Gartley Harmonic pattern in forex is the most common harmonic chart pattern in the Forex market. Gartley pattern is in form of a bullish W or bearish M.
Tracing down the Gartley harmonic trading pattern, the Gartley “222”pattern is the page number found in H.M. Gartley’s book” Profits in the Stock Market.”
Gartley did not give it a name and hence for some time it has been called the ‘222’ pattern after the page number of the book.
The Gartley harmonic Pattern in forex
It is mainly a continuation pattern that appears when a trend pauses before continuing in its trend direction. It starts with strong uptrend or downtrend which draws zigzag like corrective movements.
The Gartley harmonic pattern in forex may also signal trend reversal when it forms at the end of a trend.
The Gartley pattern looks like A-B-C-D pattern except that it has an extra leg of X-A.
It forms both in an uptrend, Bullish Gartley and downtrend, Bearish Gartley.
Take a look at the illustration below;
Rules for Gartley harmonic Pattern
- The Gartley pattern looks similar to the AB=CD pattern except it has an extra leg: X-A.
- The AB=CD pattern
- D should not exceed X.
- Move AB should be 61.8% retracement of XA.
- Move BC must be 38.2% or 88.6% retracement of AB.
- If BC is 38.2% of AB, then the CD must move 127.2% extension of BC.
- If BC is 88.6%, then the CD should be 161.8% of BC.
- CD should be 78.6% retracement of XA
How to trade a Gartley pattern on a market chart
Let’s start with an example below with a Bearish Gartley pattern
The Bearish Gartley harmonic pattern in forex forms in a downtrend as a pause in price trend.
The first leg forms when the price falls sharply from point X to point A. This is the pattern’s longest leg.
Then price pulls back and forms the zig-zagging AB=CD pattern.
When the pattern completes at point D – this will be at the 78.6% retracement of the X-A leg. Sell.
- Sell trigger entry is at D.
- The stop loss is placed few pips above point D.
- The safe target lies within 38.2 – 61.8% of AD move.
The most important point to ensure is to have a favorable risk reward ratio.
Now, take a look at the chart below with a Bullish Gartley harmonic pattern
From our example above,
- the Buy entry signal is at D.
- The stop loss is placed few pips below point D.
- The safe target lies within 38.2-61.8% of AD move.
As mentioned earlier, the most important point to ensure is to have a favorable risk reward ratio.
Now that we know how a Gartley pattern looks like, let’s take a look at the Animals as named by Scott Carney in the next lesson.
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