Gartley Pattern: How to Identify and Trade It

What Is the Gartley Pattern?

The Gartley pattern was introduced by H.M. Gartley in his 1935 book Profits in the Stock Market. He discovered that the market moves in repetitive waves and that certain price patterns follow predictable Fibonacci levels, making them useful for traders.

This pattern is part of harmonic trading, a strategy that uses Fibonacci retracements and extensions to identify high-probability reversal zones. Unlike basic chart patterns, harmonic patterns focus on precise price movements rather than general trends.

The key Fibonacci levels in a Gartley pattern are:

• 61.8% retracement of the first price swing (X-A)

• 38.2% to 88.6% retracement of the second swing (A-B)

• 78.6% retracement of the full move (X-A), which forms the final point (D)

By following these ratios, traders can spot potential reversals and enter trades with better accuracy.

Structure of the Gartley Pattern

The Gartley pattern is made up of four price swings: X-A, A-B, B-C, and C-D. These legs create a unique shape that helps traders identify potential reversal zones based on Fibonacci levels.

Breaking Down the Pattern

1. X-A Leg:

   • The first price move, either up or down, setting the foundation for the pattern.

2. A-B Leg:

   • A retracement of the X-A leg, typically pulling back 61.8% of the initial move.

3. B-C Leg:

   • A partial reversal of the A-B move, retracing between 38.2% to 88.6% of A-B.

4. C-D Leg:

   • The final and most important move, extending to 78.6% of X-A, where the pattern completes.

Key Fibonacci levels in the Gartley pattern:

• A-B retracement of X-A: 61.8% (main confirmation level)

• B-C retracement of A-B: 38.2% to 88.6% (varies)

• C-D completion: 78.6% of X-A (ideal entry point for trades)

Once the pattern reaches point D, traders look for price confirmation before entering a trade, aiming for a potential trend reversal.

How to Identify the Gartley Pattern

The Gartley pattern can be tricky to spot at first, but by following a step-by-step approach and using Fibonacci tools, traders can accurately identify it.

1. Find the X-A move: Look for a strong price movement in one direction.

2. Identify the A-B retracement: Check if the price pulls back to around 61.8% of the X-A move.

3. Look for the B-C retracement: The price should reverse from A-B, retracing between 38.2% and 88.6% of A-B.

4. Confirm the C-D leg: The final leg should end near 78.6% of the X-A move—this is where the trade setup completes.

5. Validate with Fibonacci tools: Use the Fibonacci retracement and extension tools to measure each leg correctly.

Best Time Frames for Gartley Pattern Trading

The Gartley pattern works on all timeframes, but its reliability depends on the market and trading style:

• Short-Term Traders: 15-minute to 1-hour charts for quick trades.

• Swing Traders: 4-hour and daily charts for stronger, more reliable setups.

• Long-Term Investors: Weekly charts for significant trend reversals.

For higher accuracy, traders prefer 4-hour and daily timeframes, as they reduce false signals and offer better risk-to-reward ratios.

Bullish Gartley Pattern vs. Bearish Gartley Pattern

The Gartley pattern can appear in both bullish and bearish forms, indicating potential trend reversals.

Bullish Gartley Pattern

A bullish Gartley pattern appears after a downtrend and signals a potential upward reversal.

• Key Fibonacci Levels:

  • A-B retracement: 61.8% of the X-A move.

  • B-C retracement: Between 38.2% and 88.6% of A-B.

  • C-D completion: At 78.6% of X-A.

• Entry Point: Buy at point D, ideally near a support zone.

• Stop-Loss Placement: Below point D to manage risk.

• Profit Target: Typically set at 38.2% or 61.8% retracement of C-D.

Bearish Gartley Pattern

A bearish Gartley pattern appears after an uptrend and signals a potential downward reversal.

• Key Fibonacci Levels:

  • A-B retracement: 61.8% of the X-A move.

  • B-C retracement: Between 38.2% and 88.6% of A-B.

  • C-D completion: At 78.6% of X-A.

• Entry Point: Sell at point D, ideally near a resistance level.

• Stop-Loss Placement: Above point D to limit risk.

• Profit Target: Typically at 38.2% or 61.8% retracement of C-D.

Key Differences

Below is a table that summarizes the difference between a bearish and a bullish Gartley Pattern:

Gartley Pattern vs. Bat Pattern

Both the Gartley pattern and the Bat pattern are part of harmonic trading and help traders identify potential reversals. However, they have key differences in Fibonacci levels, structure, and reliability.

So which pattern to use?

• Use Gartley if: You want an early entry and trade in a trending market.

• Use Bat if: You prefer a deeper entry point with a better risk-reward ratio.

Common Mistakes and How to Avoid Them

Trading the Gartley pattern can be highly effective, but many traders make avoidable mistakes that lead to losses. Here are the most common errors and how to prevent them:

• Misidentifying the Pattern: Confusing Gartley with other harmonic patterns.

  • Use Fibonacci tools to confirm key levels (61.8% A-B, 78.6% C-D).

• Entering Too Early: Trading at D without confirmation.

  • Wait for candlestick patterns and RSI/MACD signals.

• Incorrect Stop-Loss Placement: Stops too close to D, leading to premature exits.

  • Place stop-loss beyond X and use ATR for adjustments.

• Ignoring Market Context:  Trading against the trend or during news events.

  • Align with higher timeframe trends and avoid volatile periods.

• Poor Risk Management: Risking too much on one trade.

  • Stick to the 1-2% risk rule and ensure a 1:2 risk-reward ratio.

• Unrealistic Profit Targets:  Holding trades too long.

  • Take partial profits at 38.2% or 61.8% of C-D and use a trailing stop.

Tools and Indicators to Use for Gartley Pattern Trading

The Fibonacci retracement and extension tools are essential for identifying the Gartley pattern, as they help measure price pullbacks and project potential reversal points. Harmonic pattern scanners, available on platforms like MT4, MT5, and TradingView, automate pattern detection, reducing human error.

Oscillators like RSI, MACD, and Stochastic confirm trade entries by identifying overbought or oversold conditions, ensuring point D aligns with a potential reversal zone. Volume indicators such as OBV and Volume Profile add further confirmation by showing whether buying or selling pressure supports the reversal.

To align with market trends, traders often use moving averages (50 & 200 EMA) to determine trend direction before entering a trade. The ATR (Average True Range) indicator helps set appropriate stop-loss levels by adjusting for market volatility.

Conclusion

The Gartley pattern remains a widely used harmonic pattern for identifying potential market reversals with well-defined entry, stop-loss, and profit targets. By applying Fibonacci tools, confirming trades with technical indicators, and following a structured approach, traders can improve their decision-making.

Understanding its structure, common mistakes, and key differences from similar patterns helps traders use it more effectively in various market conditions.