The Gartley pattern forms as the market corrects the price trend after an up or downtrend. These patterns have four sequential price moves that appear as an ABCD pattern page. When you see Gartleys, there’s a potential price trend continuation. They appear in any market, not only in stock charts.
What Is A Gartley Pattern?
It’s a harmonic chart pattern that utilizes Fibonacci ratios. The pattern’s name, Gartley, comes from a technical trader in the early 30s.
Investors use a Gartley harmonic pattern to identify market reactions to highs and lows. Hence, they show the best entry or exit points for a trader.
How To Trade The Gartley pattern?
It’s not easy to spot this pattern. When you do, use Fibonacci ratios to confirm whether it’s a bearish or bullish Gartley pattern. That’s because you’re to sell at D when it’s bearish and buy at D in a bullish one.
How To Identify This Type of harmonic Pattern?
You can spot it easily when you check the chart for an ABCD pattern in the trend. Remember to look for an M or W pattern. This pattern starts at point X and forms an ABCD. Thus, the pattern’s points are XABCD.
Using Fibonacci ratios, A to B should be about 61.8% of the price jump from X to B. Also, the distance from B to C should be 38.2% of A to B. On top of that, C to D should be 127.2% of the AB distance or 78.6% of XA.
Example Of A Gartley Pattern
In a bullish Gartley pattern, you’ll see a significant jump from X to A, then a downtrend almost half the length of XA from AB. The trend moves up again from B to C and goes down from C to D.
One of the bullish Gartley pattern rules is that you can decide to buy at D or place a stop-loss order.
If the chart shows a bearish Gartley pattern, it reverses with a significant downward move from X to A. In line with Gartley pattern rules, you can sell at D to avoid a continuation of the downward trend.
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