In Module 2 you saw that a trend is a series of higher highs and higher lows. That only works if everyone agrees on what a "high" and a "low" are. Market structure gives you a consistent definition, so you read the same chart the same way every time.
What a swing point is
A swing high is a candle whose high is higher than the highs of the candles around it. A swing low is a candle whose low is lower than the lows around it. Price turned there, and the turn is now visible on the chart.
The most common rule is the fractal: a swing high needs at least two lower highs on each side, and a swing low needs at least two higher lows on each side. Some traders use one candle each side for speed, others three or more for fewer, cleaner swings.
Swing points are confirmed late
You can't know a candle is a swing high until the candles after it have formed. With a two-candle rule, the swing high is confirmed two candles after the actual top. That delay is normal. It is the price of objectivity: you mark only turns that have actually happened.
Major and minor swings
On any chart there are dozens of tiny turns. If you mark them all, every wiggle looks like a change of trend. Structure traders focus on major swings: the turns that produced a meaningful move and, as you'll see in chapter 3, broke a previous swing.
A practical test for a major swing
- It is clearly visible without zooming in.
- It led to a move that took out a previous high or low.
- Price moved away from it with conviction, usually with large-bodied candles.
| Rule | Swings you get | Suits |
|---|---|---|
| 1 candle each side | Many; quick but noisy | Scalping, lower timeframes |
| 2 candles each side | A balanced number | Most traders; the common default |
| 3+ candles each side | Few; slow but clean | Swing and position trading |
Key takeaways
- A swing high is a high with lower highs on each side; a swing low is a low with higher lows on each side.
- The fractal rule of two candles each side is the common default.
- Swings are confirmed only after the candles that follow them close.
- Read structure from major swings, the turns that led to meaningful moves, and ignore the minor wiggles.