Tracing down the harmonic Gartley trading pattern, the Gartley “222”pattern is the page number found in H.M. Gartley’s book” Profits in the Stock Market.” Gartley did not give it a name and hence for some time it had been called the 222 pattern after the page number of the book.
Gartley pattern is in form of a bullish W or bearish M. It is mainly a continuation pattern that appears when a trend pauses before continuing in its trend direction. It starts with strong uptrend or downtrend which draws zigzag like corrective movements
It looks like A-B-C-D pattern except that it has an extra leg of X-A. Let’s look at the typical characterristics
Take a look at the illustration below;
- X should exceed D.
- Move AB should be 61.8% retracement of XA.
- Move BC must be 38.2% or 88.6% retracement of AB.
- If BC is 38.2% of AB, then the CD must move 127.2% extension of BC.
- If BC is 88.6%, then the CD should be 161.8% of BC.
- CD should be 78.6% retracement of XA
How to trade a Gartley pattern on a market chart
Let’s start with an example below with a Bearish Gartley pattern
From our example above, Sell trigger entry is at D. The stop loss is placed few pips above the farthest possible D level. The safe target lies within 38.2-61.8% of AD move. The most important point to ensure is to have a favorable risk reward ratio.
Now, take a look at the chart below with a Bullish Gartley pattern
From our example above, the Buy entry signal is at D. The stop loss is placed few pips below the farthest possible D level. The safe target lies within 38.2-61.8% of AD move. The most important point to ensure is to have a favorable risk reward ratio.
Now that we know how a Gartley pattern looks like, let’s take a look at the Animals as named by Scott Carney in the next lesson.
How long you should hold an open position, is a personal thing for all traders. The decision is all yours. You know what your goals are as a trader, the kind of strategy you use to trade. All this starts from what you are? and What you want? If I am to answer, this...