Updated on March 10, 2023
The term ‘Measured Move’ in technical analysis is a concept that involves projecting a price target based on a previous price move. This move is used to identify potential levels of support or resistance that can help make successful predictions about future price movements.
How to understand the measured move?
The Measured Move is based on the premise that market trends tend to repeat themselves. It also assumes that the price moves in the market are often proportional. To use the Measured Move, traders have to first identify a significant price move, such as an impulse wave or a flag pattern. The next step is to calculate the size of that move by measuring the vertical distance between the start and endpoints. Following this, the trader draws a parallel line from the end of the first move to the same price level as the start of the move. The point where this line intersects the price axis ultimately represents the Measured Move price target.
How to use the measured move?
The Measured Move can be used to make definite predictions about future price movements and to identify levels of support or resistance. If a stock is approaching its Measured Move target, traders can interpret this as a potential reversal or consolidation point.