Gartley Pattern

In 1932, H.M. Gartley described a 5-point "Gartley" trading pattern in his book, Profits in the Stock Market. Larry Pesavento has improved this pattern with Fibonacci ratios and established rules on how to trade the "Gartley" pattern in his book, Fibonacci Ratios with Pattern Recognition. There are many other authors who have worked on this pattern, but the best work to my knowledge is done by Scott Carney in his books of "Harmonic Trading".

"Gartley" patterns have five points starting at point X, which is the lowest of all points in a bullish setup and the highest of all points in a bearish setup. For bullish Gartley, from X, prices rise to form a higher swing-high at "A". From A, a retracement swing low "B" is formed within 0.382 to 0.618 of XA range. Another swing high "C" is formed at 0.618 of AB. Point "D" is formed in Potential Reversal Zone (PRZ) within 0.618 to 0.786 of XA swing, or 1.27 to 1.62 of BC range. D is the decision or buy trade point in bullish "Gartley" setup. Point D is also a sell trade point in a bearish "Gartley" setup.

Trade: A confluence of Fib ratio levels is calculated to find a Potential Reversal Zone (PRZ). This is the area where Gartley pattern formations are anticipated for reversals and for potential trade entries. Trades are only placed after "D" formation and if the market makes a reversal bar (wide-range or higher-high) from the PRZ.

Target: The first set of targets are the price levels of C and A. The second target is set at extensions of 1.27 to 1.62 of AD range.

Stop: Once a trade is triggered, a "stop" is placed below D or below PRZ for "long" and above D for "short" trades.

Bullish Gartley

Bearish Gartley

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