It is more natural to view this correction as a "normal pullback" within the existing uptrend.

4. The Role of Swing and Correction Changes by Timeframe

One important point is:

The distinction between swing and correction depends on the timeframe.

• On a Daily chart:
  • A movement that looks like a "small correction".
• On a 15-minute chart:
  • Could be a complex structure made of multiple trend swings and corrections.

Tap to zoom

When using multi-timeframe in practice:

• Higher Timeframe:
  • Look at the direction and structure of the big swing.
  • e.g., A section that looks like "one correction" within an uptrend on Daily/4H.
• Main/Lower Timeframe:
  • Zoom in on that correction section.
  • Look at the internal swing/correction structure to find entry/exit points.

Think of it this way:

Inside a Correction on the Higher Timeframe, there are multiple Trend Swings and Pullbacks on the Lower Timeframe.

Therefore, it is important to decide in advance:

• "On which timeframe will I define the swing?"
• "How will I view the correction within that swing on the timeframe one step lower?"

The 3-Timeframe Structure (Higher-Main-Lower) discussed in Timeframes can be applied here as is.

5. Connecting Swing/Correction, S/R, and Volume

If we connect the contents covered in chart-basics so far with Swing/Correction, the picture looks like this:

1. S/R Basics
   • Where price reacted frequently → Support/Resistance Zones
2. Volume Basics
   • Where energy was loaded in each wave → Volume
3. Swing vs. Correction (Current Article)
   • Whether that movement is a Main Swing or Correction → Role of the wave

For example, in an uptrend:

• In an Upward Swing rising towards a resistance zone:
  • Volume increases more than usual.
• In the subsequent Correction Wave:
  • Volume decreases.

This structure is usually a candidate to be interpreted as:

• "A normal correction within an alive uptrend."

Conversely:

• Near the top of an upward swing:
  • Volume explodes massively.
• The following downward correction:
  • Retraces most of the past upward swing.
  • Or strongly breaks a key support zone.

You must consider the possibility that the existing uptrend has weakened, or a new downward swing is starting.

6. Common Mistakes Beginners Make with Swing/Correction

The concept of swing and correction looks simple, but errors frequently occur in practice.

6-1. Trying to See Every Tiny Wave as a "Swing"

• If you only look at 1m/5m charts
  • And give meaning to every single small wave
  • You will reach conclusions that do not match the higher structure at all.
• You must set a Main Timeframe as a standard and distinguish swing/correction on that timeframe first.

6-2. Trying to Trade Only Against the Higher Swing Direction

• Inside an upward swing on Daily/4H
  • Seeing only small downward corrections on 5m/15m
  • And continuously attempting counter-trend shorts.
• Eventually, you end up getting swept away by the big wave.

Short-term counter-trend trading is safer to approach carefully after gaining enough experience with higher structures.

6-3. Concluding "Trend Over" Just Because Correction Deepened

• Trends often continue while allowing for deeper corrections than expected.
• Instead of simply thinking "it retraced a lot, so the trend is over,"
  • Look at S/R locations
  • Volume reaction
  • Higher/Lower timeframe structure together to judge probabilistically.

7. Questions to Ask When Checking Swing and Correction

When looking at a real chart, asking yourself these questions helps:

1. On which timeframe is the wave I'm seeing a swing?
   • Daily / 4H / 1H?
2. How deep has the retracement progressed within that wave?
   • What % level of the previous swing?
3. Which S/R zone does this retracement overlap with?
   • Higher timeframe zone or short-term level?
4. Where did volume explode more?
   • In the trend direction swing or the correction?
5. How does this wave structure relate to my trading plan?
   • Is it a place to follow the swing direction?
   • Or a place to wait for the correction to end?

If you get into the habit of writing down answers to these questions, you can gradually move from "viewing the chart by feel" to "reading the structure."

Next Up

So far, we have scanned the basic languages of the chart:

• Candle Structure
• Timeframes
• Volume
• Support & Resistance
• Swing and Correction

From here on, in the Patterns section, we will cover Candle Patterns and Chart Patterns, connecting:

• Which patterns have meaning at which locations based on the foundation built so far.
• How to combine them with Swing, Correction, Support, and Resistance to lead to practical trading ideas.