Measured Move: Right on Average, Wide
A measured move projects the size of a completed leg forward from the end of the pullback, on the assumption that the next leg will be about the same length. Measured on this site's shared history the median came in at 0.958 of the first leg, with the middle eighty per cent spread from 0.51 to 2.20.
How it works
The idea is the simplest projection in technical analysis. A market moves, pulls back, and moves again — and the second move is assumed to be about the size of the first.
The arithmetic is one subtraction and one addition. Measure the first leg from its low to its high. Add that distance to the low of the pullback. That price is the target.
It appears under several names. The AB equals CD pattern, the flag pole projection, and the bull flag target are all this calculation with different labels attached.
What it actually does
On this site’s shared history the median second leg came in at 0.958 of the first, across 82 consecutive swing pairs measured on a one per cent zigzag.
That is a striking result for such a crude rule. The projection says the ratio should be 1.0 and the measured middle of the distribution is 0.958 — within five per cent of the claim.
Then the second number arrives. Only 16% of the 82 pairs landed between 0.9 and 1.1 of the first leg. Five times out of six, the projection was not close.
The tenth percentile was 0.512 and the ninetieth was 2.195. One second leg in ten was barely half the first; one in ten was more than double it.
Both facts are true at once and neither cancels the other. The rule describes the centre of the distribution accurately and tells you almost nothing about the trade in front of you. That combination — correct on average, wide in practice — is the honest description of most projection tools, and it is the part that gets left out when one is taught.
In practice
Read participation, not the line. Volume thinning as price approaches the projection is a reason to take the exit; the projection arriving is not.
The target inherits the timeframe’s clock. A daily measured move is a multi-week hold, and a five-minute one resolves inside a session.
A gap can deliver the entire projection in one print, which is the best outcome available and the one nobody plans for.
The stop belongs below the pullback low. That is the level whose breach says the setup was wrong, and it is unrelated to how far the projection reaches.
Costs come off the projection before anything else. 2% of a median bar’s range per round trip on this history, which matters most when the target is close.
The projection has no mechanism behind it. Unlike a prior high, nothing has ever happened at that price — it is arithmetic on a chart, which is why the honest use is to size an expectation before entering rather than to defend a position afterwards.
There is a way to use the spread rather than fight it. Before entering, compare the distance to a half-sized projection against the distance to the stop. If the trade does not clear its costs at 0.5 of the first leg, it depends on landing in the upper half of a very wide distribution, which is a different and much weaker proposition than the setup appeared to be.
That check takes ten seconds and rejects a category of trade that otherwise looks fine. The projection is not being used as a target there; it is being used as a filter, and a filter is a job it can actually do — because a filter only needs the middle of the distribution to be roughly right, which is the one thing this rule genuinely delivers.
What a measured move is not
It is not a forecast. It is the middle of a wide distribution.
It is not a reason to hold. Price reaching it is not an obligation to continue.
It is not specific to a pattern. Flags and AB equals CD are the same sum.
And it is not a risk model. It describes only the profitable side.
When it fails
In a range the second leg stops at the top of the box, which is usually a long way short of the projection, and the trade gives back an open profit waiting for a target that was never reachable.
The second failure is measuring the wrong first leg. A larger or smaller swing produces a different target from the same chart, and the choice is made by the person drawing it.
A third is treating 0.958 as a plan. The median is a description of eighty-two trades, not a prediction about one.
A fourth is ignoring what is between here and there. A prior high sitting inside the projection is a better exit than the projection.
And a fifth is the reverse error — refusing to use it at all. A rough expected size is genuinely useful before entry, when you are deciding whether the trade clears its costs.
The original data
On this site’s shared 576-bar history, 82 consecutive swing pairs were measured on a one per cent zigzag.
The median second leg was 0.958 of the first, 51% were shorter than the first, only 16% landed within a
tenth of equality, and the tenth and ninetieth percentiles were 0.512 and 2.195. The figures are in
research/series-measurements.json, produced by site/measure_series.py.
The 51% figure is the one to keep. A second leg is very slightly more likely to fall short than to exceed, which makes a full-size target at the projection a coin flip rather than an edge. The practical adjustment is to place the first exit inside the projection and let a trailing stop handle the rest — that converts a fifty-fifty target into a high-probability partial plus an open-ended remainder, without needing the projection to be right at all.
Related
Fibonacci extension is the same idea with ratios attached. Take profit is where the exit decision belongs. And swing high and low is what the legs are measured between.
This is the projection I actually use, mostly because it needs no theory. What changed how I use it was measuring the spread rather than the average. Once you have seen that the second leg can be half or double, you stop treating the target as a place the market owes you and start treating it as a rough guide to whether the trade is worth taking at all.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.