Why does this work? Chart patterns form when two forces (buyers vs sellers) reach temporary equilibrium. The pattern's height measures the intensity of this battle—larger patterns = more participants, more volume, more commitment. When one side wins (breakout), that same energy continues propelling price.
Step-by-step derivation:
Identify pattern boundaries
Top (resistance where sellers dominated)
Bottom (support where buyers dominated)
Height H=Top−Bottom
Locate breakout pointB
For bullish patterns: price closes above resistance
Neckline = support level connecting the two shoulders
Head = highest point (the peak of selling pressure)
Height H=Head−Neckline
Breakout B = neckline break (close below)
Target = B−H
Why this step? The head represents the final failed attempt of bulls to push higher. When neckline breaks, all those trapped bulls exit, creating selling pressure equal to the distance they climbed.
Bottom = lowest point (two attempts to go lower failed)
Height H=Resistance−Bottom
Breakout B = resistance break (close above)
Target = B+H
Why this step? Each bottom represents strong buying support. The gap between bottom and resistance measures how much selling pressure buyers absorbed. Breaking resistance releases that accumulated buying power.
Flat resistance at the top (repeated rejection level)
Rising support (higher lows showing increasing demand)
Height H=Resistance−First Low (use the starting low, not the last one)
Breakout B = resistance break
Target = B+H
Why use first low? The entire pattern represents accumulation from the initial low. The first low → resistance distance captures the full energy of the pattern formation.
40% position → Sell at T1=B+1.0H (lock in partial profit)
30% position → Sell at T2=B+1.5H (capture extended move)
30% position → Trail stop below each new swing low (maximize potential)
Why scale? You balance probability (T1 hits more often) with upside (T2-T3 capture breakout extensions). Never hold 100% hoping for T3—statistics don't support it.
A price projection using the height of a completed chart pattern to estimate minimum expected move after breakout. Formula: Target = Breakout ± Pattern Height
Why does pattern height predict future move?
The pattern height represents the energy/intensity of supply-demand battle during formation. That same energy propels price after breakout, making height a minimum expectation.
Measured move formula for bullish breakout?
Target = B + H, where B = breakout price, H = pattern height (top - bottom)
Measured move formula for bearish breakdown?
Target = B - H, where B = breakdown price, H = pattern height (top - bottom)
In head and shoulders, what is the height H?
H = Head peak - Neckline. NOT head to current price. The neckline is where energy releases.
In ascending triangle, which low do you use for height?
Use the FIRST low (start of pattern), not the last low. This captures full accumulation energy.
What volume ratio suggests using 1.5H target instead of 1.0H?
Volume ratio > 2.5 (breakout volume / avg pattern volume). High ratio = explosive breakout = extended target.
What R:R ratio is ideal for measured move trades?
At least 2:1 (reward:risk). Target should be 2x farther than your stop-loss from entry.
Why not measure from current price after breakout?
Pattern height is fixed at formation. Must measure from pattern boundaries, then project from breakout point. Current price is arbitrary.
What makes a pattern good for measured moves?
Clear boundaries, sufficient duration (3-4+ weeks), volume contraction in pattern + expansion on breakout, textbook shape.
Three target levels for scaling out?
T1 = B + 1.0H (40% position), T2 = B + 1.5H (30%), T3 = trailing stop on remaining 30%
Common mistake: treating targets as what?
Guarantees. Targets are probabilities (60-70% to T1), not certainties. Always use stop-loss and manage risk.
Recall Explain to a 12-Year-Old
Imagine you're playing tug-of-war. Your team pulls the rope 10 feet your direction, then other team pulls 10 feet their direction, back and forth. The rope moves in a range—say 20 feet total.
Now suddenly your team wins and pulls the rope past the middle line (the breakout). How much farther will you pull? Well, if you had the strength to pull 20 feet during the fight, you probably can pull at least another 20 feet after you win, right?
That's measured moves in stocks. The "rope distance" during the battle (pattern height) tells you the minimum distance the winner can pull after breaking through. It's not a promise, but it's a really good educated guess based on the energy already shown.
Dekho, chart patterns sirf sundar shapes nahi hote—ye actually buyers aur sellers ke beech ki ladai ka visual record hote hain. Jab koi pattern banta hai, toh uski height batati hai ki ye ladai kitni intense thi. Ab intuition ye hai ki jitni energy pattern banane mein lagi, utni hi energy breakout ke baad price ko aage push karti hai. Bilkul spring compress karne jaisa—jitna zyada dabaoge, utna zyada release hoga. Isiliye pattern ki height (H=Top−Bottom) hamein ek predictable target degi, guessing ya umeed ki jagah.
Formula bahut simple hai: bullish pattern mein Target=B+H aur bearish mein Target=B−H, jahan B breakout point hai. Jaise Double Bottom mein agar dono bottoms ₹420 pe hain aur resistance ₹450 pe, toh height ₹30 hui. Logic ye hai ki sellers ne do baar ₹30 neeche push kiya aur fail hue—matlab buyers ne ₹30 ki selling pressure absorb ki. Jab resistance toote, wahi buyers same conviction se ₹30 upar (₹480) push karenge. Head and Shoulders mein ulta—head pe trapped bulls jab neckline break pe exit karte hain, toh unki climbing distance ke barabar selling pressure banti hai.
Ye cheez matter isliye karti hai kyunki trading mein sabse bada sawaal hota hai—"exit kahan karun?" Measured move tumhe ek rational, calculated target deta hai, na ki emotion ya luck ke bharose. Yaad rakho, ye tumhara minimum expectation hai—price aksar isse aage bhi jaata hai, par H tumhara conservative baseline hai jo risk-reward planning aur discipline maintain karne mein madad karta hai. Regional student ke liye ye ek game-changer skill hai kyunki bina kisi mahenge software ke, sirf simple ghatana-jodna se tum professional-level targets nikaal sakte ho.
