Gartley Pattern

The Gartley Pattern was designed as a swing  trading strategy. It was originally discovered by H.M Gartley in 1935. This pattern can be identified on any timeframe. Gartley described both buy and sell patterns identically, he had different diagrams for each. It was the AB=CD pattern within the Gartley sell pattern that led to the nickname Gartley “222.” Gartley applied this particular pattern to all the market indexes.
Larry Pesavento found about 20 years ago that by further adding the ratios from the Fibonacci summation series, he could develop a solid trading pattern. Gartley also used ratios of one-third and two-thirds with this pattern but did not use ratios from the Fibonacci summation series. The main Fibonacci retracement ratios that we apply to the Gartley pattern include:.618, and .786.
Gartley stated in his 1935 masterpiece that over a 30-year period he found these patterns to be profitable in 7 out of 10 cases. The statistics validating this are still the same as Gartley suggested over 70 years ago.

Gartley Pattern Structure

The Gartley Pattern begins with a market movement - impulse leg that establishes our X and A points.

Once the X and A points have been identified, we then look for the next Ratio's  :

• The market forms the B completion point by fulfilling at least a 61.8% retracement of the XA leg, and that it does not touch  the 78.6% retracement of XA

• At B, the price reverses again. Ideally, the retracement B to C should be between 61.8% and 78.6% of the AB price range..The market forms the C completion point by fulfilling at least  a 61.8% retracement of the AB leg.  

• At C, the price again reverses. The market forms the D completion of the pattern by fulfilling a 127.2% extension of AB. D should ideally be 78.6% of the range XA. Ideally CD should be equal AB. The D completion point cannot extend past X, this invalidates pattern.

Trading Plan

Entry: Limit order placed at D completion point, 127.2% of AB.

Stop Loss: 10 pips below X if it is long entry, and 10 pips above X if it is short entry.

                       

Target 1: 38.2% retracement of AD leg. When attained, stop moves to breakeven. 

Target 2: 61.8% retracement of AD leg.