Gartley Pattern: How Do Its Types, Rules and Trade Setup Work?

What Should Traders Know?

• A five-point harmonic structure defines the Gartley pattern, with Fibonacci ratios identifying a potential reversal zone (PRZ) at point D.
• The 61.8% retracement of the XA leg marks point B; if point B extends to 78.6%, the formation no longer qualifies as a Gartley pattern.
• The 78.6% retracement of the XA leg marks point D, keeping it within the XA leg rather than beyond point X.
• An M-shaped formation represents a bullish Gartley pattern, finishing above point X; the bearish version forms a W below point X.
• Neither MetaTrader 4 (MT4) nor MetaTrader 5 (MT5) includes a Gartley tool, requiring traders to add the 78.6% and 88.6% levels manually to the Fibonacci retracement tool.
• A confirmation candle precedes entry at point D, with traders setting the stop loss just beyond point X and booking profits in stages.
• The potential return at the first profit target may be below the risk if the stop loss is beyond point X, reducing the risk-to-reward ratio.
• A Gartley pattern indicates only a possible price turning point; a strong trend can continue through point D and beyond point X.

How Does the Gartley Pattern Work?

A possible reversal at point D is the focus of the Gartley pattern, a harmonic formation comprising five points, X, A, B, C and D. Four legs connect these points, and their Fibonacci ratios identify the PRZ. Harmonic patterns are price chart formations that use Fibonacci ratios to measure individual price legs and locate potential trend reversals. For a Gartley pattern, two ratios are essential: point B retraces 61.8% of the XA leg, while point D retraces 78.6%, remaining within that leg. A Fibonacci retracement expresses a price pullback as a percentage of the preceding leg.

Both reversal and continuation characteristics are present in the Gartley pattern. The CD leg may finish at point D, allowing price to turn back towards the direction of the XA leg and potentially extend the XA trend. Since Fibonacci ratios measure only the lengths of chart legs, Gartley patterns occur across forex, stocks, indices and commodities.

The number frequently attached to the pattern's name refers to the place where H.M. Gartley first described it.

Where Does the Name Gartley 222 Come From?

Page 222 of H.M. Gartley's 1935 book Profits in the Stock Market contains his description of the formation, giving rise to the name Gartley 222. Exact Fibonacci ratios were absent from Gartley's book. The initial link between the pattern and Fibonacci ratios came from Larry Pesavento. Later, in The Harmonic Trader, Scott Carney specified the ratios used today: point B at 61.8% and point D at 78.6% of the XA leg. This TMGM guide follows Carney's ratios throughout. The terms Gartley 222 and Gartley pattern refer to the same formation.

Which Fibonacci Ratios Define the Gartley Structure?

For a Gartley formation to be valid, point B must correspond to a Fibonacci retracement of 61.8% of the XA leg, with point D at its 78.6% Fibonacci retracement. The retracement at point C ranges from 38.2% to 88.6% of AB, while CD extends BC by a Fibonacci ratio of 127% or 161.8%. Fibonacci extensions compare the distance travelled by a new leg with the length of the preceding leg.

What distinguishes a Gartley pattern is point B's position at 61.8% of XA. A retracement to 78.6% at point B invalidates the Gartley classification: that point B ratio belongs to the Butterfly pattern.

Within the final three legs of every Gartley lies an ABCD formation, where CD should be approximately as long as AB (AB=CD). The 78.6% retracement places point D within XA. This separates the Gartley from the Butterfly and Crab patterns, both of which have point D beyond point X.

Whether XA moves upwards or downwards, the required ratios remain unchanged, producing bullish and bearish versions of the Gartley.

What Separates Bullish and Bearish Gartley Patterns?

Identical Fibonacci ratios underpin both versions of the Gartley; the distinction is whether XA rises or falls. Traders seek an upward move from point D in the bullish version and a downward move from point D in the bearish version.

How Is a Bullish Gartley Formed?

Traders watch for an upward price move when a bullish Gartley completes at point D, above point X.

• A low establishes point X.
• From X, the XA leg climbs to A.
• AB then declines to B, retracing 61.8% of XA.
• BC advances to C, retracing between 38.2% and 88.6% of AB.
• CD declines to D at the 78.6% retracement of XA, remaining above X.

An up-down-up-down sequence gives the bullish Gartley its M-shaped appearance. As some sources describe the bullish version as a W, verify each leg's direction rather than relying on the letter alone.

How Is a Bearish Gartley Formed?

Traders watch for a downward price move when a bearish Gartley completes at point D, below point X.

• A high establishes point X.
• From X, the XA leg declines to A.
• AB then advances to B, retracing 61.8% of XA.
• BC declines to C, retracing between 38.2% and 88.6% of AB.
• CD advances to D at the 78.6% retracement of XA, remaining below X.

A down-up-down-up sequence produces the bearish Gartley's W shape on a chart. With both versions understood, the next task is to recognise them in actual chart data.

How Can You Recognise a Gartley on a Chart?

Start with XA and test the Fibonacci ratio of each subsequent leg to determine whether a chart formation qualifies as a Gartley.

1. Locate a distinct XA leg showing a strong upward or downward move.
2. Verify that B is close to the 61.8% Fibonacci retracement of XA.
3. Confirm that C retraces between 38.2% and 88.6% of AB.
4. Estimate D at XA's 78.6% Fibonacci retracement, then verify that CD measures approximately 127% or 161.8% of BC.
5. Identify the PRZ surrounding D, where the ratios converge.

Exact Fibonacci matches are uncommon on real charts. Nevertheless, B should be near 61.8% and D near 78.6%. Some traders also compare duration, checking whether XA and the move from A to D span a similar number of candles.

A brief initial setup is needed to identify Gartley patterns in MetaTrader 4 or MetaTrader 5.

How Can You Plot a Gartley in MT4 and MT5?

MetaTrader 4 (MT4) and MetaTrader 5 (MT5) do not provide a dedicated Gartley tool. Instead, plotting the pattern requires the Fibonacci Retracement, Fibonacci Expansion and Trendline tools. Both platforms omit 78.6% and 88.6% from their default Fibonacci retracement levels, as well as 127.2% from the Fibonacci Expansion tool. Add these levels during the initial setup.

1. In MT4, select Insert, followed by Fibonacci and Retracement. In MT5, select Insert, Objects, Fibonacci and then Fibonacci Retracement.
2. Plot the Fibonacci retracement between X and A.
3. In the Fibonacci retracement properties, use Add to include 0.786 and 0.886. These settings are under Fibo Levels in MT4 and Levels in MT5.
4. Verify B's position near 61.8% and identify D at 78.6%.
5. Apply another Fibonacci retracement to AB to verify C.
6. Apply the Fibonacci Expansion tool from B to C, include 1.272 in its levels and verify the endpoint of CD.
7. Use Trendline to connect X, A, B, C and D.

After plotting the Gartley and locating D, attention turns to preparing the trade plan.

How Can You Plan a Gartley Trade?

Before price arrives at D, a Gartley trade requires decisions on entry, stop loss and profit targets. As the formation offers no guarantee of a reversal, planning begins with the stop loss.

Step 1: Where Should You Enter a Gartley Trade?

Once a confirmation candle indicates a turn in price, a Gartley entry is taken at or close to D. Such a candle closes in the new direction; one example is a bullish engulfing candlestick at D in a bullish Gartley. An entry ahead of D relies on guessing where CD will finish. For additional confirmation, some traders look for Relative Strength Index (RSI) divergence or a level of support or resistance at D.

The entry process consists of four steps.

1. Allow price to arrive within the PRZ surrounding D.
2. Verify that D is near XA's 78.6% retracement.
3. Look for a confirmation candle closing in the new direction.
4. After that candle closes, take the entry at or close to D.

A stop loss is necessary for each entry, and the Gartley structure provides a clearly identifiable location.

Step 2: Where Should the Gartley Stop Loss Go?

For most traders, the stop-loss level on a Gartley trade lies just beyond X: below it for a bullish formation and above it for a bearish formation. A move beyond X invalidates the Gartley, so a stop placed there closes the trade when the structure no longer holds. Placing a tighter stop just beyond D reduces risk but increases the frequency of stop-outs. Set the position size so that a stop-out loses only a small proportion of the account.

Use the following four steps to establish the stop loss.

1. Locate X on the price chart.
2. For a bullish Gartley, set the stop just below X; for a bearish Gartley, set it just above X.
3. Calculate the gap between entry and stop loss to establish the trade's risk.
4. Adjust the position size so that a stop-out loses only a small proportion of the account.

Once risk has been established, decide the levels at which to book profits.

Step 3: Which Profit Targets Apply to a Gartley Trade?

Traders commonly use CD's 38.2% and 61.8% Fibonacci retracements as the initial Gartley profit targets, followed by C and then A.

1. The 38.2% Fibonacci retracement of CD provides target 1.
2. The 61.8% Fibonacci retracement of CD provides target 2.
3. Point C provides target 3.
4. Point A provides target 4.

Partial exits at successive profit targets are common among traders. Because target 1 is often near D, it affects the risk-to-reward ratio, which compares the potential loss on a trade with its potential gain. The example below brings entry, stop loss and profit targets into a single plan.

What Does a Gartley Trade Plan Look Like?

Consider a bullish Gartley with X at 100 and A at 200: a single trade plan can show all five points alongside a stop loss and four profit targets. The prices are for illustration only, with no real instrument and no outcome.

An entry at 121.4 and stop loss at 99 create a risk of 22.4. By comparison, target 1 at 142.4 is just 21.0 from entry, offering slightly less reward than the amount at risk. The rewards increase to 34.0 at target 2, 55.0 at C and 78.6 at A. Only target 2 and the subsequent targets therefore offer more than the risk. Whether that risk-to-reward ratio is acceptable depends on the trade plan, not merely on identifying a Gartley.

Among the various harmonic formations, the quickest way to distinguish a Gartley is to examine B and D.

How Does the Gartley Differ From Other Harmonic Patterns?

Of the harmonic patterns compared here, only the Gartley places B at 61.8% of XA and D at its 78.6% retracement, within the XA leg.

The Butterfly formation most closely resembles a Gartley. Its distinguishing features are B at 78.6% and D beyond X. By contrast, an ABCD has no X, although an ABCD structure is present in the final three legs of every Gartley.

These distinctions provide a basis for assessing the Gartley's strengths and shortcomings.

What Are the Gartley Pattern's Strengths and Limitations?

Clear rules are a strength of the Gartley, but valid formations occur infrequently, and potential reward is often modest relative to risk.

Four principal benefits stand out.

• Specific rules govern every leg, allowing traders to test the formation against prescribed Fibonacci ratios.
• The PRZ provides an identifiable entry area, indicating where traders should look for a confirmation candle.
• Advance planning of stop loss and profit targets is possible using X, C and A, together with CD.
• Across forex, stocks, indices and commodities, Gartley formations can appear because their ratios measure only leg lengths.

Several meaningful limitations also apply.

• Genuine Gartley formations occur infrequently, as all four legs must meet their Fibonacci requirements simultaneously.
• Live-chart identification can be difficult, since many near-matching formations fail to meet one of the ratios.
• Selecting a different X changes the PRZ, allowing two traders to identify D at different prices on an identical chart.
• Reward at the first target may fall short of risk if the stop loss is placed beyond X, as illustrated in the worked example.
• A powerful trend may continue through D and beyond X, invalidating the formation and activating the stop loss.
• A reversal is never guaranteed by a Gartley, and any trade based on the formation can therefore lose money.

Frequently Asked Questions

Does the Gartley Qualify as a Fibonacci Pattern?

It does: each leg of a Gartley is tested against a Fibonacci ratio. The required levels are B at 61.8% of XA, C at 38.2% to 88.6% of AB, CD at 127% or 161.8% of BC and D at 78.6% of XA. These ratios were introduced by Larry Pesavento and Scott Carney after the publication of Gartley's 1935 book.

How Can the Gartley Signal Both Reversal and Continuation?

Both characteristics apply: the Gartley is a pattern signalling reversal as well as a pattern signalling continuation. At D, the endpoint of CD, price may turn back towards the direction established by XA. It therefore identifies a potential reversal of CD alongside a possible resumption of the XA trend.

Is Any Harmonic Pattern Better Than the Others?

There is no universally best harmonic pattern, as the location of D and the stop loss varies between formations. With a Gartley, D remains within XA, making X a clearly identifiable stop-loss level. In the Butterfly and Crab patterns, D extends beyond X; traders therefore base their stop loss on D instead.

Can You Use the Gartley Across All Timeframes?

Yes. From short intraday charts through to daily and weekly charts, the Gartley works across all timeframes and markets. More formations appear on lower timeframes, but a greater number are false because minor price fluctuations can satisfy the ratios by chance. On higher timeframes, Gartley formations are less frequent and their legs are more clearly defined.