What Is the Gartley Pattern?
The Gartley is the most widely used harmonic chart pattern. It maps a four‑leg price structure (X–A–B–C–D) whose turning points align with specific Fibonacci retracements and extensions. When the pattern completes at D, traders look for a high‑probability reversal and set entries, stops, and profit targets accordingly. The pattern was popularized by H.M. Gartley (Profits in the Stock Market, 1935) and is summarized in modern form by harmonic‑pattern practitioners and technical educators (see Investopedia article below).
Key takeaways
– The Gartley is a reversal pattern based on Fibonacci ratios that identifies potential turning points.
– Typical trading plan: enter at D (pattern completion), stop beyond X, and take profits at multiple levels.
– Exact Fibonacci matches are rare; acceptable tolerances improve usability. Use confirmation (price action, indicators) to reduce false signals.
– The pattern appears in bullish and bearish forms and can be applied across timeframes, but reliability varies by market and timeframe.
Anatomy of the Gartley (X–A–B–C–D)
Core legs and commonly used Fibonacci relationships:
– XA — the initial impulse swing.
– AB — retraces XA, ideally to 61.8% of XA (the classic Gartley).
– BC — retraces AB, commonly between 38.2% and 88.6% of AB.
– CD — a projection/extension of BC (often 127.2%–161.8% of BC).
– D — the completion point: commonly a 78.6% retracement of XA (this is the key Gartley completion zone).
Notes:
– These are guideline ratios, not absolute rules. The closer the confluence of ratios at D (78.6% XA and a BC extension), the stronger the pattern is considered.
– Bullish Gartley: X is a swing low → A up → B pullback → C up → D pullback (expect rise after D). Bearish Gartley is the mirror opposite.
How to identify a Gartley pattern — practical checklist
1. Identify the initial leg XA (clear impulse swing).
2. Confirm AB retraces XA to about 61.8%. If AB is far from 61.8% consider discarding or downgrading the pattern.
3. Measure BC: it should be a retracement of AB (38.2%–88.6%). If BC falls outside this range, pattern reliability drops.
4. Project CD as an extension of BC (127.2%–161.8%) and check whether D also sits near the 78.6% retracement of XA. The D zone is the potential entry zone.
5. Look for at least two ratio confluences at D (e.g., 78.6% XA and 1.272× BC) — more confluences = higher probability.
6. Mark support/resistance and nearby structure (previous highs/lows) that align with D.
Practical trading steps (entry, stops, targets)
1. Entry
– Prefer entering on confirmation at or near D: a reversal candlestick pattern (pin bar, engulfing), bullish/bearish divergence on RSI/MACD, or a break of a short‑term trendline.
– You can use a limit order in the D zone (a small buffer around the precise fib level) or wait for confirmation candle close for a market order.
2. Stop loss
– Typical stop placement: just beyond X (a few pips/points beyond the swing high/low X) or beyond D with a buffer—whichever preserves logical structure and acceptable risk.
– Keep position sizing consistent with your risk per trade (e.g., 1% of account).
3. Profit targets (common approaches)
– Partial profit 1: take some off at the nearest structure or point C (or at a 38.2% retracement of AD).
– Partial profit 2: second target at point A (or at a 61.8% retracement of AD).
– Third/extended target: 127.2%–161.8% extension of AD or measured move to past swing if momentum strong.
– Alternative target scheme: Target 1 = 38.2% AD, Target 2 = 61.8% AD. Use trailing stop afterwards.
4. Position sizing & risk/reward
– Only take trades with acceptable projected R:R after account for stop size. Many traders seek at least 1.5:1 to 2:1 R:R on the planned exits (factoring partial exits).
Confirmation and filters to improve probability
– Price‑action confirmation at D (reversal candle(s)).
– Momentum divergence (RSI, MACD) at D suggests weakening of prior trend.
– Volume spike on reversal (higher conviction).
– Confluence with other technical levels (horizontal support/resistance, trendline, pivot points, moving averages).
– Timeframe consistency: confirm the pattern on a higher timeframe before trading on a lower one.
Example (AUD/USD — illustrative)
– Suppose a bullish Gartley forms with X ≈ 0.70550, A up, B retracement ~61.8% of XA, and completion at D near a 78.6% retracement of XA.
– Entry: buy near D when a bullish engulfing candle forms.
– Stop: place stop a few pips below X (0.70550) to protect from deeper invalidation.
– Target: first take profits near point C (~0.71300) or at 38.2%–61.8% of AD; consider a higher target near point A if momentum continues.
– This example follows the same logic reported in practical examples of Gartley trades.
Limitations and common pitfalls
– Ratios rarely match exactly — forcing a fit increases false signals. Accept small tolerances.
– On low‑liquidity or choppy markets the pattern produces many whipsaws.
– Overreliance on a single pattern without confirmation increases losses. Combine with volume, momentum, and higher‑timeframe structure.
– Timeframe matters: small intraday patterns are less reliable than daily/weekly patterns.
– Psychological biases: traders may “see” patterns where none exist (confirmation bias). Use objective measurement tools (Fibonacci drawing tools) and backtests.
Backtesting and implementation tips
– Backtest the exact rules you’ll use (ratio tolerances, entry confirmation, stop placement, profit rules) across multiple instruments and timeframes.
– Track win rate, average R:R, expectancy, and maximum drawdown. Adjust filters to suit your style.
– Start with small position sizes or simulated trading to validate the setup in live conditions.
– Keep a trade journal: every Gartley setup, outcome, and the confirmations used.
Practical step‑by‑step summary for a single trade
1. Spot potential X–A–B–C–D structure.
2. Verify AB ≈ 61.8% of XA; BC within 38.2%–88.6% of AB; D near 78.6% of XA and BC extension (1.272–1.618).
3. Wait for reversal confirmation at D (candlestick, divergence, volume).
4. Enter at D (limit or market on confirmation).
5. Place stop beyond X. Size position to risk a fixed % of account.
6. Take profits in stages (C, A, extension or use 38.2%/61.8% of AD).
7. Trail stops after hitting targets to capture extended moves.
The bottom line
The Gartley pattern is a structured, rule‑based approach to locating potential reversals using Fibonacci relationships. When combined with confirmation signals, sound risk management, and backtested rules, it can be a useful tool in a trader’s toolkit. Like all technical tools, it is not foolproof — use confluence and disciplined risk control.
References and further reading
– Investopedia — “Gartley Pattern”: https://www.investopedia.com/terms/g/gartley.asp
– H.M. Gartley, Profits in the Stock Market (1935) — original work on the pattern.
– Additional harmonic‑pattern resources and charts (TradingView, harmonic pattern communities) for practice and pattern scanners.
If you want, I can:
– Provide a checklist image or printable PDF of the Gartley trading checklist.
– Scan a chart you provide and mark potential Gartley patterns with suggested entries/stops/targets.