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Trading Gartley and Butterfly Patterns

The Gartley pattern is named after H. M. Gartley who wrote a book in 1935 called “Profits in the Stock Market”. The second pattern is called a “Butterfly”, which is a variation of the Gartley.

Gartley and Butterfly reversals appear on all time frame charts. They are very useful tool for every trader. These patterns formed near important support or resistance levels are very powerful. Identifying of these patterns can be used with other trading strategies.

Patterns

Bullish Gartley Bearish Gartley

The first pattern on the left is a Bullish Gartley. It might not look bullish to you, but it should reverse at point D and move higher. The chart on the right is a Bearish Gartley. In this case you would short at point D because a decline from point D is expected.

There are several intricate components to a Gartley, but the most basic rules are: Leg X to A is an impulse move and the retracement leg A to D is a distinct two wave move where leg A to B equals leg C to D (in points).

There is a great indicator by nen that identifies the patterns for you.

Bullish Butterfly Bearish Butterfly

In this case you would short at point D because a decline from point D is expected. This pattern is named based on the fact that it looked like the wings of a buttefly. The biggest difference between this pattern and the Gartley is that the A to D leg is always GREATER (in points) than the X to A leg. The A to D leg will most often be 1.272 or 1.618 times greater (in points) than the X to A leg.

Examples from forex trading

On June 6 2007, the patterns appeared on 3 majors at the same time at the beginning of European session.

EURUSD

GBPUSD

USDCHF

Using patterns with other indicators and trading techniques

Technical analysis on 4 hours chart.

Bearish Butterfly identified on 15 minutes chart supported by 4 hours technical analysis.

 

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Foreign exchange trading carries a high level of risk and may not be suitable for all investors. Do not invest more money than you can afford to lose. You can lose some or all of your initial investment. Any performance claims on this site are not necessarily indicative of future results.


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