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Trends & Market Structure

What Is a Correction

A correction is a move against the trend that gives back part of what the trend made — not all of it — before the trend goes on. This paper shows you one drawn from the euro's turning points in 2025, when a rise of 1,652 pips gave back 438, the idea as a pendulum swinging part of the way back, the correction on the daily chart, the fall measured as a share of the rise, and how to ring a correction with the ellipse on your platform.

Difficulty
Beginner
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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A rise, a fall inside it, the rise again

A correction is a move against the trend that gives back part of what the trend made. The euro against the dollar rose 1,652 pips from 13 January to 1 July 2025 — a pip being the fourth decimal place, the smallest step most people count in. Then, for a month, it fell: 438 pips, to 1.13916 on 1 August, about a quarter of the rise given back. Then the rise went on, to a new high of 1.19189 on 17 September. The month of falling is the correction. It went against the trend, took back part of it, and did not end it.

A pendulum

The picture is a pendulum. It swings out a long way to the right, and then it swings back — not to where it started, but part of the way, and then out again. The swing out is the trend. The swing back is the correction. What makes it a correction rather than a reversal is that it gives back part of the swing and not all of it, and the next swing out goes further than the last.

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