How To Trade The Gartley Pattern

The original pattern in harmonic trading, the Gartley pattern, has a long and storied history in technical trading circles. It has been behind many fortunes made in technical trading and is one of the most readily identified as well as reliable patterns in harmonic trading. Indeed, it could be considered the grand-daddy of all harmonic trading patterns, as various tweaks of it have given rise to the multitude of “mutants” that we use to analyze the market today. As a general rule, I would recommend that you choose a time frame between 15 minutes-per-candle and 1 day-per-candle when trading the Gartley Patterns.

Trade A Wide Range Of Currencies

Harmonic patterns (5-point) have a critical origin followed by an impulse wave followed by a corrective wave to form the “EYE” at completing AB leg. Then followed by a trend wave and finally completed by a corrective leg . The critical harmonic ratios between these legs determine whether a pattern is a retracement-based or extension-based pattern, as well as its name . One of the significant points to remember is that all 5-point and 4-point harmonic patterns have embedded ABC (3-Point) patterns. The Gartley pattern shown below is a 5-point bullish pattern.

Since Carney’s revolutionary application of Fibonacci ratios, harmonic patterns have become one of the foremost schools of thought within technical analysis. The point D is the trigger to buy in a bullish Gartley pattern. Traders will need a confirmation of an actual reversal in this area. The confirmation may come in the form of a reversal candlestick pattern or the readings of technical indicators. it is price action trading really and what you can do is learn a lot more about forex reversal candlestick patterns to help you identify the best buy or sell signal at point “D”. As you can see below, the bearish gartley pattern is the opposite of the bullish gartley pattern.

How To Trade The Gartley Chart Pattern

Notice how choppy the Gartley appears when compared to the idealized figure at the top of this article. Here are the traditional identification guidelines for the gartley patern pattern. The Gartley pattern is complex because it deals with Fibonacci ratios. Trying to find it without a computer or calculator is a difficult exercise.

However, if that does not happen and the price continues to rise post point D, it is a signal that your trade hypothesis was wrong and that it is not a true Bearish Gartley Pattern in development. Therefore, you need to exit the trade with minimum possible losses, andyou can do that by putting your stop loss just a few points above the point D when trading aggressively. However, for the reasons mentioned above, putting your stop loss above the price region of point X will serve as a better stop loss target in trading the Bearish Gartley Pattern. The Gartley Pattern is counted amongst the most reliable harmonic patterns in trading. Many traders have based their trading strategy around this pattern and amassed large profits by trading it. If these ratios are off, the trader might be looking at another harmonic pattern and should adjust the trading strategy accordingly.

Fibonacci Ratios And Gartley Patterns Reliability

Fibonacci levels were added later by Scott Carney and Larry Pesavento. After outlining the most basic structure of the butterfly pattern, let’s see the specific Fibonacci alignments that give the gartley patern best trading setups with this pattern. It’s also important to say that a butterfly pattern on a statistical basis offers somewhat higher probabilities for a successful trade than the Gartley.

The distance between A and B should be close the size of the movement from X to A. The A-B leg will not retrace pass point X – if it does, the pattern is considered invalid. May also indicate trend reversal when found near bottom of downtrend channel, or as a reaction coming of significant support at point X. X-to-A ideally moves in the direction of the overall trend, in which case the move from A-to-D reflects a short-term correction of established uptrend. Trade with a global market leader with a proven track record of financial strength and reliability. Trade a wide range of forex markets plus spot metals with low pricing and excellent execution.

How To Identify The Gartley Pattern?

Point D can be found at the 127.2%-161.8% extension of AB or at the 78.6% retracement of XA. The ending point D of the CD leg must be equal to or surpass point B in order to complete the Butterfly pattern. The retracement point C can be anywhere between 38.2% – 88.6% of the AB leg.

As an example of the Gartley pattern, we’ll look at both a bullish continuation pattern and a bearish continuation pattern – the ‘M’ and ‘W’ patterns of Gartley theory. Please ensure you gartley patern understand how this product works and whether you can afford to take the high risk of losing money. Many traders look for a 61.8% retracement of the AD move to place a take profit order.

Target Zones

The Gartley pattern is a reversal pattern with clear rules and provides an excellent reward to risk. Gartley is a special chart pattern within the harmonic pattern universe. And as with the other harmonic trading patterns, it must meet its own specific Fibonacci levels in order to qualify as a valid formation.

Reviewed by: Lisa Rowan