Before reading this lesson, you should have previously read through...

The Gartley pattern, one of the most traded harmonic patterns, is a retracement and continuation pattern that occurs when a trend temporarily reverses direction before continuing on its original course. It uses Fibonacci levels and has a bullish and bearish version.

The Gartley pattern, one of the most traded harmonic patterns, is a retracement and continuation pattern that occurs when a trend temporarily reverses direction before continuing on its original course.

It gives you a low risk opportunity to enter the market where the pattern completes and the trend resumes.

As with many chart patterns, there is a bullish and a bearish version.

The Gartley pattern includes the AB=CD pattern in its structure, meaning it is very important that you have studied this pattern first.

The pattern is often referred to as Gartley222 because H. M. Gartley first described it on page 222 of his 1935 book Profits In The Stock Market.

How to identify bearish and bullish Gartley patterns

The chart below demonstrates what a bullish Gartley pattern looks like:

Gartley1

X-A

As shown above, the Gartley pattern looks similar to the AB=CD pattern except it has an extra leg: X-A.

In its bullish version, this first leg forms when the price rises sharply from point X to point A. This is the pattern's longest leg.

The Gartley pattern looks similar to the zig-zagging AB=CD pattern except that it contains an extra leg at the start. Fibonacci levels are used to measure the distance of these legs.

A-B

The A-B leg then sees the price change direction and retrace back down part of the distance covered by the X-A leg. In the pattern's purest form, it will make a 61.8% Fibonacci retracement of the X-A leg.

Note that the A-B leg can never retrace beyond point X – if it does, the pattern is no longer valid.

B-C

In the B-C leg, the price changes direction again and moves back up, retracing anything from 38.2% to 88.6% of the distance covered by the A-B leg. If it retraces up beyond the high of point A, the pattern becomes invalid.

C-D

The C-D leg is the final and most important part of the pattern. As with the AB=CD pattern you are looking for an AB=CD structure to complete the pattern, looking to enter at point D.

The difference when trading the Gartley pattern is that you look to place your trade entry order at the point where the C-D leg has achieved a 78.6% retracement of the X-A leg.

This is easier to see, and it means that you can simply draw a Fibonacci retracement using the X-A leg and then use the 78.6% retracement level to enter. The pattern will no longer be valid if price retraces past point X.

Note: point D will not always be exactly the same as the 78.6% retracement, however, if point D is the same as the 78.6% retracement, it means that the signal to enter is stronger.

Ideally, point D should also represent a 127%-161.8% extension of the B-C leg.

MetaTrader 4 can automatically add Fibonacci retracements

The following shows you how this looks on a chart using the Fibonacci tool on MT4.

If you apply the Fibonacci tool to your MetaTrader 4 platform, it can automatically mark key Fibonacci levels on your chart.

The chart below shows what a bullish Gartley pattern looks like with the Fibonacci retracement and extension levels marked on the X-A and B-C leg:

gartley1

Did you know? You can easily configure your Fibonacci tool to trade the Gartley pattern. MT4 allows you to add custom levels to your default Fibonacci retracement tool:

Article
How to set up Fibonacci retracement levels in MetaTrader 4.
15

Try the following exercise to practice identifying the Gartley pattern:

Exercise 1: Find the Gartley pattern Show exercise

Rules for the Gartley pattern

Before you try and trade the pattern, make sure that the following rules are met:

  • The AB=CD pattern
  • A 78.6% Fibonacci retracement of the X-A leg
  • A 127% or 161.8% Fibonacci extension of the B-C leg

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How to trade the Gartley pattern

We will now look at how you can trade using the Gartley pattern. For the example, we will use the bullish Gartley pattern. For a bearish Gartley pattern (a short/sell trade), simply invert the pattern and your orders.

Entry

Identify where the pattern will complete at point D – this will be at the 78.6% retracement of the X-A leg. Place a buy order here.

See the chart below for an example of this:

gartley2

el1 Long entry

Stop loss

Place your stop loss just below point X, as below:

gartley3

el1 Long entry
sl2 Stop loss

Try the following exercise to practise placing your entry and stop loss:

Exercise 1: Place your entry and stop loss Show exercise

Profit target

Where you place your profit target using this pattern is highly subjective and depends on your trading objectives as well as market conditions.

One method, however, involves drawing a new Fibonacci retracement from point A to D of the completed pattern. Once this Fibonacci retracement has been drawn, look at placing your profit target at the 61.8% retracement level of A-D.

Note that you can only draw this Fibonacci retracement once the pattern has completed at point D and the price has reversed.

See the chart below for an example of this:

gartley4

el1 Long entry
sl2 Stop loss
tp3 Profit target

Try the following exercise to practise placing your profit target:

Exercise 1: Place your profit target Show exercise

To see further examples and learn more about the Gartley patterns check out our harmonic pattern webinars:


Summary

In this lesson, you have learned that …

  • … the Gartley pattern is a retracement pattern that occurs when a trend temporarily reverses direction before continuing on its course.
  • … it includes the AB=CD pattern in its structure and gives you the chance to go long (bullish Gartley) or short (bearish Gartley) at the point where the pattern completes and the trend resumes.
  • … it relies on Fibonacci levels, which determine how far price retraces or extends during the patterns formation – MetaTrader 4 can automatically add these levels to your chart.
  • … to trade using the Gartley pattern, place your buy order at the point where the C-D leg achieves a 78.6% retracement of the X-A leg.
  • … place your stop loss just under point X.
  • … draw a new Fibonacci retracement from point A-D of the completed pattern and take profit at the point where price will have retraced 61.8% of the distance between A-D.

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  • Hello.. i don' see " start quiz" button... Could you have a look please? Thank you so much.. regards
  • the leg CD of all advanced patterns should have a AB=CD (or extension) in it ?
  • Hi iPM,
    they can be 1:1, 1:1.272 or 1:1.618, some very extended patterns like the crab even allow for 1:2.618.

    You can also refer to this cheat sheet from Orlando's old blog:
    http://en.tradimo.com/co/526fca946b9619722d000024/
  • Dear Tradimo,

    Is there any way to know - on which time frame the pattern at the moment will play out ?
    For instance - despite a perfect setup the pattern fails on the H4 time frame but plays out on the D1 chart ? is there any good way to foresee it ?

    Regards,
    iPM25
  • Hi iPM25,

    I am not sure I understand your question. The same setup on D1 and 4H are the same but one shows more details than the other. I see it as planning a cross country journey on individual county or state maps or on a large country map. The result should be the same. Did I get something wrong?
    Regards.
    Peter
  • hahaha.. you got it absolutely right. I am still in the process of learning which highway i am driving on i.e. county, state or national/country highway. and what road i am comfortable driving on.

    here is my simple question:
    on the 4H time frame - i really want to figure out whether Gartley / BAT / 79%pull back is going to play out or butterfly or crab will play out ?
    I am thinking it might have something to do with opening price being above daily or weekly pivot ?

    for instance on Friday i.e. 10th July 2015 - i was hoping bearish 79%/89% pattern will play out on EURAUD but i was wrong and it ended up being a butterfly (127-141 levels were tested).
    how can i stop myself from making such mistakes ?
  • This is not necessarily a mistake. You cannot know where price will turn. I have the same, I don't know if price turns at the 100 MA or the 200. But if both are likely spots then I have to be ready to trade any of these levels. Why do you think it is a mistake?
  • Haha.. i think it is a mistake because i thought it was a good trade setup for Gartley or Bat or 79% pull back - there was alignment of 4H & D1 resistance levels and still didn't play out.
    So i must have missed out on something. So thats why a mistake. smile
    somehow i feel if price opens above daily pivot level or weekly pivot level then strong trending market should be expected for that particular day or week. and a higher frame should be used or extension levels should be used instead of retracement levels.
    i dont know exactly why do i think so ? does it make any sense ?

    Regards,
    iPM25
  • Sometimes even textbook setups fail. There's nothing we can do about them. Negative outcome is not necessarily a result of a mistake just like a winning trade can be down to a massive error as well. Imagine a trade where you forgot to put a SL. The price should have stopped you out instead gave you a winner. Was it a good trade? No. It could have gone horribly wrong due to you not putting in the SL.

    That observation about pivots could be a good one but I think you have to test it. Sometimes even the most sensible don't work.
  • why was the fibonacci not dragged out from point "x" all the way exactly right on top of point "a". rather when drawn in your example it was dragged exactly from "x" but to the left of "a" but still on the same level. Does doing that affect the fibonnaci indicator? or is it safer to drag it right on top of the points? thanks
  • Hi Grungeboy,
    As long as price levels are correct it does not matter if the Fib tool touches or covers or is completely outside the pattern. The retracement levels will be on the correct price either way. The only difference is visualization.
    Regards.
    Peter
  • When we spot trade on one time frame, suppose 15 min and it was bullish. Can we go to 1 hr chart to execute long trade? or we can only trade in the specific time frame where pattern was formed?
  • Hi Faizan,
    Normally, it works the other way: you spot a pattern on higher time frame and enter on the lower. See:
    Multi Time Frame Analysis

    Let me know if you have any questions.
    Regards.
    Peter
  • Thanks Peter but i am very struggling in finding the key S/R levels with Fibonacci levels because this is the area where patterns are formed. How can we approve the key S/R area? Another question is what if there is no pattern formed? Then we must execute trade or wait?
  • Finding support and resistance is something you need to practice a lot. It is not hard, but takes some getting used to. Here are some tips.
    -when drawing the S&R go for the most touches http://i.imgur.com/lNQOk5I.png
    -switch to a line chart to see a clearer picture http://i.imgur.com/jPs7jUA.png
    -use zones instead of lines http://i.imgur.com/PL90szg.png
    -switching to higher time frame also helps you see clearer http://i.imgur.com/9l83Dq6.png

    One important note:
    If you struggle to find good clear levels, that could be a cue to stay away from that market until it develops neater price action.

    You might also want to check out our Support and resistance course
  • What is the difference between price action trading and pattern trading? Does price action means trading the few harmonic patterns? If i trade only harmonic patterns, will it be enough for me as a professional trader?
  • Trading Experte, u.a. verantwortlich für Tradimo Premium
    Hello faizan00772,

    that is a very good question and it shows your understanding about these 2 topics. There is no clear difference between both. I would say it in that way: Pattern trading is kind of price action trading, but price action trading is not all the time pattern trading.

    And yes, it can be enough to trade only harmonic patterns to be a successful trader.

    Best wishes
    nleeson111
  • Thank you sir. I am very struggling in finding patterns. I have not identified a single correct pattern yet. I hope one day i will be able to.
  • Trading Experte, u.a. verantwortlich für Tradimo Premium
    Hello faizan00772,

    don´t looking too frantic for such patterns. The best way is when a pattern is just there without a lot of interpretation. Maybe it is a good recommendation to start with easier patterns like double top, head and shoulder and so on.
    I traded a lot with paatern in the past and tbh I never traded Gartley.

    Best regards
    nleeson111

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