What it means
A measured move is a price swing made of two legs of roughly equal size separated by a correction. The target for the second leg is the length of the first leg projected from the end of the correction.
Flags, AB=CD patterns and pattern targets all use the same idea.
Why traders use it
Markets often repeat the size of recent swings. Projecting the first leg gives a simple, objective target.
Chart examples
Two equal legs
How to identify it objectively
- 1Leg 1: from a swing low to a swing high.
- 2Correction: a pullback that holds above the start of leg 1.
- 3Target = correction low + leg 1 length.
- 4Treat the target as an area, not a line.
Bullish use
- 1Leg 1 up, pullback holds.
- 2Leg 2 starts with a break of the correction.
- 3Target: leg 1 projected from the pullback low.
Bearish use
- 1Leg 1 down, rally fails.
- 2Leg 2 starts.
- 3Target: leg 1 projected from the rally high.
What confirms it
- The target lines up with another level.
- Leg 2 has similar momentum to leg 1.
What invalidates it
- The correction breaks the start of leg 1.
How a hypothetical setup is built
Entry
When leg 2 starts (break of the correction high).
Stop
Below the correction low.
Target
The measured projection.
A hypothetical illustration of how the concept is turned into a plan, not a recommendation. Practise it on a paper account first.
Related concepts
Historical testing
Not tested on The Tradeskill.
Limitations: when it fails
- Leg 2 is often shorter or longer.
- Choosing leg 1's start changes the target.
- It is a target estimate, not a prediction.
Knowledge check
Pick an answer to see the explanation. Nothing is saved.