How To Trade Gartley Pattern

Hello Forex Traders,

Friday is here again and the dust of another trading week is settling down. Therefore today our main focus as Forex traders should primarily be on learning. Trade management of open orders or taking a last small position of the week are of course tasks which we can still do. But usually speaking, if you do any trading at all on Friday, then you would want to keep the trading light… especially if you are up in profit. Never give back what you earned in the first four days.

So, today the focus of this article is on Gartley Patterns. Grab a cup of your favorite drink, I have ginger tea in front of me. :)

INTRODUCTION TO GARTLEY

The Gartley pattern was first introduced by H.M. Gartley in his book “Profits in the Stock Market”, which was published in 1935. The pattern was named “The Gartley,” but in fact many variations of the Gartley pattern have become common ever since the release of that book. Gartley patterns are chart patterns used in technical analysis, and are known for their relationship using Fibonacci numbers and ratios. The Gartley pattern is a reversal pattern with clear rules and provides excellent reward to risk.

“Classical” chart patterns are considered to be: flag, pennant, wedge pattern, triangle, range, rectangle, flat, head and shoulders, inverted head and shoulders, double top and bottom, trip top and bottom, gap, cup and handle, broadening top. Some of these patterns are reversal signals, others are continuation patterns. Most of the classical charts patterns use Fibonacci levels as well. A flag will typically find support levels at the various Fibonacci points (such as 23.6% and 38.2%) of various swing highs and lows but they are not so prominently used as in Gartley. Read more here. 

5 LETTERS

The Gartley is using 5 letters to distinguish the 5 separate moves/waves/impulses. Here is an introduction:

The letter  X is the start of the trend;
The letter  A is the end of the trend;
The letter  B is the first pullback of the trend;
The letter  C is the pullback of the pullback (not breaking point A);
The letter  D is the target of the letter C.

The various Fibonacci relationships between XA and AB have a value when calculating targets for B, C and D. Depending on the type of Fibonacci level the pattern is commonly named differently. The pattern is valid for both a down and an uptrend. In general though, there is a also a close link to the Elliott Wave Theory. The AB, BC and CD legs are also known in EW as an ABC correction of XA and a continuation of the XA direction can be expected at point D.

We will now go into the specific Gartley patterns which are usually called Bat, Crab, Gartley, Butterfly, etc.

GARTLEY

This pattern is valid when price respects and bounces off of the XA swing high swing low to form point B at the 61.8% Fibonacci retracement level. The target of point D is in fact using the same XA swing high swing low and is aiming for the 78.6% Fibonacci retracement level of XA. The CD leg is therefore often equal to the AB leg.

11- 10- 2013 gartley

Other modern variations that have become popular are listed here below.

BAT PATTERN

This pattern is valid when price respects and bounces off of the XA swing high swing low to form point B at the 38.2% or 50% Fibonacci retracement levels (but not more than 61.8%). The target of point D is in fact using the same XA swing high swing low and is aiming for the 88.6% Fibonacci retracement level of XA. The CD leg is therefore longer than the AB leg.

13- 10- 2013 bat

ALTENATE BAT PATTERN

This pattern is valid when price respects and bounces off of the XA swing high swing low to form point B at the 38.2% Fibonacci retracement level. The target of point D is beyond the origin of XA and is 1.13 of XA.

11- 10- 2013 alt bat

BUTTERFLY

This pattern is valid when price respects and bounces off of the XA swing high swing low to form point B at the 78.6% Fibonacci retracement level. The target of point D is beyond the origin of XA and is 1.27 – 1.618 of XA.

11- 10- 2013 butterfly

CRAB

This pattern is valid when price respects and bounces off of the XA swing high swing low to form point B at the 38.2%-61.8% Fibonacci retracement levels. The target of point D is beyond the origin of XA and is 1.618 of XA.

11- 10- 2013 crab

DEEP CRAB

This pattern is valid when price respects and bounces off of the XA swing high swing low to form point B at the 88.6% Fibonacci retracement level. The target of point D is beyond the origin of XA and is 1.618 of XA.

11- 10- 2013 deep crab

AB=CD, 5-0, DRIVERS

Here are the remainder of the popularized patterns. An example of 5-0:

11- 10- 2013 5-0

An example of AB=CD:

11- 10- 2013 ab=cd11- 10- 2013 alternte ab=cd

An example of drivers:

11- 10- 2013 driver

SIMPLIFY: SPLIT OF LEVELS

When analyzing the patterns, it becomes obvious that different patterns play out depending on where letter B stops in relationship with XA. This is my attempt to make the patterns easier to interpret (drivers and 5-0 excluded).

PART I: Let us break it down into Fibonacci levels.

1)      38.2%    - Bat / Alternate Bat / Crab

2)      50%        - Bat / Crab

3)      61.8%    - (Bat) / Crab / Gartley / ab=cd

4)      78.6%    - Butterfly

5)      88.6%    - Deep Crab

That means that if the currency bounces up at the 38.2% for instance, then there could 3 Gartley patterns in play.

PART II: Let us continue with this break down and analyze the likely Fibs where letter C can stop when Fibbing AB and the answer is simple: C can stop at any Fib of AB, which are 38.2%, 50%, 61.8%, 78.6%, 88.6%.

PART III: The last but not least, the target D.

1)      Bat – 88.6% Fib of XA OR  2.618 of BC

2)      Alternate Bat – 113% Fib of XA (below X) OR   2.0 of BC

3)      Crab – 161.8% Fib (below X)  OR  3.14 of BC

4)      Gartley -  78.6% Fib of XA   OR   1.27 of BC

5)      Butterfly – 161.8% Fib (below X)   OR  1.618 of BC

6)      Deep Crab  - 161.8% Fib (below X)    OR   2.618 of BC

TRADING THE PATTERNS

Trading the patterns is as always a matter of entry methodology. We discussed entry techniques in a previous article: please read the entire article here. In general it boils down to either entering upon a direct level, a confirmation or a momentum break.

For the Gartley patterns mentioned here, a direct level entry means a pending entry order at a specific Fibonacci level. A confirmation would be to wait for a candle stick reversal pattern at the Fib. And the break out would occur when price bounces off the Fib and breaks a trend line in the anticipated direction.

Please note that trading letter B is a with the trend setup but with limited target (target is letter C). Trading letter C is a reversal trade but with good reward to risk (target is letter D). Trading letter D could be seen as with the trend trade (very close to support and resistance in any case) and good reward to risk as well (target can be the top in up trend example, bottom in down trend example OR any Fib from C to D).

What is your opinion on Gartley? Do you use them? Do you want to use them? Do you like it? Do you already use Fibs?

We gave a practical example of Gartley this week in the GBPAUD reversal article. Here is part 1 and 2 (part 2 has the pattern).

Thank you for reading and sharing. Wish everyone a great weekend and Good Trading next week!

Update 1: the bat screenshot has been changed on 13th of October.

Update 2: our reader Russell had good advice: read Scott M. Carney’s book Harmonic Trading books for an indepth understanding of Gartley pattern trading.

The following two tabs change content below.
Chris is the head of the mentoring program and trading room at Winner's Edge Trading. He has a passion for technical analysis and helping Forex traders achieve their goals in trading. Chris has been trading for almost 10 years and is most fond of the Double Trend Trap (as a strategy), moving averages (as an indicator) and Fibonacci (as a tool).

Latest posts by Chris Svorcik (see all)

Follow our social media:
1359774937_facebook 1359774984_linkedin 1359774949_twitter 1359774960_google 1359774973_rss 1360027635_youtube

Winner’s Edge Trading, as seen on:

Winner's Edge Trading in the news

  • Zaid Sarwar

    Great Great break down of patterns. You guys helped me alot . I would say best article for peoplle trying to know pattern trading. I hope you guys keep on going

  • Nathan

    Hi Chris: One more question pls: While I have found it easier to identify points, B,C and the XA leg, typically there are several other swings before point D is reached. Hence I get confused as to which point to pick for B, since there are multiple swing points which look like candidates for B. Is this common? Or am I reading the price action incorrectly?

  • Nathan

    Excellent Chris! Quick question: Is there a time relationship between the XA, AB, CD etc legs as well?

  • Chris Svorcik

    Oops – great catch! Thanks for that heads-up!

    The bat screenshot has been modified in the meantime. Thanks!

  • Chris Svorcik

    Thank you Rohan! :) IT is definately good pattern to keep in mind when trading :) thanks for the feedback – much appreciated!

  • Chris Svorcik

    Thanks Russell, good tip for our readers. Much appreciated.

  • Chris Svorcik

    That’s great! :)

  • Chris Svorcik

    Hi Adam, that is great! These patterns and Fibs are indeed very interesting. Glad you agree. Good Trading!

  • Chris Svorcik

    Hi Selemon, happy to hear that you found the article interesting and useful! :)
    Your feedback is much appreciated :) wish you Good Trading this week!

  • smayer97

    BTW, your diagrams for the Bat and Alternate Bat are IDENTICAL!. One of them is wrong. You may want to correct that.

  • Rohan De Villiers

    EXCELLENT article !! going to look for them in last weeks charts and see where i missed them

  • Russell Daily

    I think the best advice comes from reading Scott M. Carney’s book…Harmonic Trading. You wrote a very good article Chris. Perhaps you could advise your readers to read Carney’s books for an indepth understanding of pattern trading.

  • Forexannie

    Fabulous

  • adam

    ths is great stuff i am excited to start usign this for trading thanks so much ffor the great article

  • Selemon

    Wow great read thanks chris