Today we decided to acquaint you with the Gartley pattern trading strategy so that you could understand the rationale of some articles published by our team of analysts.

What is the Gartley pattern?

It’s the pattern which is based on Fibonacci ratios. It is a continuation pattern which occurs when a main trend reverses temporarily before going in the initial direction. It has the shape of a backhanded latter “M” with slightly lower shoulder on the right side.

A bullish Gartley pattern

The lines that connect the peaks of the pattern correspond to certain Fibonacci retracement levels/ratios. The lines of the pattern itself are distances that quotes get past (these lines are called legs). X-A is the longest leg of the pattern; it corresponds to the price upward movement from X to A.

A-B leg indicates the change of the price direction and 61.8% Fibonacci Retracement shift from the X-A leg.

B-C leg doesn’t normally reach the level of A peak; the price movement is from 32.8% to 88.6% Fibonacci retracement of the A-b leg.

C-D is a final leg of the Gartley pattern, and it’s the most important, because it indicates the moment when you should start buying (after the pattern is complete). Point D corresponds to the 78.6% Fibonacci retracement level of the X-A leg. And at this point, you should start to buy or sell depending on what reversal candlestick has been formed.

If there is a bullish reversal candlestick, place a buy stop pending order at least 2 pips above the high of that bullish reversal candle and a stop loss 2-5 pips below the low of it. For "take profit", you have two options – points C or A (two previous swing highs).

If you are dealing with a bearish reversal candlestick, place a sell stop pending order at least 2 pips below the low of this reversal candle. For "take profit", you may use either c or A (two previous swing lows).

An example of the real chart, taken from the article written by Ivan Karamazov

A bearish Gartley pattern

It is the opposite of its bullish homolog. X-A is the longest leg of the pattern, but at this time, prices are moving down from X to A.  A-B leg corresponds to the upward movement of quotes which ends at point B (61.8% Fibonacci retracement level of X-A leg). Point C in B-C leg can be either 38.2% or 88.6% Fibonacci retracement of the longest leg of the pattern. Point d in C-D leg is the 78.5% Fibonacci retracement level of the Z-A leg. It also can be the 127% or 161.8% levels of the B-C leg.

An example of the real chart, taken from the article written by Ivan Karamazov

If the Gartley pattern setup is correct, it deprives us of the risks of not being rewarded. The point D of the Gartley pattern indicates a good entry position. The only difficulty anticipated with this technical tool is that it’s not easy to grasp manually, as it consists of a handful of components that should be formed accordingly to make this pattern work. The Gartley Pattern MT4 Indicator could be useful in this case, as it eliminates the necessity of finding the Gartley pattern manually.

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