The Gartley pattern helps traders know when and what to buy

In the mid-1930s, a trader named Harold McKinley Gartley runs an advisory service about the stock market that many people followed. This service is a pioneer in applying scientific and statistical methods when analyzing the way the stock market behaved.

The Gartley pattern

The Gartley pattern is also known as the 222 pattern. You may wonder why it is also known as such, but they got the named 222 because you can find it on page 222 of the HM Gartleys book. Gartley patterns have ABCD patterns preceded by a significant high or low. Usually, we see these patterns when the overall trend’s correction looks like a letter M is happening. Furthermore, this M looks like a W for bearish patterns. We use these patterns when we look for good entry points to ride in the overall trend.

Gartleys come to life when the price action has been in an uptrend or a downtrend recently but is now showing correction signs. Reversal points being Fibonacci retracement and extension level is a great thing because it offers more reversal indication. It may be a challenge to see this pattern easily. Even when you do, it might still be confusing with all the Fibonacci tools but remember to slow it down.

Check these characteristics for a perfect Gartley:

1. Move AB is move XA’s 0.618 retracement.
2. Move BC is move AB’s 0.382 or 0.886 retracement.
3. If move BC’s retracement is move AB’s 0.382., then CD needs to be move BC’s 1.272. If move BC is move AB’s 0.886, then CD needs to be move BC’s 1.618.
4. Move CD should be move XA’s 0.786 retracement.

People somehow loved this Gartley idea that they even made their versions and modifications. Read on to know more.

 One of three: the crab

An avid harmonic price pattern believer named Scott Carney made the crab in 2000, saying this is the most accurate of them all. He said that the potential reversal zone from move XA is too solid and extreme. You can place an extremely tight stop loss that can lead you to a massive high reward to risk ratio.

 Check these characteristics for a perfect crab:

1. Move AB is move XA’s 0.382 or 0.618 retracement.
2. Move BC is move AB’s 0.382 or 0.886 retracement.
3. If move BC’s retracement is move AB’s 0.382, then CD is move BC’s 2.24. If move BC’s retracement is move AB’s 0.886, then CD should be move BC’s 3.618.
4. CD should be move XA’s 1.618 extension.

Two of three: the bat

The bat is the second harmonic price pattern made by Scott Carney in 2001. Its definition is 0.886 retracement of move XA that acts as a potential reversal zone.

Check these bat characteristics:

1. Move AB needs to be move XA’s 0.382 or 0.500 retracement.
2. Move BC needs to be move AB’s 0.382 or 0.886 retracement.
3. If move BC’s retracement is move AB’s 0.382, then CD needs to be move BC’s 1.1618 extension. If move BC is move AB’s 0.886, then CD should be move BC’s 2.618 extension.
4. CD should be move XA’s 0.886 retracement.

Three of three: the butterfly

This pattern created by Bryce Gilmore can leave you with hefty profits once spotted. A perfect butterfly’s definition is when move AB has 0.786 retracement in line with move XA.

Check these butterfly characteristics:

1. Move AB should be move XA’s 0.786 retracement.
2. Move BC should be move AB’s 0.382 or 0.886 retracement.
3. If move BC’s retracement is move AB’s 0.382, then CD should be move BC’s 1.618 extension. If move BC is move AB’s 0.886, then CD should be move BC’s 2.618 extension.
4. CD should be move XA’s 1.27 or 1.618 extension.

People loved Gartley’s idea.

Gartley thought he had unmasked the most challenging part of trading: discerning when and what to buy. As time went by, traders also noticed that these patterns are also applicable to other markets that many people based many things like books, software, and different patterns in Gartley.