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.
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.
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.
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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