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Gartley Pattern

A technical trader must learn to master the Fibonacci patterns especially the Gartley pattern.  Day and swing traders ought to understand the Gartley pattern's exact price structures. One can quickly learn and understand the Gartley pattern's distinctive price structures within few hours.   Nevertheless, the most important thing is to be able to identify valid Gartley patterns and trade them.

Gartley Pattern Formation

The Gartley pattern is formed after the
XA price action that follows a bullish or bearish trend.
The first two conditions are
a trend is completed and correction XA is now in place.
The X is the high of the trend and A is the low of the correction after an uptrend. A is the high of the rally (correction) after a downtrend.

The next component of the Gartley pattern is AB.  AB is the price action that stops exactly at 61.8% Fibonacci retracements of XA.
The AB is followed by BC.  BC is the price action that stops between 38.2% and 88.6% Fibonacci retracements of AB.  The last segment of the Gartley pattern is CD.  CD is the price action that ends the pattern exactly at 78.6% retracements of XA. 

Do not worry if you think it is too much to take in now.
Rest assured that it is not that complicated as you think.

A simpler way to explain the Gartley pattern is to see it as a special ABCD pattern with specific Fibonacci price structures after a pull back when a bullish trend has ended or rally after a bearish trend ends.

Remember that the aim is to identify valid Gartley patterns instead of calling anything a Gartley pattern.  I have seen it quite often when traders call something a Gartley pattern when in fact it has nothing to do with it.

The first two conditions must be fulfilled before one can even think of a Fibonacci pattern.  Never forget to check those two conditions.

First question:  was there a trend?
Second question : was there a correction XA to the trend.

Warning
In the case of valid Gartley pattern the XA should not be a total retracement of the trend. In other words it should not cancel it.

How To Trade Gartley Pattern

Usually, most Fibonacci patterns traders wait until the Gartley pattern is completed at the point D before they will try to sell or buy.
A bearish Gartley pattern is in place after a bullish trend.
A bullish Gartley pattern is in place after a bearish trend.

So at the end of the bullish Gartley pattern, technical traders will try to buy because they are expecting a reversal at the point D.  In contrast they will look for a bearish trading signal at the point D after a bearish Gartley pattern.

Do not worry, I will post a video at the end of this article to show how to trade a complete Gartley pattern at the point D by using a different times frame like a pro.

Apart from trading the Gartley pattern after it is completed.  One can also trade it as the pattern is being formed.  So, one is trading it as it is being formed, but one also is ready to take part in the reversal trading signal at the point D when the Gartley pattern is ready.

Both day and swing traders enjoy trading the Gartley pattern.

Note that the point D is often called
reversal point, terminal point or possible reversal point because it is the point where technical traders are expecting a reversal.

Warning
This does not mean that by all means a reversal will definitely take place at the point D.  Usually it will but not always.
Draw a warning line at the point D, and give priority to bullish signal above D and bearish ones below it without assuming anything.  If there is no reversal signal at D, do not invent it.  Just stay composed, and flow with the price by adhering to the trading drill (setup-signal-entry).

One of the common Fibonacci patterns trading mistakes is to just sell or buy at the possible reversal point D without using a top-down trading method.

Alright, enough said.  You get it.

The gorgeousness of the Gartley pattern trading is when the pattern is being formed.  During its formation,  one trades at the points B and C.
The best trades take place at a the point C.  A specialist Gartley pattern trader can capitalize on high probability trades that occur at C when the pattern is in its last lap CD.

The first profit target when one takes a trade at the point C is at the point B.  Grab some profit or secure gains because the price can still stop at B, and never reach point D.

Be ready to add to your positions if a valid breakout trading signal is in place above the point B ( below B if it is a bearish breakout).  Now, manage the trades until the price reaches the point D.

The Gartley pattern is very sought after Fibonacci pattern by both active day and swing traders plus the technical investor.

Warning

Quite often, there is a clash between Fibonacci and Elliott wave traders.  Just remember that.  I will not expand on that clash in this article because it is completely a new beast.

What I have been banging on to technical traders over the years is never enter a trade without seeing a clean cut signal.  Never do that.

First there is a trading setup on a different time frame, then one is waiting for the signal on another, but one will only enter the trade on the entry time frame.  Without the top-down trading, one can still fail to profit from a valid Gartley pattern.  Trade the Gartley pattern like a pro using a top-down trading system.

A valid Gartley pattern on the monthly chart of Walgreens Boots Alliance Inc stock (WBA NASDAQ-100) is formed between 2009 and 2011.  AB is at 61.8% 0f XA.

BC is between 38.2% and 88.6% 0f AB.  CD stopped exactly at 78.6% 0f XA.

A reversal occurred at the point D.  Note that XA did not cancel the prior bullish trend or impulse wave.

This an example of a distorted Gartley pattern because in this case XA is a total retracement of the prior bullish trend.  It has cancelled the trend.  In that case one must be cautious or put a question mark on the development of the Fibonacci pattern.  Apart from that anomaly, every else was spot on.


AB is at the 61.8% of XA (correction).  BC is between 38.2% and 88,6% 0f AB.

Finally, CD stopped exactly at 78.6% Fibonacci retracement of XA.  


The icing on the cake is the reversal that occurred at the possible reversal point D.


Be aware that the price does not have to reverse at 78.6% all the time.  Draw a warning line at the point D, and give priority to bullish trading signal above D and bearish one below.  In very instance, one must use a top-down trading method to avoid trading like an old fashioned Fibonacci patterns trader.  It is stupid to just sell at the point D hoping that it one's lucky day.


The financial instrument in question here is Goldman Sachs Group Inc (GS Dow 30) monthly chart.

A Gartley pattern with a big question mark on it is being formed between 2009 and 2015.  

One could have sold it at points B and D and also take bullish positions at C when it was still underway.  


Now, you understand why technical day and swing traders love Gartley and other Fibonacci patterns.  The key is to identify a valid Gartley pattern then breath in and out, before using a different times frame trading method to take the trade like a pro.  If the pattern is not neat, one must trade it prudently.