The Gartley pattern is also called the ABCD pattern and is one of the most popular harmonic pattern.
We have a five-points set up with the Gartley pattern labeled XABCD which follow specific Fibonacci ratios.
The key ratio involved in the Gartley pattern are 38.2%, 61.8%, 78.6% and 100%.
Gartley patterns that lead to the double tops and double bottoms can be great areas for reversals in the market but, it can be used for directional trades as well.
Figure 1: Bullish Gartley
The Gartley Pattern Rules
AB swing retraces 61.8% of the XA swing;
BC swing retrace from 38.2% to 78.6% of the AB swing;
CD swing retraces to 78.6% of the XA swing;
AB=CD will be Symmetry
AD=61.8% or 78.6% retracement of XA (Can reach 100 for double bottom);
Swing D can also retrace from 127% to 161.8% extension of the BC swing;
Buy/Sell at D;
Figure 2: Bearish Gartley
The Gartley pattern is only giving you a possible entry point without telling you much about where to put your protective stop loss and where to take the profits.
We can place our protective stop loss behind point X using a buffer of minimum 10 pips.
The market is fractal in nature and repeats itself on different scales and this can help us define our take profit target as being the move that starts from the point D equal in distance to the XA leg.
Bearish Gartley Pattern – Short Trade Setup
In the examples below, I’m gonna use our own proprietary Harmonic Dashboard indicator that does all the hard work for you and identifies valid Gartley patterns that follow the correct Fibonacci ratios.
We’re gonna enter at market price, immediately at the open of the next candle once the Gartley pattern is established.
The bearish Gartley pattern spotted in the figure below doesn’t reach the Fibonacci ratios to the pip as that’s usually the case with almost every one of these patterns, however, the swing legs are quite close to their correct Fibonacci ratios.
Bullish Gartley Patter – Long Trade Setup
In this example we have a bullish Gartley pattern that has missed its target as the swing-wave started from point D never reached it’s equal leg of wave XA.
When trading such a large time frame one can always trail his stop and make sure you’ll profit from the move.
We can also notice that both wave BC and wave CD retrace almost 100% of the previous wave which is not unusual.