The Gartley - Harmonic Pattern

Harmonic Pattern – The Gartley



Harmonic Patterns enable traders to determine turning points with precision and high accuracy. In our introduction to Harmonic Patterns, we indicated that; all Harmonic patterns have five points – namely, “XABCD”.

Of the five points, the market always provides “XA” which is the impulse leg/move. Therefore the trader is required to identify the remaining points - “BCD”.

The Gartley pattern is the most commonly used harmonic pattern, and it was founded by an American ‘Harold McKinley Hartley’ (H.M. Hartley) in 1932. 

Like all Harmonic patterns, The Gartley is based on the Fibonacci retracement numbers, and it is used to help traders forecast/identify turning points on the market-trend chart. It is therefore a good indicator on when to enter or exit trades.

Using the Fibonacci tool, the Gartley pattern identifies BCD points by using the following measurement Criteria: -
>Point ‘B’ is 61.8 retracement of leg “XA”.
>Point ‘C’ is between 38.2 to 88.6 retracement of leg “AB”.
>Point ‘D’ is 78.6 retracement of leg “XA”. 


All harmonic Patterns complete at point "D", this is the ‘Potential Reversal Zone’ (PRZ).
For the Gartley Harmonic pattern, First Take Profit (TP) is at 38.2 and second TP is at 61.8. Stop Loss (ST) is set a few pips below (bullish) or above (bearish) "D". This is the case with all Harmonic patterns.

Before a decision to enter or exit a trade is taken, it is highly recommended that such a decision is supported by three or more other patterns/indicators (a Confluence of indicators thereof), these may include the usual candlestick reversal pattern, head and shoulders, double bottom, double top, flags, wages, triangles – etc. Price action analysis is another powerful approaching to analyzing the market.

As the most used Harmonic Pattern, The Gartley is a formidable tool that if used correctly can positively turn traders’ fortunes - in a big way.

OJ Mwale – Sani Global

Images: Courtesy of BabyPips & TradingStrategyGuides

Comments

Post a Comment

Popular posts from this blog

Harmonic Patterns

Image
Harmonic Patterns – A Forex Market Trader’s Perspective – Harmonic patterns are formations on forex charts, created by price movements in the market. These patterns assist the trader to: – Analyze the forex market and forecast its price movement with precision therefore Determine potential trend-retracement areas (entry and exist points) with the highest possible accuracy. In other words ; Harmonic patterns use Fibonacci retracement levels to geometrically draw patterns that depict potential trend-reversal zones, thereby assisting the trader to precisely highlight the best trade entry/exit points. Due to their proven accuracy in pin-pointing potential trend-reversal zones in forex market, Harmonic Patterns are key (advanced) tools in the trader’s box. Harmonic Patterns are usually characterized by “M” (Uptrend) and W” (downtrend) shapes and can be categorized into Seven basic patterns: Gartley , Butterfly , Crab , Bat , Shark , Cypher and Deep Crab
Read more

The Butterfly-Harmonic Pattern

Image
The Butterfly-Harmonic Pattern - Forex Trader’s Perspective - As explained in our introduction , Harmonic Patterns use Fibonacci retracement tool, to enable the trader determine turning points (trend reversal zones) with nearest accuracy. All Harmonic Patterns are shaped in a zigzag formation, “M” shape depicting an uptrend and a “W” depicting a downtrend. The Butterfly like all Harmonic patterns, has five points - namely, “XABCD”. As always, the market will provide the “XA” leg – being the impulse leg or move. The trader therefore is expected to identify the remaining “BCD” points. Therefore, using the Fibonacci retracement tool, you can measure and identify “BCD” points based on the following measurement guidelines or Criteria : - Plot the Fibonacci from peak of to the lowest point on the chart, then identify: - 1) Point B: Which should be at around level 78.6, retracement of leg “XA”. 2) Point C: Which should be between 38.2 and 88.6, retr
Read more

The BAT Harmonic Pattern

Image
                                         - A Forex Trader’s Perspective - As explained in our introduction to Harmonic Patterns, the Gartley and Butterfly, Harmonic Pattern enable the trader to determine turning points with precision 80% of the time - according to expert traders. As is the case with all Harmonic patterns, the BAT harmonic pattern has five points - namely, “XABCD”.  The market will always provide  points “XA”, which is the impulse move and the longest leg in this pattern. And as usual, the trader is required to find the remaining “BCD” points. Therefore using the Fibonacci-retracement levels, the trader is required to identify BCD points, guided by the following measurement Criteria : - >Point ‘B’ is 38.2 to 50.0 retracement of leg “XA”. >Point ‘C’ is between 38.2 and 88.6 retracement of leg “AB”. >Point ‘D’ is 88.6 retracement of leg “XA” It is important to note that; Point “D” is also referred to as; Potential Reversal Z
Read more