📝 What Is a Correction and How Do We Read the Trend on the 4-Hour Chart (4h)?
Hello traders! Understanding market movements starts with an essential concept: Correction.
1. 🎯 What Is a Correction (Rebound/Pullback)?
A correction is a temporary and natural price reversal that occurs after the market has had a one-sided (too fast and too far) movement in one direction.
Purpose of the Correction: It serves to cool down the market. Assets cannot rise or fall infinitely.
🚦 Corrections occur due to:
* Overbuying: After a significant drop, traders step in to buy, generating a Rebound (correction upwards).
* Over-selling: After a significant rise, traders start to take their profits, generating a Pullback (correction downwards).
🔥Attention: The correction is NOT a change in the trend. It is merely a pause within the dominant trend.
2. 🧭 How Do We Identify the Dominant Trend (4h Rule)?
Before trading a correction, we need to know what the main "current" of the market is, and the 4-hour (4h) timeframe is ideal for this:
* Downward Trend (Bearish): When the price is below the Long-Term Moving Averages (e.g., MA25, MA99) and creates successively lower highs and lows.
Action: We prepare for Short positions (selling). The rebound is seen as an opportunity to re-enter Short at a better price.
* Upward Trend (Bullish): When the price is above the Long-Term Moving Averages and creates successively higher highs and lows.
Action: We prepare for Long positions (buying). The pullback is seen as an opportunity to re-enter Long at a better price.
3. 🛡️ Basic Strategy
The safest principle is to trade in the direction of the dominant trend (4h). Use the correction only to improve your entry (or exit) point in the direction of the main trend.
