What it means
Price charts are waves, and waves have two independent properties. One is how often they arrive, and the other is how tall they stand, and amplitude is the technician's word for the height.
The measure is simple in principle: take a swing's lowest trough and highest peak over the chosen interval, and the distance between them, in points or percentage, is the amplitude of that move. Rising amplitude signals conviction.
When each successive swing travels further than the last, buyers or sellers are pressing with growing force, and the trend is feeding rather than fading. Shrinking amplitude tells the opposite story, since waves that lose height show a market running out of energy.
The contracting swings of triangle patterns are amplitude decay drawn directly on the chart. Cycle analysis leans on the concept hardest, because a cycle is described by its period and its amplitude together.
Analysts who decompose price motion into waves treat the height of each as evidence about which cycle dominates. Amplitude is not volatility, though they are cousins.
Volatility summarises the dispersion of many price changes, while amplitude describes the span of a single identified swing from its low to its high. Traders turn the concept into a filter, ignoring moves smaller than a set percentage and acting only when a swing's amplitude exceeds the threshold.
Breakouts are judged partly through it. A push past resistance with wide amplitude carries more information than a timid poke, because the size of the move reflects how much force was behind it.
Chart scale distorts the eye: the same swing looks violent on an arithmetic scale and modest on a logarithmic one, so amplitude belongs in numbers before it is trusted from pictures. The concept says nothing about direction by itself, since a market can swing widely in both directions and go nowhere, so amplitude must be paired with trend and structure.
For a manager watching positions rather than trading them, the size of a stock's typical swings still calibrates what counts as news and what is merely the usual weather. Like all technical measures, amplitude describes rather than predicts, and any forecast built on it rests on patterns repeating, which they do until they do not.
In practice
Real-world examples.
Example
A stock rises from a trough of $48 to a peak of $55 over three weeks. The swing's amplitude is $7, or about 15% of the trough price, which an analyst would compare with the stock's usual swings before drawing conclusions. The result is a concrete number that can be compared across stocks and periods.
Example
A currency pair's daily swings widen from 30 pips to 90 pips over a month. The growing amplitude signals strengthening momentum behind the move, although a trader would still check the direction of the trend before acting. The same reading in a quiet month would look very different, which is why traders compare swings against a baseline.
Example
A trader applies a 5% amplitude filter, ignoring every swing smaller than the threshold. Only moves large enough to clear the noise trigger a review, which keeps attention on the waves that matter. Setting the threshold too high would miss real trends, so the filter is usually tested on past data first.
Formula
Calculation
Amplitude = peak price minus trough price over the chosen interval, often expressed as a percentage of the trough. For a swing from 48 to $55, amplitude = 55 - 48 = $7, or about 14.6 percent of 48.Case study
Seen in the real world.
A made-up trading desk, Corvane Partners, reviews its breakout strategy. This case study is fictional and illustrative. It finds entries on swings wider than twice the stock's average amplitude succeed far more often than entries on timid moves, and it codes the threshold into its screens. The rule was built on a single market, so the desk treats the result as a hypothesis.
The desk then tests the rule on a second year of data before trusting it. The results hold up, but the team also notices that wide swings on thin trading volume fail more often. It therefore adds a volume condition to the screen, so that only wide, well-traded breakouts trigger an entry. The adjusted screen then goes to the risk team for review.
Watch out
Common mistakes.
- Confusing amplitude with frequency; height and how-often are separate properties. Measure the swing's span and its duration independently before drawing conclusions.
- Judging amplitude from the chart's look; scale choices flatter or shrink moves visually. Compute the points or percentage rather than trusting the picture.
- Treating amplitude as a direction signal; big swings can travel both ways and net nowhere. Combine the magnitude with trend context before acting on it.
Questions
People also ask.
What is amplitude in technical analysis?
The magnitude of a price swing over an interval, measured from trough to peak in points or percentage. It describes how far prices move, separate from how often they move or which direction they trend.
How is amplitude measured?
Subtract the swing's lowest price from its highest, and optionally express the result as a percentage of the trough. Filters often require a minimum amplitude before a move counts as significant.
What does shrinking amplitude indicate?
Fading momentum. Successively smaller swings show a market losing energy, and the contracting waves inside triangle and consolidation patterns are amplitude decline made visible.
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