As a professional trader, you’re wondering what other trading strategies and techniques you can use to improve your trading performance. If you have yet to hear, the Gartley Harmonic Pattern is something that numerous traders are talking about lately. Especially those who are into deep technical analysis and different trading concepts.
Whether you’re an experienced trader or just learning and getting informed occasionally about it, you should know that there are numerous forms of stock or Forex trading in the market. Harmonic patterns are among those forms that have a slightly different approach to trading.
If you haven’t read it yet, in the book called the “Profits in the Stock Market,” H.M Gartley has explained his newly developed Gartley harmonic pattern in detail. This harmonic Gartley pattern became a huge thing among stock and Forex traders worldwide due to its good risk-reward ratio and high success rate.
So, what is the Gartley Harmonic Pattern all about? Why did it achieve major success among devoted traders globally?
The Gartley Harmonic Pattern represents the particular harmonic chart pattern that assists traders in spotting reaction highs and lows. It’s based on Fibonacci ratios and numbers representing a sequence of numbers from zero to one.
In his book, H.M. Gartley described the basis for Harmonic chart patterns back in 1935. Among numerous other chart patterns, the Gartley pattern is undoubtedly the most used harmonic chart pattern.
Generally speaking, Gartley patterns must be used in conjunction with numerous forms of tech analysis. These forms could act as confirmation.
The key benefit of the Gartley Harmonic pattern is that these types of patterns enable particular insights into the magnitude and timing of price movements, which is crucial for success in any trading market.
The Gartley Harmonic Pattern refers to the most common harmonic chart pattern that works on the proposition that Fibonacci sequences are utilized for creating geometric structures in prices such as:
The Fibonacci ratio has become extremely popular among professional traders that utilize Fibonacci tools. Also, tech analysts utilize the Gartley pattern and other technical indicators and patterns.
For instance, the Gartley harmonic pattern could provide a clear indication of where the price will probably go over the long-term period. At the same time, the traders would emphasize the execution of short-term trades in the predicted trend’s direction. It’s crucial to remember that traders often utilize breakdown and breakout price targets as resistance and support levels.
To identify the Gartley Harmonic pattern among numerous other patterns, it’s crucial to know the following information:
To successfully draw the Gartley harmonic pattern, here are some basic steps any trader needs to take:
Remember to always place your profit target and stop-loss in whichever Gartley pattern you encounter. In the graph explained in the steps above, it’s best to place your stop-loss beneath D and X points. Traditional traders should put their profit target near C, for instance.
Any trader has to follow some specific rules of the Harmonic Gartley Pattern. Being a part of the Harmonic family, it’s obvious that the Gartley Harmonic Pattern’s every swing needs to conform to particular Fibonacci levels. Let’s take a look at every single component of the famous Gartley structure:
This is the visual image of the Bullish Gartley Pattern:
Keep in mind that the Bearish Harmonic Gartley pattern represents the inverse of the Bullish Gartley harmonic pattern.
Now that you’re familiar with the basic rules of the Gartley pattern, it’s time to learn the simple and effective way of trading it. A Gartley pattern is normally a sign that the original “X to A” trend is about to restart.
Once the pattern completes, the market would reverse once again at D, signaling the end of that retracement. Regarding the bearish Gartley harmonic pattern, traders are able to trade this particular move by opening an opening position at the D. In case the pattern is bullish, it’s crucial to open a “buy position.”
When it comes to the Forex market, here is what it’s crucial to know about the Bearish and Bullish Gartley Harmonic Pattern:
The Bearish Gartley pattern is opposite to the Bullish Pattern, and it’s often referred to as the continuation and retracement pattern. Nonetheless, this pattern proposes that a sell signal could be appropriate instead of a buy signal.
This particular pattern is a valid downward move in price that’s been pursued by numerous retracements. Here’s an example of the GBP/USD chart that shows the Bearish Gartley pattern the best:
Regarding the foreign exchange market, the Bullish Gartley harmonic pattern is usually used for identifying a valid buying opportunity. It’s a continuation and a retracement pattern that projects the addition of an uptrend. Here’s an example of the GBP/USD chart that shows the Bullish Gartley pattern the best:
If you are a passionate Forex trader, you’d want to know how to best trade the Gartley Harmonic Pattern in the Forex market. If you want to execute a bearish or bullish Gartley trade, keep in mind that it involves creating the pattern, defining market entry, plus locating profit targets, and stopping losses.
It offers flexibility to the trader when it comes to market entry. It offers to buy and sell opportunities that depend upon the various conditions in the market. Usually, once the C-D leg retraces at 78.6% of Z-A, a directional move is when traders choose to buy or sell. The timing and profitability of bullish or bearish trade have improved.
Stop loss placing is relatively easy. It’s done above or below the Z-A leg origins. Its potential reversal zone looks like that:
With the Gartley pattern, profit target localization is rather subjective. Anyways, one method utilizes retracements level as downside or upside targets. For example, a trader can draw a Fibonacci retracement in a Bullish Gartley pattern from the highest A point to the lowest D. Once done. Profit targets could be placed at either 78.6% or 61.8%.
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