DEFINITION of 'Amplitude'
The amplitude is the difference in price from the midpoint of a trough to the midpoint of a peak of a security, and it is positive when calculating a bullish retracement (when calculating from trough to peak) and negative when calculating a bearish retracement (when calculating from peak to trough).
Amplitude can be the amount of retracement in a price and is also the width of a channel in a rangebound market. Chart pattern analysis says that after a retracement, price will continue to move at least a distance equal to the retracement's amplitude.
BREAKING DOWN 'Amplitude'
The amplitude allows for an estimation of the volatility of a particular security. The larger the amplitude, either positive or negative, the more volatile the security is judged to be. The level of volatility can also denote the amount of risk present in a particular investment.
What Constitutes a Peak or Trough
A peak is identified as the highest price point a particular security reached during a specific period of time. With this understanding, the peak can vary depending on the time period under examination. The trough is the inverse of the peak. It represents the point at which the security had the lowest price during the same period of time. When related to a country’s gross domestic product (GDP), the trough represents the lowest point during an economic depression immediately preceding an upward shift towards recovery.
Determining Amplitude as Related to Peaks and Troughs
The amplitude represents the difference between the midpoint of the peak and the midpoint of the trough within a time period. Each midpoint is determined by finding the difference between the extreme, such as the aforementioned peaks or troughs, and the midline. The midline may resides at zero in cases where both positive and negative value are possible. In other cases, the midline may represent the mean price of a security in cases where negative values are not permissible. The amplitude is calculated by subtracting one midpoint from another.
Calculating Amplitude as a Formula
In order to calculate the amplitude, the value of a, the following formulas can be used assuming the value of b is the midpoint of the peak and the value of c is the midpoint of the trough.
For a bullish retracement, the formula, b – c = a, should be used where c precedes b on the xaxis. This will result in a positive amplitude, a, to denote the upward trend.
For a bearish retracement, the formula, c – b = a, should be used where b precedes c on the xaxis. This will result in a negative amplitude, a, to denote the downward trend.

Uptrend
Describes the price movement of a financial asset when the overall ... 
Detrended Price Oscillator (DPO)
An oscillator that strips out price trends, in an effort to estimate ... 
Downtrend
Describes the price movement of a financial asset when the overall ... 
Peak
The highest point between the end of an economic expansion and ... 
Maximum Drawdown (MDD)
The maximum loss from a peak to a trough of a portfolio, before ... 
Descending Tops
A pattern in charts where each peak in price is lower then the ...

Trading
PeakandTrough Analysis
Prices never move in straight lines, so it's time to learn about this powerful trendfollowing technique. 
Trading
Forex: The Memory Of Price Strategy
Hate getting stopped out right before the price reverses? This forex trading strategy may help. 
Trading
Profit From Currency Spikes With This MemoryOfPrice Strategy Variation
Use this singleentry strategy to capitalize on currency spikes by anticipating reversals. 
Trading
The Basics Of Money Flow
Learn how this indicator uses both price and volume to record a more complete picture of price action. 
Trading
Using Double Tops And Double Bottoms In Currency Trading
Find out how to apply the two most common price reversal patterns to your trading. 
Investing
Peak Oil: Problems And Possibilities
Learn a little more about the "non" part of this nonrenewable resource. 
Investing
Alphabet Could Break Trading Range After Earnings (GOOGL, GOOG)
Alphabet's long holding pattern may come to an end on April 21st, when it releases first quarter earnings results. 
Investing
Best US Equity Sector Since Market Peak October 2007
Find out about the best U.S. equity sectors since market peak in October 2007, how they became the best and what may happen if market conditions change.

What does a double bottom tell a trader about the overall trend?
Learn how a double bottom pattern forms on a price chart and why many traders consider double bottoms to be a sign of reversal ... Read Answer >> 
How do I implement a forex strategy when spotting a Multiple Tops pattern?
Understand how to use a multiple tops chart pattern to establish a profitable forex trading strategy, including the optimal ... Read Answer >> 
What are the key metrics used to measure the business cycle?
Learn what key metrics are used to determine if the business cycle is in a period of expansion, contraction, or at a peak ... Read Answer >> 
How are Triple Bottom patterns interpreted by analysts and traders?
Learn about the formation and interpretation of the triple bottom pattern, how to identify it on a chart and how to confirm ... Read Answer >> 
How do I build a profitable trading strategy when spotting an Multiple Tops pattern?
Understand the optimal conditions for creating a profitable trade strategy based on the multiple tops pattern, and learn ... Read Answer >> 
What stage of the economic cycle is usually the best for an investor to enter the ...
Learn how savvy investors employ sector rotation to gain from the electronics sector during expansion and avoid losses during ... Read Answer >>