The Gartley Forex Trading Pattern is the most common Harmonic Pattern among all the patterns. HM Gartley has introduced the concept of the Gartley pattern. Using the Gartley pattern, the Famous Forex traders and investors can earn huge profit if they can spot the patterns correctly. This price pattern is complex in nature and depends on the Fibonacci ratios. This pattern is used in determining the Forex Trading (buy and sell) signals. Signals in this price pattern are determined by measuring the Price Retracement of any currency in the uptrend and downtrend.
Concept of the Gartley Pattern
In the Gartley Pattern, the two corrective waves form with in the boundary of the former impulsive wave. The two waves are equal in price and time (AB=CD). The Gartley is the result of the series of the Price Retracement Percentages and the Price Reversals. An ideal pattern could be established with the use of the Price Retracement Percentages and the Price Reversals. Use of specific Fibonacci points in this pattern makes it skillful in determining the valid trading opportunities. 78% Retracement level is the reliable Retracement in this pattern.
Look at in the figure below. A is 61.8% and point B is the Price Retracement of XA. C point is the Price Retracement of AB but with in the range of A. These movements should be according to the Fibonacci Ratios. There are two important points to be taken care of for predicting this pattern. The first important point is that XD should be 0.786 of the side XA. The second important point is the BC projection from 1.27 to 1.618. Now in the figure, point D is the right time and right price to enter a bullish position.
For the traders and investors, this is an excellent pattern because this pattern has high degree of accuracy and requires a stop loss as compared to the other patterns. So the risk to reward ratio is better in the Gartley pattern. Gartley Patterns can be bullish and bearish both as shown in the figures below.
How to use Gartley Pattern in Forex trading ?
Price rally on the upside can be expected after the reversal level has been established. Mid point (Point B) of the pattern becomes an important Resistance level. Long trade entry in this pattern should be placed on crossing of the low level of the mid point because this signals a strong momentum possible on the upside. Stop loss should be placed lower than the low level of the Pivot Point named D in the figure. The Forex traders and investors should initially target 61.8% of Fibonacci Ratio in the range C-D. The secondary target for the traders and investors should be the 127/161 Fibonacci Projection of the A-D range. An example is shown in the figure below.
As indicated in the figure above, B is the preferred entry point with D as stop loss.