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The Butterfly, the Bat, the Cypher and the Gartley patterns are
advanced harmonic chart patterns that go well beyond the basic
concepts of candlesticks, trendlines, and support and resistance.
If you have ever wondered what the professionals know that you
may be missing, these patterns may solve the mystery.
Each of these patterns are incredibly powerful signals that
professional traders use to identify retracement levels and entries.
They are patterns that every trader should know and this guide will
introduce you to one of the most common...The Gartley Pattern.
Understanding this pattern could open your eyes to fresh insights
into technical analysis.
In this guide, youll define what the Gartley Pattern is, understand
how to spot it, and learn how to use this critical pattern in your
trading plan.
BONUS: Read to the end to see the Gartley Pattern spotter exercises!
Yours Truly,
Chris Irvin
P.S. For real-time, up-to-the-minute stock picks and market updates,
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Copyright 2015 Market Traders Institute, Inc. | 1-800-866-7431 | MarketTraders.com
The
Gartley Pattern:
The Beginning
The Gartley Pattern has its foundation within the Fibonacci ratios.
If you are unfamiliar with Leonardo Fibonacci, it will suffice to know that
he was considered to be one of the greatest mathematicians of the middle
ages. One of his most important contributions to the Western world was
the introduction of the arabic numeral system to the Roman Empire. Another
contribution made by this scholar was the introduction of a series of numbers
that is now known as the Fibonacci Sequence.
It looks something like this:
55 34 = 1.618
34 55 = .618
The Fibonacci ratios that are used to evaluate the financial markets, and more specifically the Gartley
Pattern, have already been calculated and are at the heart of some amazing technical analysis tools.
The easy part is learning how to use those tools. The most frequently used Fibonacci ratios are as
follows:
Based on the correlation of the ratios as they are derived, we are able to use the retracement levels
to project the extension levels.
Example:
When the retracements and extensions are applied to charts, traders are able to project profit
targets based on correlations between the two. It really is like having a GPS for your trades. When
applied to a chart, the Fibonacci retracement and extension levels will look like this:
Back to the
Gartley Pattern
Now that we have some understanding of Fibonacci ratios and how they are used in the markets,
lets focus our attention back on the Gartley Pattern.
As stated previously, the Gartley Pattern is one of several patterns that help traders navigate the
BC retracement phase of the price swing. The example below shows where the BC retracements
are found in the trend. Based on the fact that the Gartley Pattern is a counter trend move, the price
swing is notated with lowercase letters and is referred to as a sub-abcd move.
Example:
The Gartley Pattern takes the same Fibonacci based price swing that
we use in the primary ABCD move and inverts it to measure the
retracement phase.
The Fibonacci retracement and extension ratios are the
same, but they move against the primary trend on a
smaller scale.
Gartley
Pattern Phases
The initial phase of the Gartley Pattern is the primary AB retracement.
The sub a begins at the primary B. From the sub b, the markets been
proven to retrace back to the .618 retracement level as shown below.
The next move of the Gartley Pattern is the sub ab retracement to the sub c. This retracement
moves the market back to a level that is at or near the .618 retracement of the ab boundary.
The third phase of the Gartley Pattern is the sub extension that moves the sub d extension down to
a level that is approximately 1.618.
The sub d extension may identify the low point of the retracement, which can also be identified as
the primary C.
This level will typically correspond to a level that is at or near the .786 retracement of the primary
AB boundary. Once the primary C has been identified, the trader can enter into the primary trend.
In this case re-establishing the bullish move.
PRO TIP:
For a full lesson on the Fibonacci Golden Ratio and how it could predict
entry and exit points for your trades, go to Lesson 6 of The Ultimate Stock
Course. Not an MTI student? Get a sneak peek of the Fibonacci Golden
Ratio on the live market charts when you register for an upcoming webinar.
Check the schedule and grab a ticket here.
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Gartly
Pattern
Exercises
Now that you know the ins and outs of the
Gartley Pattern, get your hands dirty.
Below youll find a series of exercises and
helpful hints for spotting Gartley Patterns and
finding trends within trends.
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Exercise:
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Exercise:
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Exercise:
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Exercise:
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Answer Sheet
1
A
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Answer Sheet
3
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Free Ticket:
Tactics for Higher Returns with Stock Trading.
Now that youve mastered one market pattern,
its time to expand your horizons. There are a handful
of market patterns that could help you detect market
shifts in direction more quickly, trade trends and find
potentially profitable entry and exit points like a pro.
To learn more patterns and to get an up-to-the-minute
market review update, attend an upcoming webinar (free
ticket for The Ultimate Traders Guide to Gartley Patterns
Profits owners).
Register Now
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