Gartley Pattern: Types, Rules and Trade Setup

Key Takeaways

• The Gartley pattern is a five point harmonic pattern that uses Fibonacci ratios to mark a potential reversal zone (PRZ) at point D.
• Point B sits at 61.8% of the XA leg, and a point B that reaches 78.6% means the chart no longer shows a Gartley pattern.
• Point D sits at 78.6% of the XA leg, so point D stays inside the XA leg and never goes past point X.
• A bullish Gartley pattern draws an M shape and ends above point X, while a bearish Gartley pattern draws a W shape below point X.
• MetaTrader 4 (MT4) and MetaTrader 5 (MT5) have no Gartley tool, so traders add 78.6% and 88.6% levels to the Fibonacci retracement tool by hand.
• Traders enter at point D after a confirmation candle, place the stop loss just beyond point X and take profit in stages.
• The first profit target can pay less than the risk when the stop loss sits beyond point X, which shrinks the risk to reward ratio.
• The Gartley pattern only suggests where price may turn, and a strong trend can run through point D and past point X.

What Is the Gartley Pattern?

The Gartley pattern is a harmonic pattern with five points, X, A, B, C and D, joined by four legs whose Fibonacci ratios point to a PRZ at point D. Harmonic patterns are chart patterns that measure each leg of price with Fibonacci ratios to find where a trend may turn. Two ratios define the Gartley pattern. Point B is a 61.8% Fibonacci retracement of the XA leg, and point D is a 78.6% Fibonacci retracement of the XA leg, so point D stays inside the XA leg. A Fibonacci retracement measures how far price pulls back over a leg, as a percentage of that leg.

The Gartley pattern is both a reversal pattern and a continuation pattern. At point D, the CD leg may end and price may reverse back in the direction of the XA leg, so the XA trend may continue. The Gartley pattern appears in forex, stocks, indices and commodities, because the Fibonacci ratios only measure leg lengths on the chart.

The number traders often see next to the name comes from where H.M. Gartley first described the Gartley pattern.

Why Is It Called the Gartley 222?

The Gartley pattern is called the Gartley 222 because H.M. Gartley described it on page 222 of his 1935 book Profits in the Stock Market. Gartley's book did not give exact Fibonacci ratios. Larry Pesavento first linked the Gartley pattern to Fibonacci ratios, and Scott Carney later set the exact ratios used today in his book The Harmonic Trader, with point B at 61.8% and point D at 78.6% of the XA leg. TMGM uses Carney's ratios throughout this guide. Gartley 222 and Gartley pattern mean the same thing.

Gartley Pattern Structure and Fibonacci Ratios

A valid Gartley pattern has point B at a 61.8% Fibonacci retracement of the XA leg and point D at a 78.6% Fibonacci retracement of the XA leg. Point C retraces 38.2% to 88.6% of the AB leg, and the CD leg is a 127% or 161.8% Fibonacci extension of the BC leg. A Fibonacci extension measures how far a new leg travels compared with the leg before it.

Point B at 61.8% of the XA leg is the defining ratio of the Gartley pattern. If point B reaches 78.6% of the XA leg, the chart no longer shows a Gartley pattern, because a 78.6% point B belongs to the Butterfly pattern.

Every Gartley pattern contains an ABCD pattern in its last three legs, and the CD leg should be close to the AB leg in length (AB=CD). Point D at 78.6% keeps point D inside the XA leg, which separates the Gartley pattern from the Butterfly pattern and the Crab pattern, where point D goes past point X.

The same ratios apply whether the XA leg rises or falls, which gives the Gartley pattern a bullish version and a bearish version.

Bullish vs Bearish Gartley Pattern

The difference between a bullish Gartley pattern and a bearish Gartley pattern is the direction of the XA leg, because the Fibonacci ratios are identical. In a bullish Gartley pattern, traders look for price to rise from point D. In a bearish Gartley pattern, traders look for price to fall from point D.

Bullish Gartley Pattern

A bullish Gartley pattern ends at point D above point X, where traders look for price to rise.

• Point X is a low.
• The XA leg rises from point X to point A.
• The AB leg falls to point B at 61.8% of the XA leg.
• The BC leg rises to point C, between 38.2% and 88.6% of the AB leg.
• The CD leg falls to point D at 78.6% of the XA leg, still above point X.

Because the legs go up, down, up and down, the bullish Gartley pattern draws an M on the chart. Some sources call the bullish version a W, so check the direction of each leg before you trust the letter.

Bearish Gartley Pattern

A bearish Gartley pattern ends at point D below point X, where traders look for price to fall.

• Point X is a high.
• The XA leg falls from point X to point A.
• The AB leg rises to point B at 61.8% of the XA leg.
• The BC leg falls to point C, between 38.2% and 88.6% of the AB leg.
• The CD leg rises to point D at 78.6% of the XA leg, still below point X.

Because the legs go down, up, down and up, the bearish Gartley pattern draws a W on the chart. The next step is finding either version on a real chart.

How to Identify a Gartley Pattern on a Chart

You identify a Gartley pattern by checking each leg against its Fibonacci ratio, starting with the XA leg.

1. Find a clear XA leg, a strong move up or down.
2. Check that point B sits near a 61.8% Fibonacci retracement of the XA leg.
3. Check that point C sits between 38.2% and 88.6% of the AB leg.
4. Project point D at a 78.6% Fibonacci retracement of the XA leg, and check that the CD leg is about 127% or 161.8% of the BC leg.
5. Mark the PRZ around point D, where the ratios meet.

Fibonacci ratios rarely land exactly on a real chart, but point B should sit close to 61.8% and point D close to 78.6%. Some traders also check time, looking for the XA leg and the run from point A to point D to take a similar number of candles.

Finding the Gartley pattern on MetaTrader 4 or MetaTrader 5 needs a small setup first.

How to Draw a Gartley Pattern in MT4 and MT5

MetaTrader 4 (MT4) and MetaTrader 5 (MT5) have no Gartley tool, so you draw a Gartley pattern with the Fibonacci Retracement, Fibonacci Expansion and Trendline tools. Neither platform includes 78.6% or 88.6% in its default Fibonacci retracement levels, or 127.2% in the Fibonacci Expansion tool, so add those levels once.

1. Open Insert, then Fibonacci, then Retracement in MT4, or Insert, then Objects, then Fibonacci, then Fibonacci Retracement in MT5.
2. Draw the Fibonacci retracement from point X to point A.
3. Open the Fibonacci retracement properties and add 0.786 and 0.886 with the Add button, in the Fibo Levels tab in MT4 or the Levels tab in MT5.
4. Check point B near 61.8%, and mark point D at 78.6%.
5. Draw a second Fibonacci retracement on the AB leg to check point C.
6. Use the Fibonacci Expansion tool from point B to point C, add 1.272 to its levels, and check where the CD leg ends.
7. Join points X, A, B, C and D with the Trendline tool.

Once the Gartley pattern is drawn and point D is marked, the next step is planning the trade.

How to Trade the Gartley Pattern

Trading the Gartley pattern means planning three things before price reaches point D, the entry, the stop loss and the profit targets. No Gartley pattern guarantees a reversal, so the stop loss comes first in the plan.

Step 1: How to Find the Gartley Pattern Entry Point

The entry for a Gartley pattern trade is at or near point D, after a confirmation candle shows price turning. A confirmation candle closes in the new direction, such as a bullish engulfing candle at point D in a bullish Gartley pattern. Entering before point D means guessing where the CD leg will end. Some traders also look for Relative Strength Index (RSI) divergence or a support or resistance level at point D for extra confirmation.

Follow these four steps to enter a Gartley pattern trade.

1. Wait for price to reach the PRZ around point D.
2. Check that point D sits close to 78.6% of the XA leg.
3. Wait for a confirmation candle that closes in the new direction.
4. Enter at or near point D once the confirmation candle closes.

Every entry needs a stop loss, and the Gartley pattern gives a clear place for one.

Step 2: How to Set the Gartley Pattern Stop Loss

Most traders place the stop loss for a Gartley pattern trade just beyond point X, below point X in a bullish Gartley pattern and above point X in a bearish Gartley pattern. Price moving past point X breaks the Gartley pattern, so a stop loss there exits once the Gartley pattern is no longer valid. A tighter stop loss just beyond point D lowers the risk, but gets hit more often. Size each trade so that a stop out costs only a small share of your account.

Follow these four steps to set the stop loss.

1. Find point X on the chart.
2. Place the stop loss just below point X in a bullish Gartley pattern, or just above point X in a bearish Gartley pattern.
3. Measure the distance from the entry to the stop loss, which is the risk on the trade.
4. Size the trade so that a stop out costs only a small share of your account.

With the risk set, the next step is deciding where to take profit.

Step 3: How to Set Gartley Pattern Profit Targets

The common profit targets for a Gartley pattern trade are the 38.2% and 61.8% Fibonacci retracements of the CD leg, then point C, then point A.

1. Target 1 is the 38.2% Fibonacci retracement of the CD leg.
2. Target 2 is the 61.8% Fibonacci retracement of the CD leg.
3. Target 3 is point C.
4. Target 4 is point A.

Many traders close part of the trade at each profit target. Target 1 often sits close to point D, which matters for the risk to reward ratio, the comparison between what a trade can lose and what it can gain. A worked example puts the entry, the stop loss and the profit targets together.

Gartley Pattern Trading Example

A bullish Gartley pattern with point X at 100 and point A at 200 shows all five points, the stop loss and four profit targets in one trade plan. The prices are for illustration only, with no real instrument and no outcome.

The risk on the trade is 22.4, the distance from the entry at 121.4 to the stop loss at 99. Target 1 at 142.4 is only 21.0 away from the entry, so target 1 pays slightly less than the risk. Target 2 pays 34.0, point C pays 55.0 and point A pays 78.6, so only target 2 and beyond pay more than the risk. The trade plan decides whether the risk to reward ratio is worth taking, and spotting the Gartley pattern alone does not.

The Gartley pattern is one of several harmonic patterns, and point B and point D are the quickest way to tell them apart.

Gartley Pattern vs Other Harmonic Patterns

The Gartley pattern is the only one of these harmonic patterns with point B at 61.8% and point D at 78.6% of the XA leg, inside the XA leg.

The Butterfly pattern looks the most like the Gartley pattern, but in a Butterfly pattern point B reaches 78.6% and point D goes past point X. The ABCD pattern has no point X, and every Gartley pattern contains an ABCD pattern in its last three legs.

Knowing what makes the Gartley pattern different helps you weigh what it does well and where it falls short.

Advantages and Limitations of the Gartley Pattern

The Gartley pattern gives clear rules, but valid Gartley patterns are rare and the reward is often small next to the risk.

The Gartley pattern has four main advantages.

• Clear rules for each leg let traders check a Gartley pattern against set Fibonacci ratios.
• A defined entry zone at the PRZ tells traders where to watch for a confirmation candle.
• The stop loss and profit targets can be planned in advance from points X, C and A and the CD leg.
• Forex, stocks, indices and commodities all show Gartley patterns, because the ratios only measure leg lengths.

The Gartley pattern also has real limitations.

• Valid Gartley patterns are rare, because all four legs must fit their Fibonacci ratios at the same time.
• Spotting a Gartley pattern is hard on a live chart, because many shapes that look close miss one ratio.
• The choice of point X moves the PRZ, so two traders can mark point D at different prices on the same chart.
• The first profit target can be smaller than the risk when the stop loss sits beyond point X, as the worked example shows.
• A strong trend can run through point D and past point X, which breaks the Gartley pattern and triggers the stop loss.
• No Gartley pattern guarantees a reversal, so every Gartley pattern trade can lose money.

FAQs

Is the Gartley Pattern a Fibonacci Pattern?

Yes, the Gartley pattern is a Fibonacci pattern, because every leg is checked against a Fibonacci ratio. Point B sits at 61.8% of XA, point C at 38.2% to 88.6% of AB, the CD leg at 127% or 161.8% of BC, and point D at 78.6% of XA. Larry Pesavento and Scott Carney added these ratios after Gartley's 1935 book.

Is the Gartley Pattern a Reversal or Continuation Pattern?

The Gartley pattern is both a reversal pattern and a continuation pattern. Price may reverse at point D, where the CD leg ends, and that reversal points back in the direction of the XA leg. So the Gartley pattern marks a reversal of the CD leg and a possible continuation of the XA trend.

Which Harmonic Pattern Is the Best?

No single harmonic pattern is the best, because each one places point D and the stop loss differently. The Gartley pattern keeps point D inside the XA leg, so point X gives a clear stop loss level. The Butterfly pattern and the Crab pattern push point D past point X, so traders set the stop loss from point D instead.

Does the Gartley Pattern Work on Any Timeframe?

Yes, the Gartley pattern works on any timeframe and in any market, from short intraday charts to daily and weekly charts. Lower timeframes show more Gartley patterns, but more of those Gartley patterns are false, because small price changes can fit the ratios by chance. Higher timeframes show fewer Gartley patterns with clearer legs.