Swing vs Correction: Label the Waves

Trend is not a straight line. It is a sequence of swings (impulses) and corrections (pullbacks).
If you cannot tell them apart, risk management becomes guesswork.

Simple Definitions

• Swing / Impulse — moves that drive price in the dominant direction, often with increasing range and volume.
• Correction / Pullback — counter-trend or sideways chop that relieves momentum before the next swing.

Identification Tips

1. Measure range and speed. Swings usually travel farther and faster than corrections.
2. Watch volume or participation. Corrections often show fading volume.
3. Look at structure. Corrections tend to stay within the bounds of the previous swing’s 38–61% retracement.
4. Use time. Corrections often take longer relative to how fast the swing unfolded.

How to Use the Labels

• Trend continuation trades wait for a correction to finish near support/resistance.
• Risk placement becomes logical: stops hide beyond the structure that invalidates the swing.
• Scaling rules improve—you can add during corrections and distribute during swings.

Red Flags

• Corrections that become larger than the previous swing → trend may be transitioning.
• Multiple failed attempts to resume the swing → expect deeper mean reversion.
• Corrections that happen with high volume and wide candles → might not be a correction at all.

Name the wave you are trading.
Once you can articulate “I am trading the correction within the daily swing,” your execution decisions align automatically.