Gartley Pattern: Introduction, Structure, How to Trade and Distinguish

The Gartley pattern is one of the most important harmonic patterns in technical analysis. It helps traders identify potential entry points based on Fibonacci retracement.

FOREX89 will help you understand the definition, structure, trading strategies, and differentiation of the Gartley pattern.

What is the Gartley Pattern?

The Gartley pattern was first introduced by H.M. Gartley in 1935 in the book Profits in the Stock Market. It is a trend reversal pattern that relies on Elliott Wave Theory and Fibonacci levels to determine potential buying and selling points.

The Gartley pattern helps traders identify trading opportunities with low risk and high reward by pinpointing key reversal points in price trends at Tickmill.

To effectively apply the Gartley pattern in practice, you need to understand its structure as follows.

Structure of the Gartley Pattern

Below are the key components that make up this pattern:

The Gartley pattern consists of five important points:

• X-A: The initial main price trend, which can be either bullish or bearish.
• A-B: Price retraces to 61.8% Fibonacci retracement forex of XA.
• B-C: Price recovers but does not exceed 88.6% of AB, typically ranging between 38.2% and 88.6%.
• C-D: This is the most crucial leg, where price moves in the opposite direction and reaches the 78.6% Fibonacci level of XA.
• D: A potential entry point where the price is likely to reverse.

This pattern operates on the principle that the market tends to move in repetitive mathematical ratios. In the next section, we will explore different trading strategies using the Gartley pattern.

How to Trade the Gartley Pattern

Once you identify the Gartley pattern, you need to know how to apply it effectively in trading.

Identifying the Gartley Pattern on Charts

• Use the Fibonacci Retracement tool to measure price corrections.
• Check key Fibonacci levels (61.8%, 78.6%, 88.6%).
• Combine with other indicators like MACD and RSI indicator forex to increase accuracy.

Effective Entry Strategies

• Placing Buy/Sell Orders: Enter a trade at point D, confirmed with technical indicators.
• Setting Stop-Loss: Below point X (for bullish patterns) or above point X (for bearish patterns).
• Taking Profit: Based on Fibonacci retracement levels of 38.2%, 50%, and 61.8% of CD.
• Confirming the Trend: Use MACD forex strategy, RSI, or Bollinger Bands to ensure signal accuracy.

Now, do you know how to differentiate between a bullish and bearish Gartley pattern? If not, check out the next section!

Differentiating Bullish and Bearish Gartley Patterns

Understanding the difference between bullish and bearish Gartley patterns helps traders choose the right strategy for each market condition.

Bullish Gartley Pattern

• Appears in a downtrend.
• When the price reaches point D, the market tends to reverse upwards.
• Trade Setup: Enter a Buy order at point D, set Stop-Loss below X, and take profit at Fibonacci retracement levels of 38.2% – 61.8% of CD.

Bearish Gartley Pattern

• Appears in an uptrend.
• When the price reaches point D, the market tends to reverse downwards.
• Trade Setup: Enter a Sell order at point D, set Stop-Loss above X, and take profit at Fibonacci retracement levels of 38.2% – 61.8% of CD.

Common Mistakes When Using the Gartley Pattern

Although the Gartley pattern offers many trading opportunities, improper application can lead to the following mistakes:

• Misidentifying Fibonacci levels, leading to incorrect pattern recognition.
• Entering trades too early or too late without waiting for confirmation.
• Ignoring trading volume, which can reduce accuracy.
• Failing to set a proper Stop-Loss, increasing risk when the market moves against expectations.

Comparing the Gartley Pattern with Other Harmonic Patterns

Besides the Gartley pattern, there are other harmonic patterns. Below is a comparison to help you understand their differences.

Criteria	Gartley	Bat	Butterfly	Crab
Fibonacci	78.60%	88.60%	127%-161.8%	161.80%
Risk	Medium	Short	High	High
Entry point	Safe	Low risk	Strong fluctuations	High volatility

The Gartley pattern generally has a lower risk ratio compared to the Butterfly and Crab patterns, allowing traders better control over their entry points.

The Gartley pattern is a powerful tool that helps traders identify potential trade opportunities with low risk and high reward. However, to maximize its effectiveness, traders should combine it with other technical indicators and have a solid risk management plan.