Gartley patterns on Forex

Gartley patterns on Forex

Gartley patterns on Forex

Harold Hartley first described harmonic price patterns in his 1935 book Profit in the stock market. Since then, they have been called "Gartley patterns".

All candlestick patterns that were formed at the Fibonacci correction levels should be considered very carefully, as they allow you to predict the price movement in the future.

As You may have guessed, in this article we will look at The Gartley figures on Forex. In particular, let's talk about Pesavento patterns, Hartley's butterfly And other patterns.

A formation called the Gartley Butterfly became very popular. It represents a trend continuation or reversal pattern.
How to build a Gartley Butterfly on Forex?

This pattern is formed based on certain ratios of the Fibonacci number sequence.
The black segments of the figure shown above show the price move, while the blue ones show the ratio of Fibo levels to the distance of the quote move. The Fibonacci grid is based on the main segment of the price movement – the XA segment. From point A, the price goes for a correction, its end should occur at point B (there is a strong Fibo level of 61.8%). Then the price returns to the original position, thereby forming the sun segment. However, the local minimum A becomes lower than the next local minimum at point C (point C should be in the 78.6% zone of movement from AB), and point D from movement XA should also be in the 78.6% zone.

The main rule of The Gartley figure on Forex butterfly Is the identity of the segments CD and AB. That is, CD=AB. The AB correction movement can last up to 50%, and the CD segment should end its move in the 61.8% zone. The ratio of the AB and CD segments must be performed for any configuration of this pattern.

Note that such Gartley patterns on Forex as Butterfly are used in different configurations. And for each of them it is possible to efficiently perform the entry into the market. You can trade on this model not only in the range of X and D, but also after the figure is fully completed.

Volumes behave the same for both purchases and sales on each Model.: the tick volume increases at the first impulse movement. The volume drops to the average level as soon as the first correction is observed. During the second growth period, the volume starts to grow at an average rate. As part of the second correction, volume growth becomes more active even with weak volatility. After the point D is formed, a sharp increase can be observed depending on the General direction of the model.

We recommend considering The Gartley Butterfly patterns and its varieties on the timeframes: M30-D1. Consider the entry points to the market should still be on the M15.

Now it is time to consider trading signals based on The main Gartley Butterfly model. At the end of the article, we will give its varieties.

If you think that all Gartley figures on Forex must be built manually, this is not the case. The construction process has long been automated using special Forex indicators called ZUP. You can easily find it on the Web and download it without any problems. It is able to independently find the so-called harmonic patterns on the price chart. And if the model meets the rules for forming a Butterfly, then the ZUP indicator will build it without any problems.

Important: always check Gartley patterns not on one timeframe, but within several. If the model was formed on several halves, then the potential of the trading signal increases significantly. You can even take a chance and go a little bigger lot than usual.
Buy signal based on the Gartley Butterfly pattern
Above, we demonstrated a bullish Butterfly pattern. The red lines represent the price movement.

Point X - this is where the Gartley figures on Forex begin their construction.

The XA segment represents an impulse price movement in one direction towards an uptrend without strong pullbacks. Along this segment, the Fibonacci grid is stretched in the direction of the main movement, that is, from the bottom up.

The first correction is the AB segment. Point B can be in the range from 50% to 61.8% of the Fibonacci levels.

The sun segment is the second upward movement. Point C should be within 61.8%-78.6% of the Fibo segment AB.

The segment CD denotes the second correction of the XA. It should exceed 1.272-1.618 times the sun segment.

Point D allows you to enter the market for the first time. Its location is relevant in the range of 61.8% -78.6% Fibo. To avoid wasting time on its formation, you can set the buy Limit delay.

When the final formation of the d point is observed, you can place a Buy Stop order waiting for the breakdown of the trend line, which is built on the local vertices of the CD segment. Alternatively, you can enter the market as soon as the Japanese candle closes above the built trend line. The last option to enter the market refers to conservative trading methods.

Limit losses, that is, set a Stop Loss slightly below the Fibo level of 78.6%.

Profit taking (Take Profit) can be taken for several purposes. The first goal is point A. At this point, you can fix part of the profit, say, 50%. Then you can use a trailing stop on the Fibo levels.
Sell signal based on the Gartley Butterfly pattern
The screenshot above shows the classic bearish Gartley Butterfly pattern. The price moves along the red lines. Regarding the rest, we will briefly reveal:

Point X. It is used to build Gartley patterns on Forex.
The XA segment symbolizes the first impulse move of the price and acts as a kind of basis for building Fibonacci levels (the grid stretches from top to bottom).
The AB segment is the first correction.
The sun segment is the 2nd impulse of the price drop.
CD-second correction;
After the formation of point D, we can consider the possibility of a sale. Alternatively, we set the Sell Limit delay.

The second method of entering the market after forming D is more conservative. You need to set a Buy Stop to break through DS. Or you can open a Sell order when the candle closes below the trend line.

It is better to set the stop Loss slightly higher than 78.6%.

Take Profit you can expect the first goal at point A. Then follow the Fibo grid with a trailing stop.
Varieties of Gartley patterns

Now it's time to consider the other varieties of Gartley patterns.

Their construction is exactly the same as in the case of the Butterfly. In other words, the condition AB=CD must be met.
These Gartley patterns are quite rare. They were opened in the early 2000s. The main difference from Pesavento patterns is that the amplitude of price movement within the AB segment (in Crab) is small. For the Crab pattern condition to be met, the following condition must be met: AB must not exceed 61.8% of the segment XA. The optimal size is 38.2% or 50%.
Bat
Bats were discovered only in 2001. These harmonic patterns have their basis-the ratio of the point D (0.886). Formation “the bat” is strongly reminiscent of the “butterfly”. However, the difference between them is solely in the proportions of the wings.
Three movements
Conclusion

We emphasize that all Hartley harmonic patterns have unusually high returns. About 85% of all transactions with this formation are closed with profit. You can rarely find them on the market. However, if they appear, don't forget to check their formation on several timeframes.

In order not to confuse the “Hartley model” with the “perfect Butterfly model”, the latter was decided to call the Pesavento patterns. Its difference from the "Hartley Model" is that the price movement within the AB=CD framework stands for the XA segment. The CD ray penetrates the extremum.

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