Learn To Trade Forex • Best Forex Trading Course • AsiaForexMentor

Put an end to your quest of hunting for forex courses or coaches, there will be a new one popping out every other week. If you are looking for the “Guru’s guru” “The Best in the Industry” “One of the World’s Best Forex Trader” – as testified by my students.

AFM Proprietary One Core Program
EN
  • DE - Deutsch
  • EN - English
  • FR - Français
  • Who is Asia Forex Mentor
  • Blog
  • Vlog
  • AFM Proprietary Program
  • Reviews
  • Who is Asia Forex Mentor
  • Blog
  • Vlog
  • AFM Proprietary Program
  • Reviews
Gartley pattern
No Comments

 

 

Gartley Pattern Complete Guide

Gartley pattern

The Gartley pattern is a harmonic chart pattern, based on Fibonacci numbers and ratios, that helps traders identify reaction highs and lows. In his book Profits in the Stock Market, H.M. Gartley laid down the foundation for harmonic chart patterns in 1935. The Gartley pattern is the most commonly used harmonic chart pattern. Larry Pesavento later applied Fibonacci ratios to the pattern in his book Fibonacci Ratios with Pattern Recognition. The Gartley pattern is one of many advanced pattern trading strategies that harmonic traders use. It is highly specific and doesn’t occur frequently in the market, however, being patient and waiting for a harmonic pattern set up to take place can be highly rewarding as it would lower the risk of taking the trade since it is so precise in its Fibonacci measurements. Due to its complexity, it is not recommended for beginners to use this or any harmonic pattern strategy, however, it is definitely an advanced strategy to look into.

Gartley Pattern – Quick Setup Tutorial

Content

  1. How to use
  2. Trade rules
  3. Pros and cons
  4. Analysis
  5. Conclusion
  6. Info

How to use

The Gartley pattern requires knowledge from the Fibonacci retracement tool and a bit of the Elliott Wave’s theory. The Gartley pattern comes in two forms: the bullish, shaping like the letter “M” and the bearish, shaping like a letter “W”.

To identify a Gartley pattern, it must have 5 points, which we would identify as X, A, B, C and D. The 5 points are part of an Elliot wave movement from motive to corrective phase, with CD as the start of a reversal.

For the bullish Gartley pattern, XA is the impulse wave 5 of a bullish Elliott wave. Point B must retrace to 61.8% of XA, with AB forming corrective wave A. Point C must be at 38.2% retracement from XA and 88.6% retracement of AB. BC then forms the corrective wave B. Lastly, point D can be either 127.2% or 161.8% extension from AB but at the same time, fulfils a 78.6% retracement from XA. CD then forms the corrective wave C.

Also read: Fibonacci trading strategy

How to use Gartley pattern

For the bearish Gartley pattern, it is the opposite of its bullish counterpart. XA is the impulse wave 5 of a bearish Elliott wave. Point B must retrace to 61.8% of XA, with AB forming corrective wave A. Point C must be at 38.2% retracement from XA and 88.6% retracement of AB. BC then forms the corrective wave B. Lastly, point D can be either 127.2% or 161.8% extension from AB but at the same time, fulfils a 78.6% retracement from XA. CD then forms the corrective wave C.

How to use Gartley pattern 2

Back to top

Trade rules

After identifying the Gartley pattern, we will be looking for a trade depending on whether the pattern is bearish or bullish.

For a bullish set up, the entry is determined by price action. The stoploss can be put at point X or the 100% retracement of XA. The profit taking level can be taken at point C.

Trade rules

For a bearish set up, the entry is determined by price action. The stoploss can be put at point X or the 100% retracement of XA. The profit taking level can be taken at point C.

Trade rules 2

Back to top

Pros and cons

The pros of using the Gartley pattern trading strategy are that it is highly accurate due to the specific measurements using the Fibonacci retracements. This allows traders to identify price reversal areas, stop loss and profit targets with high accuracy. However, it due to the lack of frequent occurrence in the market, it requires patience and discipline from the trader, which in turn leads to opportunity costs, where other potential trades might be missed out on. On top of that, even though the pattern’s specificity falls into a range in the Fibonacci ratios, the degree of specificity also determines the reliability of the pattern. The pattern might give several red flags during its formation and one of the largest one that would cause it to fail is the unmatching Fibonacci ratios. Lastly, it is definitely a beginner unfriendly strategy as it is tedious and hard to grasp with Fibonacci and Elliot wave knowledge as pre-requisites.

Also learn: Swing trading strategies

Pros and cons

Back to top

Analysis

To find out the profitability of the Gartley pattern trading strategy, we decided to do a back test based on the past 5 trades from 26 Jun 21 on the M1 timeframe. The rules for entry will be the same as what was mentioned above. We will be back testing this throughout 3 types of trading vehicles, namely, EURUSD for forex, US30(DJI) for stocks and BTCUSD for cryptocurrency. For simplicity, we will assume that all trades taken have a risk of 1% of the account.

Also read: Double top pattern double bottom pattern

Definitions:  Avg Risk reward ratio= ( Total risk reward ratio of winning trades/ total no. of wins)                Profitability (% gain)= (no. of wins* reward)- (no of losses* 1) [ Risk is 1%]

An example of the application of the strategy is as shown:

Analysis

For the Backtest results, trades with blue and yellow zones indicate an overall win with the blue zone as reward and the yellow zone as the risk taken.

As shown in our backtest, the win rate of this strategy for EURUSD (Forex) is 60%, AAPL (Stocks) is 60% and BTC (Crypto) is 80%

The average risk reward ratio of this strategy for EURUSD (Forex) is 1.13, US30 (Stocks) is 1.27 and BTC (Crypto) is 1.18.

The profitability of this strategy for EURUSD (Forex) is 2.77, AAPL (Stocks) is 3.62 and BTC (Crypto) is 7.44.

Analysis 2

Back to top

Conclusion

In conclusion, the Gartley pattern trading strategy is definitely a profitable one due to its high win rate, and average risk to reward ratio it generates. Given its high specificity, the Gartley pattern still has a chance to fake traders out. In such cases, traders may consider using indicators to back their trading plan up or by watching out for certain red flags that can happen such as price action. Even then this comes with trading experience and subjectivity. Hence, this advanced technique is not recommended for new traders who had just began their financial journey in the trading world. Needless to say, a grasp for this technique will definitely increase your knowledge in the trading world and allows you to approach each trade plan with a wider perspective. After all, price action and chart patterns are a common way for traders all around the world to “communicate”.

Back to top

Info

gartley info

Back to top

« Previous
Next »
ezekiel chew asiaforexmentor
About Ezekiel Chew

Ezekiel Chew the founder and head of training at Asia Forex Mentor isn’t your typical forex trainer. He is a recognized expert in the forex industry where he is frequently invited to speak at major forex events and trading panels. His insights into the live market are highly sought after by retail traders.

Ezekiel is considered as one of the top forex traders around who actually care about giving back to the community. He makes six figures a trade in his own trading and behind the scenes, Ezekiel trains the traders who work in banks, fund management companies and prop trading firms.

GET THE PROPRIETARY ONE CORE PROGRAM (The same system I use to make 6 figures a trade with)

Related articles

forex trading strategies
The Complete Forex trading Strategies Guide (Updated 2023)

5 PART SYSTEM TO MAKE REALLY BIG MONEY IN TRADING

FREE TRAINING

We have generated over millions of dollars via trading with the 5 part system outlined in this free training. Download it now before this page comes down or when I decide to stop mentoring.







About Ezekiel Chew
About Ezekiel Chew

Ezekiel Chew the founder and head of training at Asia Forex Mentor isn’t your typical forex trainer. He is a recognized expert in the forex industry where he is frequently invited to speak at major forex events and trading panels. His insights into the live market are highly sought after by retail traders.

Ezekiel is considered as one of the top forex traders around who actually care about giving back to the community. He makes six figures a trade in his own trading and behind the scenes, Ezekiel trains the traders who work in banks, fund management companies and prop trading firms.

GET THE PROPRIETARY ONE CORE PROGRAM
(The same system I use to make 6 figures a trade with)

Categories
  • Trading Know Hows
  • Forex Trading Strategies
  • Price Action Trading
  • Forex Trading Indicators
  • Forex for Beginners
  • Crypto
  • Stocks
  • Money
Related Posts
  1. The Complete Forex trading Strategies Guide (Updated 2023)

SERVICES

  • AFM Proprietary Forex Course
  • Golden Eye Group
  • Trade Rescue
  • Corporate Forex Training
  • Speak At Your Event

COMPANY

  • Who is Asia Forex Mentor
  • Asia Forex Mentor Reviews
  • Contact Us
  • Affiliate Program

RESOURCES

  • Forex Trading Strategies
  • Forex Blog
  • Forex Vlog
  • Download Trading Platform
  • Forex Position Size Calculator

6 Raffles Boulevard, #03-308, Singapore 039594
Whatsapp Text: +65 8786 8319

©2020 ASIA FOREX MENTOR. All Rights Reserved | Disclaimer – Terms of Use | Privacy Policy | Cookie Policy | Privacy Policy – Europe GDPR

  • English
  • French
  • German

Get Ezekiel Chew’s 5 Day Email Course on “How to be in the Top 10% league of Forex Traders”

100% Free – Delivered to your inbox

Subscribe to the most popular Forex Trading  blog online, join thousands of readers






Scroll to top