The Bearish and Bullish Gartley


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Video Transcript:

Hello, traders. Welcome to the 7th Module of the Advanced Technical Analysis Course: Harmonic Patterns. In this lesson, we’re going to teach you how trade and how to draw the Bearish and the Bullish Gartley.

A little bit of history before we start, okay? The Gartley was discovered by H.M. Gartley in 1935. Even though he did not discuss the specific Fibonacci ratios in his book, Scott Carney assigned the specific retracements of the B point and D point to it. The retracement levels that yield the most reliable reversals are the 0.618 at the B point, and the 0.786 at the D point.

Now let’s see some actual drawings so you can better understand what we are talking about. The B point, which is this one, has the retrace 0.618 of the XA leg for us to start to get a valid Gartley. Then, the D point must retrace 0.786 of the XA leg for us to get a reliable Gartley. And here you will have the buying zone in a Bullish Gartley. In a Bearish Gartley it is the same, but on the opposite side. The XA leg is a down wave, and the AB leg, which has to retrace 0.618 is an up leg as well as the CD leg, which has to retrace a full amount of 0.786 of the XA leg for us to get a valid Bearish Gartley and for us to be able to short this area.

Gartley Pattern

But we also have a few other considerations or conditions that we need to keep in mind for us to actually have a valid Gartley to trade. The pattern should posses a distinct AB=CD pattern that converges in the same area as the 0.786 XA retracement. This means that this area right here, which is the 0.786 retracement, has to be also a convergence of a perfect AB=CD pattern. And the AB=CD pattern is, of course, the point A, B, C and D. So to give you a full image of what a Gartley is, first of all you’ll have to pick an XA leg up and a retracement. If the AB leg retraces the 0.618, we can start to think we may have a Gartley in our hands.

Then the C-point has to retrace between 0.382 and 0.886, and the D-point has to retrace 0.786 percent of the XA leg, and we must have an AB=CD pattern right here. The D-point has also to converge with the 0.786 XA retracement and the 1.272, 1.61 ABC extension. Now, let me explain this to you, okay? The D-point has to retrace 78.6 percent of the XA leg, but it also has to be an extension of the ABC move, okay? An extension that has to be between 1.27 and 1.618. So those are all of the rules for you to have a valid Gartley on your hands.

And if you have a valid Gartley in your hands the D-point is the buying area in a Bullish Gartley, and the D-point should be a selling area in a Bearish Gartley. Now, let’s look at an example, okay? Here you have an up move. As I told you before, we start with the first leg and you see that we have an XA-point, an X-point here, and we can grab an A-point here because we are starting to retrace, and we get a full retracement, okay? Now, after we get this retracement, we need to draw or to measure the Fibonacci retracement level that has been hit right here. And the way to draw it is from point X to point A, and we get a 0.618 retracement level, so we pick this as our point B.

And now we can start to think that we might have Gartley in our hands, so we continue to follow price. In this case, price actually bounces off the 0.618 and goes all the way up to the 0.786 retracement of the leg AB, which is right between the ratios that needed to be on this point for us to have a valid C-point. Then price bounces down off the 0.786 percent and we hit the 0.786 percent retracement of the leg XA which is also the 1.272 extension of this move right here. So we do have a valid Gartley in our hands, and our buying zone has to be this area right here with our stops below the X, and the first targets can be around this area of previous resistance, and the last targets should be around the C-point. As you can see in this example, price moves all the way up to the A-point.

So this is how you follow price in order to spot a harmonic pattern. Okay? You have to follow price. At first you have to follow the first leg, then you have to measure the first Fibonacci retracement level. If it is hit and if price bounces off of it you measure the second Fibonacci ratio, which is the Fibonacci ratio of the leg AB. If it bounces off of it, you go and you see if it hits the Fibonacci ratio that we need from the leg XA, and the Fibonacci extension from the BC move. And if it does, you have a high probability trade in your hands and you must take it.

Adam

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