Gartley pattern also known as 222 pattern, is the first original pattern created by H.M. Gartley and described in his book. Gartley did not give it a name so for some time it had been called 222 after the page number of the book. There are 2 versions of the pattern bullish (looks like letter ‘M’) and bearish (looks like letter ‘W’). Below are the schematic pictures of the Bullish and Bearish Gartley patterns:
- X should exceed D.
- AB movement should be 0.618 retracement of XA.
- BC movement must be 0.382 or 0.886 retracement of AB.
- If the retracement BC 0.382, then the CD must move 1.272 of BC. Consequently, if BC is 0.886, then the CD should be 1.618 of BC.
- CD should be 0.786 retracement of XA
Gartley Pattern being a trend continuation pattern is traded in the direction of overall trend when the price is approaching point D. The stop is placed few ticks below/above the farthest possible D level. The safe target lies within 38.2-61.8% of AD move. Many patterns can do much better than that, but the conservative targets must be used to lock in profit and possibly unloading part of the position. Entries might be done with a limit order or on price reversal away from D. All entries must be tested for risk/reward ratio. Entries with low risk/reward has to be taken cautiously or discarded altogether.
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