Measured Moves: Understanding Harmonic Simplicity

Few tools in trading are forward-looking and adapt to current volatility, Measured Moves do. Unlike traditional indicators, Measured moves offer a structured way to project price targets and turning points with no lag.

Let’s take a deep dive into the harmonic simplicity of the measure move and look at how it can be applied to real-world market conditions.

What Are Measured Moves?

A measured move is a price projection technique that assumes market swings tend to repeat in a proportional manner. By taking the length of a prior move and projecting it forward, traders can identify potential areas where price might react, either as a turning point or a continuation zone. This makes measured moves one of the few truly predictive tools in technical analysis—offering guidance without the lag that comes with moving averages or oscillators.

Beyond their predictive nature, measured moves are inherently adaptive. Markets move through phases of expansion and contraction, meaning fixed-length indicators can become unreliable when volatility shifts. Measured moves, by definition, adjust to the prevailing market conditions, making them particularly effective in dynamic environments.

Example: DXY Daily Candle Charts Measured Move

DXY Daily Candle Charts: Measured Moves

Past performance is not a reliable indicator of future results

Past performance is not a reliable indicator of future results

Timing Profit-Taking with Measured Moves

One of the most effective uses of measured moves is in setting profit targets. In trending markets, traders often struggle with the decision of when to exit—too early and they leave gains on the table, too late and they risk giving back profits. A measured move provides a logical framework for identifying where price may run out of steam.

The process is straightforward: take the length of a completed impulse move and project it from the swing low (in an uptrend) or swing high (in a downtrend) of a subsequent pullback. If price approaches this level and momentum starts to fade, it suggests a natural area for taking profits. This method ensures that you don’t rely solely on intuition or arbitrary levels but instead use market-driven symmetry to guide exits.

Example: FTSE 100 Breakout on Daily Candle Chart


Past performance is not a reliable indicator of future results

Past performance is not a reliable indicator of future results

Entering Two-Legged Pullbacks

Measured moves are also very useful for timing entries in corrective pullbacks—especially in two-legged retracements, which are common in trending markets. Price rarely moves in a straight line; instead, pullbacks often develop in two distinct waves or A,B,C,D pattern before resuming the dominant trend. This pattern can be frustrating for traders who enter too early, only to see price dip lower before the trend continues.

By measuring the size of the first pullback and projecting it forward, traders can anticipate the likely endpoint of the second leg. When price reaches this level and starts to stabilise, it provides a higher-probability entry for traders looking to trade with the trend. This technique works particularly well when combined with broader support or resistance levels, reinforcing key zones where buying or selling pressure may return.

Example: Gold Daily Candle Chart


Past performance is not a reliable indicator of future results

Past performance is not a reliable indicator of future results

Combining Measured Moves with Candle Patterns

Measured moves provide price-based structure, but confirmation from price action can refine entries and exits even further. Candlestick patterns help traders gauge sentiment at key measured move levels, offering a layer of confirmation before taking action.

For profit-taking, if price reaches a measured move projection and forms a reversal pattern—such as a shooting star in an uptrend or a hammer in a downtrend—it strengthens the case for locking in gains. Conversely, for entries, a two-legged pullback that completes at a measured move level becomes even more compelling when a bullish engulfing pattern or pin bar forms, signalling potential trend continuation.

By combining measured moves with candlestick confirmation, you avoid acting on rigid projections alone. Instead, you can use price action cues to validate measured move levels, improving decision-making and reducing false signals.

Summary:

Measured moves provide a structured, adaptable approach to navigating price action. Whether used for profit-taking or timing pullback entries, their ability to adjust to volatility and offer forward-looking projections makes them a valuable tool in a trader’s arsenal. When combined with candlestick patterns, they become even more effective, offering both precision and confirmation in a market that thrives on uncertainty.

Disclaimer: This is for information and learning purposes only. The information provided does not constitute investment advice nor take into account the individual financial circumstances or objectives of any investor. Any information that may be provided relating to past performance is not a reliable indicator of future results or performance. Social media channels are not relevant for UK residents.

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