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Harmonic Trading Patterns

The document discusses the Harmonic Gartley pattern and provides a strategy for trading it. Specifically, it outlines how to identify the pattern using common trading platforms or indicators, defines the key Fibonacci ratios the pattern must follow, and gives a 4-step process for trading it: 1) Buy at point D when it reaches 1.272-1.618 of leg AB, 2) Place a protective stop loss below wave X, 3) Take profits when the price moves the same distance as leg XA from point D, 4) The strategy can be used for both buy and sell trades on the pattern.

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Sundaresan Subramanian
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1K views

Harmonic Trading Patterns

The document discusses the Harmonic Gartley pattern and provides a strategy for trading it. Specifically, it outlines how to identify the pattern using common trading platforms or indicators, defines the key Fibonacci ratios the pattern must follow, and gives a 4-step process for trading it: 1) Buy at point D when it reaches 1.272-1.618 of leg AB, 2) Place a protective stop loss below wave X, 3) Take profits when the price moves the same distance as leg XA from point D, 4) The strategy can be used for both buy and sell trades on the pattern.

Uploaded by

Sundaresan Subramanian
Copyright
© © All Rights Reserved
Available Formats
Download as DOC, PDF, TXT or read online on Scribd
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Harmonic trading patterns – Indicator

The advance in technology and the multitude of trading platform available for traders has made the process of identifying the
Harmonic Gartley quite easy.
Many platforms have built-in automated indicators that will draw the Gartley chart pattern and will help you have a better
visualization of the pattern while at the same time making sure that it‘s following the Fibonacci ratios as per the rules.
You can find the Harmonic Patterns Indicator on most popular Forex trading platforms (TradingView and MT4) in the indicator
section. There are also some harmonic pattern software that can spot automatically the Gartley.

Now, let’s move forward and see how to trade the gartley chart pattern.

How to Trade the Gartley Chart Pattern


The Gartley market strategy like any other harmonic pattern is a four-leg reversal pattern that follows specific Fibonacci ratios. A
proper Gartley chart pattern needs to fulfill the following three Fibonacci rules:
 AB= retrace to 0.618 Fibonacci Retracement of XA leg;
 BC= minimum 38.2% and maximum 78.6% Fibonacci retracement of AB leg;
 CD= Poses a target between 1.27 – 1.618 Fibonacci extension of AB leg or an ideal target of 0.786 of XA leg. The
Gartley harmonic shares some similarities with the Butterfly Harmonic Pattern.
Note* The Fibonacci retracement and ratios are at the core of harmonic trading. Make sure the above rules are satisfied
before you trade the Gartley harmonic pattern.
We have a five-points set up with the Gartley pattern labeled XABCD which are following the Fibonacci ratios. The key ratio
involved in the harmonic trading Scott Carney PDF are 38.2%, 61.8%, 78.6% and 100%.
Gartley chart patterns that lead to the double tops and double bottoms can be great areas for reversals in the market. Also, you
can use Gartley in directional trades in the direction of the market.
The key Fibonacci ratio that makes the Gartley apart from the other harmonic chart patterns is the shallow retracement of the AB
swing leg which is only 61.8% of the XA leg.
Another characteristic of the Gartley 222 pattern is the symmetry that can be found inside the A through D swing wave. The AB
swing leg can be equal to the CD swing leg to offer us an ideal low risk high reward entry point.
Let’s take one step forward and see how you can make money applying the Gartley trading rules.

Gartley Harmonic Pattern Trading Strategy


The Gartley chart pattern is only giving us a possible entry point without telling much about where to place our protective stop loss
and where to take the profits. Now, we can keep things simple and use the Gartley price structure to our advantage.
The Gartley Market Strategy has been tested across different asset classes (currencies, commodities, stocks and
cryptocurrencies).
We recommend that you take the time and backtest the harmonic bat patterns strategy before attempting to use this advanced
pattern in your trading strategy.
Step #1 How to Draw Gartley Pattern
To learn how to draw gartley pattern simply follow step by step guide – see figure below for a better understanding of the process:
 First, click on the harmonic pattern indicator which can be located on the right-hand side toolbar of the TradingView
platform.
 Identify on the chart the starting point X, which can be any swing high or low point on the chart.
 Once you’ve located your first swing high/low point you simply have to follow the market swing wave movements.
 You need to have 4 points or 4 swings high/low points that bind together and form the harmonic bat pattern strategy.
Every swing leg must be validated and abide by the Gartley forex Fibonacci ratios presented above.
Now, we’re going to lay down the Gartley trading rules.
See below…
Note* for the purpose of this article we’re going to use the case for a bullish Gartley harmonic.
Step #2: How to Trade Gartley Chart Pattern: BUY at Point D which
should satisfy the requirement CD = 1.272 – 1.618 of AB leg.
Ideally, any trades taken using the Gartley harmonic are taken near the point D.
Once a bullish Gartley price action has been identified and subsequently the swing D leg in price has been formed thus
generating a buy signal we can go one step forward and define good location for our protective stop loss and an ideal target.
In the above chart, we can spot a bullish Gartley price pattern on the NZD/USD weekly chart, which is a signal to buy. You can sell
anywhere between the 1.272 and 1.618 Fibonacci retracement, but for better timing your entry you can also use our price action
guide – harmonic trading patterns or simply enter as soon as we hit 1.272.
It’s also worth to note that the Gartleylooks the same like a mirrored Cypher harmonic pattern.
The next important thing we need to establish is where to place our protective stop loss.
See below…
Step #3: Place the Protective Stop Loss below wave X
Usually, you want to place your protective stop loss below wave X. That’s the logical place to hide your stop loss because any
break below will automatically invalidate the Fibonacci requirements for a Gartley harmonic.
The harmonic pattern success rate is solely dependent on these Fibonacci ratios. As an harmonic trader you want to make sure
Gartley satisfy these ratios.
The next logical thing we need to establish for the Gartley harmonic pattern trading strategy is where to take profits.
See below…
Step #4: Take profit equals the same price distance of the XA swing
leg as projected from the D point
Since the price is fractal in nature and repeats itself on different scales and different time frames we can make the best out of the
Fibonacci ratios by looking for a move that starts from the point D and which is equal in price distance to the swing XA for our take
profit target.
Now, there are many take profit strategies take can be applied here. We encourage everyone to experiment with different take
profit strategies.
We’re not implying this is the best approach because we believe each harmonic Gartley can be unique depending of the
Fibonacci ratios
Note** the above was an example of a BUY trade using the Bullish Gartley harmonic pattern trading strategy. Use the
same rules for a SELL trade. In the figure below you can see an actual SELL trade example.

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