Impulse, correction & the valid pullback

8 min 55 XP

Two building blocks: impulse and correction

Every chart is made of just two kinds of move. An impulse is consecutive movement in one direction with conviction. A correction — also called a pullback — is the retracement against it. In a bullish leg, a candle that breaks the previous candle’s high is continuing the impulse; a candle that breaks the previous candle’s low has started a correction. (In a bearish leg it is mirrored.) One rule you must apply throughout: ignore inside candles — bars that stay completely within the prior candle’s range tell you nothing yet.

A bullish impulse: each candle breaks the prior candle’s HIGH — one clean move up

The exact test for a VALID pullback

Here is the precise rule, the one most people get wrong. Mark the highest candle of the impulse (call it A). A pullback is valid only when a later candle’s body/low breaks the LOW of that highest candle A. That break proves a real correction leg formed and leaves a clean swing low. A valid pullback can be one candle or two — what matters is that candle A’s low gets taken.

VALID: candle B trades below candle A’s low → a real pullback, a clean swing low forms

VALID too: the pullback takes two candles (B then C), but C still breaks A’s low — that is enough

What makes a pullback INVALID

A pullback is invalid when the candles after the highest candle (C) stay inside it — both C’s high AND C’s low are still protected. Those are just inside candles; no swing low forms, so there is no real pullback to mark. The leg is still one single impulse, and you simply wait.

INVALID: D and E are inside candle C — C’s high and low both protected, so no valid pullback formed

Valid pullback ✅

A later candle breaks the highest candle’s LOW.
A clean swing low forms — a real correction.
That low becomes liquidity (the inducement, next).

Invalid pullback ❌

Following candles stay INSIDE the highest candle.
Its high and low are still protected.
No swing low — still one impulse. Wait.

Why this matters so much

Structure points (HH, HL, LH, LL), the inducement, order blocks and entries are ALL built on correctly identified impulses and valid pullbacks. Read the legs wrong and every concept on top collapses. This page is the foundation — slow down and get it exact.

Impulse = each candle breaks the prior high (bull) / low (bear).
Valid pullback = a later candle breaks the LOW of the impulse’s highest candle (mirror for bear).
A valid pullback may take one or two candles — the break of A’s low is what counts.
Invalid pullback = following candles stay INSIDE the highest candle (high & low protected).
Ignore inside candles; everything in SMC is built on reading these legs correctly.

Praxis.

Guest mode. Your progress is saved on this device Create account

Level 2: Technical Analysis

Module 7: Smart Money & ICT Concepts · Lesson 97/144