THE GARTLEY PATTERN

Gartley is arguably the most common forex harmonic chart pattern. Named after H.M. Gartley,
who said that this pattern offers “one of the best trading opportunities”, the Gartley formation is
based on the idea that Fibonacci sequences have a structure that can be used to identify levels
of potential interest on both sides.

As with every harmonic chart pattern, there are bullish and bearish versions of Gartley. Both
have the same goal – help the overall trend to extend in the same direction. Hence, Gartley is
predominantly a continuation chart pattern that facilitates trend extension.

Gartley uses a combination of Fibonacci retracements to come up with a final level that
generates a buy signal. The basic idea behind this chart pattern, as well as with other harmonic
formations, is that the price action follows a specific pattern.

In essence, Gartley supporters believe that the price is likely to bounce from one Fibonacci-
identified level to the other until the final buy/sell signal is generated. This way, a geometric
shape is formed, as illustrated in the photo below.

1
GARTHLY
 Bullish and Bearish Gartley patterns

As seen in the illustration above, the Gartley consists of five different points. They are marked by
numbers (0, 1, 2, 3, 4), or more frequently by letters (X, A, B, C, D). For Gartley to be verified as
such, the following requirements must be fulfilled in the first place:

2
GARTHLY
 • XA – This is where the pattern starts and it can be any price activity on the chart. The
only condition is that it is not a choppy, sideways trading action, as the idea behind
harmonics is to continue existing trends. Hence, the XA move initiates an uptrend or
a downtrend.
• AB – This is the first step that has clear and concise requirements. In theory, point B
(2) should end around the 61.8% Fibonacci retracement. Of course, it is highly
unrealistic to expect that the price action ends at 61.8% exactly; hence it is allowed
to offer variations to a certain degree.
• BC – The BC move (2-3) should follow the direction of the overall trend. The point C is
expected to end at the 38.2% Fibonacci level, near to the 88.6% Fibonacci level of the
AB move.
• CD – The price action then takes another turn and reverses the BC leg to a certain
point. If the BC leg ended at 38.2% of AB, then CD should finish at the 127.2%
extension of BC. Or, if BC leg ended at 88.6% of AB, then CD should be the 161.8%
extension of BC.
• XD – Once the CD leg is over, the final step assumes measuring the XD retracement,
which should end at 78.6%.

Ultimately, the point D signals a potential buy/sell trade. The blue trend line in the illustration
above signals the expected bullish move higher, once the price action reaches the region around
point D.

The bearish Gartley follows the same guidelines, with the XA move being to the downside and
the point D generating a sell signal.
3
GARTHLY