Targets as scenarios

A measured target is a price projection produced from a pattern's own size. The tradition works like this: for a flag, the length of the pole is added to the breakout point; for a double top, the depth between the peaks and the neckline is projected downward after the break; for a head and shoulders, the distance from the head to the neckline does the same job. In a double top with peaks at 90 and a neckline at 82, the traditional projection is the area around 82 − 8 = 74 — an area, not a number to the decimal. Using a target correctly begins with naming it correctly: a target is not a destination but the scale of a scenario. "If the break holds, the traditional projection points to this area" is analysis; "price will go there" is not. Price may never reach the target, may sail past it, or may build a structure on the way that spoils the scenario — all three are ordinary. The common misreading turns a projection into a commitment. For risk literacy the target's twin question is never skipped: WHERE does the scenario break down?

This content is educational information, not personalised investment advice. The chart examples are illustrative.

Back to the glossary