How To Trade The Gartley Pattern
The Gartley pattern helps identify price breakouts and signals where the currency pairs are headed. The pattern is also widely used in the forex market to determine strong support and resistance levels. In this article, we dive deeper into understanding the Gartley harmonic pattern.
What is the Gartley pattern?
The Gartley pattern is one of the most popular harmonic chart patterns that can identify the highest and lowest currency pair prices in the market. The pattern is based on Fibonacci ratios and numbers, and it indicates market continuation. The pattern is formed as soon as a market trend temporarily changes its direction before continuing in the initial direction. The price breakouts in the Gartley pattern are identified with the help of the Fibonacci sequence. Traders mostly use the 38.2%, 61.8%, 78.6% and 161.8% Fibonacci levels to identify market trends through this pattern.
- When the Gartley pattern moves upwards, it signals traders to place buy orders due to an expected continued uptrend signal.
- When the Gartley pattern moves downwards, it signals traders to place sell orders due to an expected continued downtrend signal.
Example of a Gartley pattern
Let’s assume we are trading USD/EUR at an exchange rate of 2. The initial market is in an uptrend, and the price increases from 2 to 3.2--an increase of 61.8% that marks the first Fibonacci retracement level of 61.8%. We continue to monitor the market closely and see that the market now falls by 78.6% to 2.5, forming the second Fibonacci retracement level and following a temporary downtrend. Finally, the market retraces back to its original trend and the exchange rate increases by the last Fibonacci retracement level of 161.8% and increases from 2.5 to 4.1, forming a continued uptrend. At this point, you receive a signal to long the trade to benefit from the rising market. Stop-loss orders in this situation can be placed at the 2.5 level to minimise risk, whereas take profit orders can be placed at the resistance line calculated through the Fibonacci levels.
How to identify the Gartley pattern?
The Gartley pattern is identified by placing Fibonacci retracement levels between two price points on the chart. But to do that, we need to first pay attention to the other points on the chart.
- A is the price movement that indicates whether the market is in an uptrend or downtrend.
- B is the first price retracement which is opposite to the market’s initial direction.
- C is the last upward movement in an uptrend and the last downward movement in a downtrend before the market continues trading in its initial direction.
- D is the last point of retracement after which the currency pair prices continue in the initial direction.
- X is the first price level considered in the Gartley pattern. When A is above point X, it indicates an uptrend and when it is below point X, it indicates a downtrend.
Here are five easy steps to identify the pattern in a forex market –
- Look for the initial movement from point X to A as the first point of contact.
- The second move is from A to B, where Fibonacci levels are first considered. The size of the AB line is approximately 61.8% of the length of the XA line, as 61.8% is the first Fibonacci retracement we apply.
- After the first movement, a second Fibonacci retracement movement is formed from point B to C, where BC's length is approximately 88.6% of AB's length, and BC is always below A to confirm market continuation.
- The second last move is from point C to D, which is between 127.2% to 161.8% longer than BC.
- Lastly, the final calculation is done by connecting A and D together and measuring their length, which approximately deviates 78.6% of the original price change of X to A.
When all these conditions are met, a successful Gartley pattern is formed.
What is a bullish Gartley?
A bullish Gartley pattern consists of four price swings, indicating an upward trend continuation and higher buying opportunities. The pattern starts at a low point X and continues to increase until it marks a temporary uptrend before finally dropping to a level that is still above the initial price level. After that, the prices finally reverse for one last time and the initial uptrend continues, providing traders with opportunities to long or buy a trade.
What is a bearish Gartley?
The inverse of the bullish pattern, the bearish Gartley pattern indicates a downtrend continuation and provides traders with higher selling opportunities. The pattern starts at point X, which is the high currency price level that continues to drop until it marks a temporary downtrend once again before finally increasing to a level that is below the initial price level. After that, the prices reverse one last time and the initial downtrend continues.
What is the Gartley 222 pattern?
The Gartley 222 pattern consists of the ABCD pattern that is followed by a significant low in downtrends and a significant high during uptrends. The 222 Gartley pattern is a continuation pattern that provides opportunities for long and short trades.
Trade the Gartley pattern to identify market trends
The Gartley pattern can be used to successfully identify support and resistance levels. It also provides traders with a market overview of where the currency pair prices are expected to move in the future. Start forex trading with Blueberry Markets to explore hundreds of currency pairs, competitive spreads, and ease of order execution. Sign up for a live trading account or try a risk-free demo account.
The Beginner’s Guide to MQL5
MetaTrader, as a platform, has built-in functions that assist in technical analysis and trade management while also allowing traders to develop their own indicators and trading strategies.
How to Use DeMarker Indicator For Forex Trading
Every trader needs to know precisely when to enter or exit a forex market.
How to Use The Accelerator Oscillator For Forex Trading
The Accelerator Oscillator indicator helps detect different trading values that protect traders from entering bad trades.
A Forex Trader’s Guide to Awesome Oscillator
When you understand market momentum, you can better identify market reversals.
What is Money Flow Index?
The Money Flow Index can analyse the volume and price of currency pairs in the market.
What is The Ichimoku Kinko Hyo Indicator?
The Ichimoku Kinko Hyo indicator provides traders with the market’s current momentum, direction and trend strength.
Top Pullback Trading Strategies
Pullback trading strategies provide traders with ideal entry points to trade along with the existing trend.
What is High Wave Candlestick?
The High Wave Candlestick pattern occurs in a highly fluctuating market and provides traders with entry and exit levels in the current trend.
What is the Parabolic SAR indicator?
Identifying market trends becomes easier with the Parabolic SAR indicator as it provides the ideal entry and exit signals in strong trending markets.
What is Currency Correlation?
Currency correlations help trade multiple currencies in the forex market by identifying the market trends of each currency pair.
Price Action Trading Strategy
A Price Action Trading Strategy helps find ideal entry and exit points depending on expert opinions, news announcements, or technical indicators.
Average True Range
Average True Range (ATR) helps in identifying how much a currency pair price has fluctuated. This, in turn, helps traders confirm price levels at which they can enter or exit the market and place stop-loss orders according to the market volatility.
Moving Average Crossover
The Moving Average Crossover is a valuable tool to find the middle price-point of a trend in forex trading. When currency prices crossover their current moving averages, it helps traders identify the favorable buying or selling points for the currency.
What is the Bullish Engulfing Candlestick?
Bullish Engulfing Candlesticks helps in identifying an uptrend reversal in the market. This candlestick pattern stands out because a trader does not need to wait until the entire pattern is completed to enter a trade.
How to Trade Forex With NFP V-Shaped Reversal
A Non Farm Payroll (NFP) V-shaped reversal refers to a sudden increase or decrease in the currency pair prices right after an NFP report is released.
Candlestick Patterns: Top Candlestick Charts Every Trader Should Know
Candlestick patterns depict the price movement of assets in a graphical manner. Candlestick patterns also enable traders to predict market behaviour.
What is the Evening Star Candlestick Pattern?
Evening Star Candlestick Patterns help traders identify ideal exit levels in the forex market by signalling a slowed upward momentum and strengthened downward momentum.
How to Use Ichimoku Cloud in Forex?
The Ichimoku Cloud provides a clear market trend direction to the traders and helps them make market decisions accordingly.
Pennants Pattern: How to trade bearish and bullish pennants
Pennant Patterns work as a continuation signal in the forex market and help identify the ideal entry and exit price points
How to Trade Forex With Renko Charts
Renko Chart is a technical indicator that provides strong market trend directions by filtering out minor price movements
What are Ascending and Descending Triangle Patterns?
The Ascending and Descending Triangle Patterns confirm continued trends in the forex market.
How to Identify Cup and Handle Pattern in Forex Trading
The Cup and Handle Pattern is a technical price chart that forms the shape of a Cup and a Handle, which indicates a bullish reversal signal.
What is the Head and Shoulders pattern?
The Head and Shoulders pattern is a trend reversal indicator that predicts bullish to bearish and bearish to bullish reversals in the forex market.
What is the Hammer Candlestick Pattern?
Hammer Candlesticks enable traders to identify potential market reversal points, determine the ideal time to enter the market and place buy or sell orders accordingly.
What is The Opening Range Breakout Strategy
The Opening Range Breakout (ORB) Strategy involves taking forex positions when the currency pair prices break below or above the previous day's high or low
Morning Star Indicator
The Morning Star Indicator helps identify strong trend reversals in the forex market and enables you to take trade position entry decisions accordingly.
How Does Stochastic Indicator Work in Forex Trading?
Stochastic Indicator helps traders identify overbought and oversold market conditions that substantially lead to market reversals.
Favourite Fib Fibonacci Retracement
Fibonacci retracement strategies help traders identify the market's support and resistance levels, trend reversal points, and entry and exit decisions.
Heikin Ashi Candlestick Pattern
The Heikin Ashi Candlestick pattern is almost the same as the traditional candlesticks, with one big difference—the former is an averaged out version of the latter.
Multiple Time Frame Analysis in Forex
By monitoring different currency pairs in different time frames, you can make your Forex trades more successful and profitable.
What are Bollinger Bands?
The Bollinger bands can help identify overbought and oversold market conditions, protecting you against placing any orders that could lead to losses.
Andrew's Pitchfork Trading Strategy
Andrew's Pitchfork is a Forex trading strategy that can predict protracted market swings and help you in identifying potential market trends that can indicate potential exit and entry points.
Fibonacci retracements are one of the most popular methods for predicting currency prices in the Forex market. Predicting upward or downward market movement can help traders with accurate price analysis for exiting or entering the market.
Trading in Volatile Markets
Forex volatility is the measure of how frequently a currency's value changes. A currency either has high volatility or low volatility depending on how much its value deviates from its average value.
The ABCD pattern
One of the most classic chart patterns, the Forex ABCD pattern represents the perfect harmony between price and time.
The Bearish Gartley Pattern
The Bearish Gartley pattern was introduced in 1935, by H.M. Gartley in his book, “Profits in the Stock Market”. The pattern helps Forex traders in identifying higher probabilities of selling opportunities.
The Bullish 3 Drive pattern
The Bullish Three Drive pattern in Forex trading is a rare pattern that gives traders information about the Forex market's potential at its most Bearish point, and in turn, suggests probabilities for a market reversal.
What is the MACD Indicator?
The Moving Average Convergence Divergence (MACD) indicator helps traders quickly identify short-term trend directions and reversals in the forex markets. You can use the MACD indicator to determine a currency pair price trend's severity and measure its price's momentum and even identify the bearish and bullish movements in the currency pair prices.
Guide to Forex
Enter your details to get a copy of our
Start a risk free
News & Analysis
Catch up on what you might
have missed in the market.