Summary Cheat Sheet: Trading the Gartley Pattern: Ratios, Rules and Best Practices

What is the Gartley Pattern in Forex

 Gartley is a special chart pattern within the harmonic pattern universe.

 H.M Gartley introduced the Gartley pattern to the world in his book entitled “Profits in the Stock
Market” which he wrote back in 1935. In the book and specifically on page 222.

 The pattern resembles an M/W shape on the chart, depending on whether it is a bullish or a
bearish Gartley. As such, the pattern consists of five points on the chart. These points are marked
with X, A, B, C, and D.

Rules of the Gartley Pattern

 Since the pattern is a member of the Harmonic family, each swing should conform to specific
Fibonacci levels. We will now go through each component of the Gartley structure:

 XA: The XA move could be any price activity on the chart. There are no specific requirements in
relation to the XA price move of the Gartley chart formation.

 AB: The AB move should be approximately 61.8% of the XA size. So, if the XA move is bullish, then
the AB move should reverse the price action and should reach the 61.8% Fibonacci retracement of
XA.

 BC: The BC move should then reverse the AB move. At the same time, the BC move should finish
either on the 38.2% Fibonacci level, or on the 88.6% Fibonacci level of the prior AB leg.

 CD: The CD should be a reversal of the BC move. Then if BC is 38.2% of AB, then CD should respond
to the 127.2% extension of BC. If BC is 88.6% of AB, then CD should be the 161.8% extension of BC.

 AD: Then there is the last rule for the Gartley pattern. When the CD move is complete, you should
measure the AD move. A valid Gartley on the chart will show an AD move, which takes a 78.6%
retracement of the XA move.

Refer to the illustration below which will help you visualize these rules for the Gartley pattern:
Gartley Trading Strategy

Gartley Trade Entry

If you have a bullish Gartley figure on the chart, you can open a long trade when you identify these
two conditions:
o CD finds support at 127.2% or 161.8% Fibonacci level of the BC move.
o The price action bounces in a bullish direction from the respective Fibonacci level.

Gartley Stop Loss

o If you open a Gartley trade, your stop loss order should be located right below the D point
of the pattern.

Gartley Take Profit

My preferred method for trading Gartleys is to enter a full position after the D bounce and then
scale out at different levels. As mentioned earlier, the targets that I look for are as follows:

o Target 1: B Swing
o Target 2: C Swing
o Target 3: A Swing
o Target 4: E (161.8% of AD)
o Then if the price momentum continues to show signs of strength, you can opt to keep a
small portion of the trade open in an attempt to catch a large move.
Refer to the illustrations below which will help you visualize the Gartley trade strategy: