Gartley Pattern

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Gartley Pattern

What it is

The Gartley pattern is a harmonic chart pattern that uses Fibonacci ratios to identify potential reversal zones in price action. First described by H.M. Gartley and later refined with Fibonacci levels, it helps traders anticipate the timing and magnitude of turnarounds in trending markets.

Key characteristics

  • Structure: a five-point formation labeled X–A–B–C–D.
  • Completion at point D signals a high-probability reversal zone and a potential entry.
  • Fibonacci relationships define acceptable proportions between legs; exact conformance improves reliability but is not required.
  • Often combined with other technical tools (trendlines, support/resistance, momentum indicators) to confirm signals.

Common Fibonacci ratios (classic Gartley)

  • AB ≈ 61.8% retracement of XA
  • BC ≈ 38.2%–88.6% retracement of AB
  • CD ≈ 127.2%–161.8% extension of BC
  • D ≈ 78.6% retracement of XA (the primary completion zone)

How to identify a Gartley (step-by-step)

  1. Identify an initial impulse move XA.
  2. AB should retrace about 61.8% of XA.
  3. BC then retraces a portion of AB (commonly 38.2%–88.6%).
  4. CD extends BC (often 127.2%–161.8%) and lands near the 78.6% retracement of XA — this is the potential reversal (D).
  5. Confirm with price action (reversal candlesticks) or technical indicators before entering.

Trading rules and targets

  • Entry: consider entering a long (bullish Gartley) or short (bearish Gartley) near point D after confirmation.
  • Stop loss: typically placed beyond X (just past the pattern’s origin) to limit risk.
  • Profit targets: common targets are:
  • Partial profit at the 38.2% retracement of CD (or at point B).
  • Second target near the 61.8% retracement of CD (or at point C).
  • Some traders use extended targets based on BC extensions (e.g., 127%–161.8% of BC) for larger moves.
  • Risk management: position size should account for distance between entry and stop; the pattern is probabilistic, not guaranteed.

Bullish vs bearish

  • Bullish Gartley: XA is an up move, D is a higher-probability long entry when price retraces into the completion zone.
  • Bearish Gartley: the pattern is inverted; XA is a down move and D indicates a potential short entry.

Practical considerations

  • Ratios are guidelines — patterns rarely match Fibonacci levels exactly. Closer alignment increases the pattern’s reliability.
  • Use confluence: trend context, support/resistance, volume, and momentum indicators can strengthen signals.
  • Backtest and paper-trade the setup for the specific instrument and timeframe you trade.

Example (illustrative)

In a bullish Gartley on AUD/USD, a trader might:
* Identify D near the 78.6% retracement of XA.
Place a stop-loss just below X (e.g., 0.70550).
 Take profit at conservative target near point C (e.g., ~0.71300) or use multiple exits at 38.2%/61.8% retracements of CD.

Bottom line

The Gartley pattern is a widely used harmonic formation that leverages Fibonacci ratios to highlight probable reversal zones. When combined with confirmation tools and disciplined risk management, it can help traders identify structured entry, stop, and target levels.