Measured Moves: A Guide to Finding Targets
Measured Moves: A Guide to Finding Targets
Visualizing the boundaries of price movement helps anticipate potential swing points. The concept of measured moves offers a structured framework to estimate future price behavior, based on the observation that each swing move often mirrors the size of the previous one, assuming average price volatility remains consistent. While not exact, this approach provides a practical method to approximate the extension of a swing move.
Background
Determining profit targets across various methods and timeframes can be challenging. To address this, I reviewed the tactics of experienced traders and market research, noting key similarities and differences. Some traders relied more on discretion, while others used technical targets or predetermined risk-to-reward ratios. Levels of support and resistance (S/R) and the Fibonacci tool frequently appeared, though their application varied by trader.
Based on current evidence, levels appear most relevant when tied to the highest and lowest swing points within the current price structure, for example in a range-bound market. In contrast, sporadic or subtle levels from historical movements seem no more significant than random points. The Fibonacci tool can provide value since measurements are based on actual price range; however, the related values have limited evidence to support them.
To explore these ideas, I conducted measurements on over a thousand continuation setups to identify inherent or consistent patterns in swing moves. It’s important to emphasize that tools and indicators should never be used blindly. Trading requires self-leadership and critical thinking. The application of ideas without understanding their context or validity undermines the decision-making process and leads to inconsistent results. This concept formed the foundation for my analysis, ensuring that methods were tested rather than taken at face value.
Definitions
Trending price movement advances in steps, either upward or downward. This includes a stronger move followed by a weaker corrective move, also known as a retracement.
When the corrective move is done and prices seem to resume the prevailing trend, we can use the prior move to estimate targets; this is known as a projection.
For example, if a stock moves up by 10%, pauses, and subsequently makes another move, we can utilize that value to estimate the potential outcome. Well thats the idea..
Data
Through manual measurements across various timeframes, price structures, and stock categories, I have gathered data on retracements and projections. However, this information should not be considered precise due to market randomness and inherent volatility. In fact, deviations—such as a notable failure to reach a target or overextensions—can indicate a potential structural change.
As this study was conducted with a manual approach, there is a high risk of selection bias, which raises concerns about the methodology's reliability. However, it allows for a more discretionary perspective, enabling observations and discretion that might be overlooked in a purely automated analysis. To simplify the findings, the presented values below represent a combination of all the data.
Retracement Tool
In the context of price movements within a trend, specifically continuation setups, retracements typically fall between 20% and 50% of the prior move. While retracements beyond 50% are less common, this does not necessarily invalidate the setup.
From my observations, two distinct patterns emerge. First, a shallow retracement where the stock consolidates within a narrow range, typically pulling back no more than 10% to 20% before continuing its trend. Second, a deeper retracement, often around 50%, followed by a nested move higher before a continuation.
For those referencing commonly mentioned values (though not validated), levels such as 23.6%, 38.2%, 44.7%, and 50% align with this range. Additionally, 18% frequently appears as a notable breakout point. However, I strongly advise against relying on precise numbers with conviction due to the natural volatility and randomness inherent in the market. Instead, a more reliable approach is to maintain a broad perspective—for example, recognizing that retracements in the 20% to 50% range are common before a continuation. This approach allows flexibility and helps account for the variability in price action.
Projection Tool
When there is a swing move either upward or downward, we can utilize the preceding one of the same type for estimation. This approach can be used exclusively since it is applicable for retracements, projections, and range-bound markets as long as there has been a similar price event in recent time.
In terms of projection, the most common range is between 60% and 120% of the prior move, with 70% to 100% being more prevalent. It is uncommon for a stock to exceed 130% of the preceding move.
Frequently mentioned values in this context include 61.8% and 78.6% as one area, although these values are frequently surpassed. The next two commonly mentioned values are 88.6% and 100%, which are the most frequent and can be used effectively on their own. These values represent a complete measured move, as they closely mimic the magnitude of the prior move with some buffer. The last value, 127%, is also notable, but exceeding this level is less common.
Application
The simplest application of this information is to input the range of 80% to 100% into the projection tool. Then, measure a similar prior move to estimate the subsequent one. This is known as the measured move.
There are no strict rules to follow—it’s more of an art. The key is to measure the most similar move in recent times. If the levels appear unclear or overly complicated, they likely are. The process should remain simple and combined with a discretionary perspective.
Interestingly, using parallel channels follows the same principle, as they measure the range per swing and project average volatility. This can provide an alternative yet similar way to estimate price movement based on historical swings.
The advantage of this method is its universal and adaptable nature for setting estimates. However, it requires a prior swing move and is most effective in continuation setups. Challenges arise when applying it to the start of a new move, exhaustion points, or structural changes, as these can distort short-term price action. For instance, referencing a prior uptrend to project a downtrend is unlikely to be effective due to the opposing asymmetry in swing moves.
In some cases, measured moves from earlier periods can be referenced if the current range is similar. Additionally, higher timeframes take precedence over lower ones when determining projections.
This is nothing more than a tool and should be used with a discretionary perspective, as with all indicators and drawing tools. The true edge lies elsewhere.
Example Use
1. Structure: Identify an established trend or range and measure a clear swing move.
2. Measured Move: Apply the measurement to the subsequent move by duplicating the line to the next point or using a trend-based Fibonacci extension tool set to 100% of the prior swing.
3. Interpretation: While this is a simple tool, its effective use and contextual application require experience and practice. Remember, this process relies on approximation and discretionary judgment.
Visualizing the boundaries of price movement helps anticipate potential swing points. The concept of measured moves offers a structured framework to estimate future price behavior, based on the observation that each swing move often mirrors the size of the previous one, assuming average price volatility remains consistent. While not exact, this approach provides a practical method to approximate the extension of a swing move.
Background
Determining profit targets across various methods and timeframes can be challenging. To address this, I reviewed the tactics of experienced traders and market research, noting key similarities and differences. Some traders relied more on discretion, while others used technical targets or predetermined risk-to-reward ratios. Levels of support and resistance (S/R) and the Fibonacci tool frequently appeared, though their application varied by trader.
Based on current evidence, levels appear most relevant when tied to the highest and lowest swing points within the current price structure, for example in a range-bound market. In contrast, sporadic or subtle levels from historical movements seem no more significant than random points. The Fibonacci tool can provide value since measurements are based on actual price range; however, the related values have limited evidence to support them.
To explore these ideas, I conducted measurements on over a thousand continuation setups to identify inherent or consistent patterns in swing moves. It’s important to emphasize that tools and indicators should never be used blindly. Trading requires self-leadership and critical thinking. The application of ideas without understanding their context or validity undermines the decision-making process and leads to inconsistent results. This concept formed the foundation for my analysis, ensuring that methods were tested rather than taken at face value.
Definitions
Trending price movement advances in steps, either upward or downward. This includes a stronger move followed by a weaker corrective move, also known as a retracement.
When the corrective move is done and prices seem to resume the prevailing trend, we can use the prior move to estimate targets; this is known as a projection.
For example, if a stock moves up by 10%, pauses, and subsequently makes another move, we can utilize that value to estimate the potential outcome. Well thats the idea..
Data
Through manual measurements across various timeframes, price structures, and stock categories, I have gathered data on retracements and projections. However, this information should not be considered precise due to market randomness and inherent volatility. In fact, deviations—such as a notable failure to reach a target or overextensions—can indicate a potential structural change.
As this study was conducted with a manual approach, there is a high risk of selection bias, which raises concerns about the methodology's reliability. However, it allows for a more discretionary perspective, enabling observations and discretion that might be overlooked in a purely automated analysis. To simplify the findings, the presented values below represent a combination of all the data.
Retracement Tool
In the context of price movements within a trend, specifically continuation setups, retracements typically fall between 20% and 50% of the prior move. While retracements beyond 50% are less common, this does not necessarily invalidate the setup.
From my observations, two distinct patterns emerge. First, a shallow retracement where the stock consolidates within a narrow range, typically pulling back no more than 10% to 20% before continuing its trend. Second, a deeper retracement, often around 50%, followed by a nested move higher before a continuation.
For those referencing commonly mentioned values (though not validated), levels such as 23.6%, 38.2%, 44.7%, and 50% align with this range. Additionally, 18% frequently appears as a notable breakout point. However, I strongly advise against relying on precise numbers with conviction due to the natural volatility and randomness inherent in the market. Instead, a more reliable approach is to maintain a broad perspective—for example, recognizing that retracements in the 20% to 50% range are common before a continuation. This approach allows flexibility and helps account for the variability in price action.
Projection Tool
When there is a swing move either upward or downward, we can utilize the preceding one of the same type for estimation. This approach can be used exclusively since it is applicable for retracements, projections, and range-bound markets as long as there has been a similar price event in recent time.
In terms of projection, the most common range is between 60% and 120% of the prior move, with 70% to 100% being more prevalent. It is uncommon for a stock to exceed 130% of the preceding move.
Frequently mentioned values in this context include 61.8% and 78.6% as one area, although these values are frequently surpassed. The next two commonly mentioned values are 88.6% and 100%, which are the most frequent and can be used effectively on their own. These values represent a complete measured move, as they closely mimic the magnitude of the prior move with some buffer. The last value, 127%, is also notable, but exceeding this level is less common.
Application
The simplest application of this information is to input the range of 80% to 100% into the projection tool. Then, measure a similar prior move to estimate the subsequent one. This is known as the measured move.
There are no strict rules to follow—it’s more of an art. The key is to measure the most similar move in recent times. If the levels appear unclear or overly complicated, they likely are. The process should remain simple and combined with a discretionary perspective.
Interestingly, using parallel channels follows the same principle, as they measure the range per swing and project average volatility. This can provide an alternative yet similar way to estimate price movement based on historical swings.
The advantage of this method is its universal and adaptable nature for setting estimates. However, it requires a prior swing move and is most effective in continuation setups. Challenges arise when applying it to the start of a new move, exhaustion points, or structural changes, as these can distort short-term price action. For instance, referencing a prior uptrend to project a downtrend is unlikely to be effective due to the opposing asymmetry in swing moves.
In some cases, measured moves from earlier periods can be referenced if the current range is similar. Additionally, higher timeframes take precedence over lower ones when determining projections.
This is nothing more than a tool and should be used with a discretionary perspective, as with all indicators and drawing tools. The true edge lies elsewhere.
Example Use
1. Structure: Identify an established trend or range and measure a clear swing move.
2. Measured Move: Apply the measurement to the subsequent move by duplicating the line to the next point or using a trend-based Fibonacci extension tool set to 100% of the prior swing.
- The first two points define the swing move.
- The third point is placed at the deepest part of the subsequent pullback or at the start of the new move.
3. Interpretation: While this is a simple tool, its effective use and contextual application require experience and practice. Remember, this process relies on approximation and discretionary judgment.
Note
Note: Adam Grimes conducted extensive quantitative analysis on retracements, analyzing hundred thousands of swings across major asset classes. His findings showed a peak retracement value around 63% with a standard deviation of 21%, emphasized that exact ratios are unreliable and that these concepts should rather be viewed as part of a spectrum. While specific values (e.g., Fibonacci levels) put you in the ballpark, there’s little evidence to support their precision—Its probably more efficient to focus on a spectrum. Also, note that the retracement values are slightly lower in my presentation, likely due to selection bias or a smaller dataset.
Disclaimer
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