Technical analysis is a form of financial analysis, usually visual, that looks for trends on price charts, and makes predictions based on patterns in market data presented on graphs
- In technical analysis, a measured move is a technical concept that assists traders in setting their trade plans. Measured moves can be either bullish bearish moves, or bearish measured moves.
- In order to plan a trade based on a measured move, we will first determine the height and length of the first move, and then we will project that information upwards (in the bullish measured move case) or downwards (in the bearish measured move case), from the move that is expected to follow
- A measured move example for Bitcoin (BTCUSD) on the daily timeframe, where each candlestick is 1 day:
Measure move down trading tactic explained:
- Find the length of the first leg from the highest peak to the lowest valley at the start of the corrective phase
- Watch the corrective phase starts, also known as the counter trend or retracment, where the trading volume is usually also lower than that of the previous leg. If the price goes up above the high the first move, close the short. This counter trend is also a bear flag, and a breakdown of the trend line definining it, is a confimation for the start of the last move, ‘Move C’ shown in the above example
- As the price gets closer to the “take profit” target or finds support near the target, close the position. In other words, a trader can expect the last move, Move C, to have a very similar price percentage drop, to that of the first move, ‘Move A’ in the above example
Bitcoin now and the potential measured move being ‘printed’ on the BTCUSD price chart: At this stage, starting 21 July 2022, when looking at the BTCUSD (bitcoin vs US dollar) price chart, we see a good lead for the formation of Move B, within a new measured move.
A technical analysis video on BTCUSD with a trade idea example: The following technical analysis video shows how a stop loss for a trade plan is much closer to the entry price of the short position, compared to the potential target or ‘take profit’. Furthermore, a trader can mix it up by planning a trade with 2 exits, as exemplified below:
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