Lesson 01 of 9 · Technical Analysis
Price Structure: Swings, Ranges and Breaks
22 min4 topics
Topic 1 of 4
By the end of this lesson
- Mark swing highs and lows consistently
- Classify a chart as trending or ranging using a stated rule
- Tell a break from a failed break after the fact, and say why it is hard live
Before any indicator, a chart needs a vocabulary. Without one, "the trend is up" means whatever the person saying it wants it to mean, and a rule built on it cannot be tested, taught or followed twice.
This lesson builds that vocabulary out of four things: the swing, the sequence of swings, the range, and the break. Everything else in this track sits on top of it.
Swing highs and swing lows
A swing high is a candle whose high is higher than the highs on either side of it. A swing low is the mirror. That is the whole definition, and it is deliberately mechanical — two people applying it to the same chart should mark the same points.
The parameter nobody states
"On either side" hides a choice: how many candles? One candle each side marks dozens of swings on any chart; five each side marks a handful.
| Candles each side | What gets marked | Use it for |
|---|---|---|
| 1 | Every minor wiggle | Almost nothing — too noisy to act on |
| 2 to 3 | The turns you would point at | Day-to-day structure |
| 5 or more | Only major turning points | Higher-timeframe context |
Pick a number and keep it. The problem with "I just see the obvious ones" is that what looks obvious changes with your position: a trader who is long finds the lows obvious, and the same chart flipped upside down would produce a different set of marks from the same person.
Good to know
A swing is only confirmed once the candles on its right have formed. This means the most recent swing high on your chart is always provisional — it is not a swing yet, it is a candidate. Most live-trading confusion about structure comes from forgetting that.
Higher highs, lower lows
Once swings are marked, the sequence between them is the structure. Four labels cover everything.
| Label | Short | Means |
|---|---|---|
| Higher high | HH | This swing high is above the previous swing high |
| Higher low | HL | This swing low is above the previous swing low |
| Lower high | LH | This swing high is below the previous swing high |
| Lower low | LL | This swing low is below the previous swing low |
- Uptrend: higher highs and higher lows, alternating. Each pullback stops above the last one.
- Downtrend: lower highs and lower lows.
- Neither: any other combination — a higher high with a lower low, for instance, which is a widening mess rather than a trend.
The word doing the work is and. A higher high on its own says nothing; price can make a new high and then collapse straight through the previous low. It is the pairing that describes a market where buyers are consistently stepping in earlier than they did last time.
Note
"Neither" is a legitimate and common answer. A definition that always produces "up" or "down" is not classifying anything — it is generating an opinion on demand. The next lessons lean on this, and lesson 4 makes it a rule.
Ranges and their edges
When swing highs stop advancing and swing lows stop declining, price is in a range: the highs cluster near one level and the lows near another.
A range is worth naming only when it has been respected more than once.
- Two touches define a candidate. One high and one low is just two points; any two points can be joined.
- Three or more touches make it a range worth trading. Each additional rejection is evidence that participants are acting at that level.
- The edges are zones, not lines — the subject of the next lesson.
Ranges matter because they invert the rules. Inside a range, the edges are where you fade; in a trend, the same behaviour at the edge is where you get run over. The two contexts want opposite trades, which is why classifying the chart comes before choosing a setup.
Most of the time is a range
Estimates vary with the definition, but most markets spend the clear majority of their time going sideways rather than trending. Any method that only works in a trend therefore spends most of its life waiting — and the trader who cannot wait converts that method into a losing one by using it in the wrong conditions.
Breaks, and why most of them are ambiguous live
A break is price moving decisively beyond a structural level — the top of a range, a prior swing high, the low a trend had been holding.
On a historical chart, breaks are obvious. Live, at the moment it matters, the same event is genuinely ambiguous, and the ambiguity is not a skill problem.
| What you see live | What it might be |
|---|---|
| Price pokes above the range high | A break starting, or a wick that closes back inside |
| A strong candle closes above | A break, or the last buyer before a reversal |
| It holds above for three candles | A break, or a pause before returning |
| It pulls back to the level and holds | The classic retest — the strongest of the four, and still not certain |
Waiting for more confirmation makes the read more reliable and the entry worse. That trade-off never goes away, and choosing where you sit on it in advance is the real decision.
Write the rule, then follow it
- "A break is a candle close beyond the level on my chosen timeframe." Simple, testable, and it will still fail sometimes.
- "A break needs a close beyond, then a pullback that holds." Fewer false signals, later entries, and it misses the moves that never pull back.
- "A break needs a close beyond by more than half an ATR." Filters out the marginal pokes that a fixed pip buffer handles badly across pairs.
Any of these is defensible. What is not defensible is deciding after the fact, because a break judged with hindsight is always obvious and never repeatable — and a rule that only works in review is not a rule.
Caution
The failed break — price closing beyond a level and then reversing back through it — is common enough that some strategies trade it deliberately. Assume a meaningful fraction of the breaks you take will fail. That assumption belongs in your position sizing, not in your hopes.
Key takeaways
- Fix the number of candles each side that defines a swing, and keep it — otherwise "obvious" swings track your position.
- Trends are higher highs AND higher lows, or lower highs AND lower lows. Anything else is "neither", which is a real answer.
- A range needs three or more touches before it is worth trading, and ranges invert what the edges mean.
- Breaks are ambiguous live. Write down what counts as one before the candle forms, and size for the ones that fail.