The Gartley Pattern
What is the Gartley Pattern?
The Gartley pattern is a powerful and multi-rule based trade set-up that takes advantage of exhaustion in the market and provides great risk: reward ratios. The pattern is also known as the “Gartley 222” because the pattern originated from page 222 of H.M. Gartley’s book, Profits in the Stock Market that was published in 1935 and reportedly sold for $1,500 at the time.
The Gartley pattern is based on major turning points or fractals in the market. This pattern plays on trend reversal exhaustion and can be applied to the time frame of your choosing. The other key that makes this pattern unique are the crucial Fibonacci retracements that come together to fulfill the plan.
There is a bullish / long / buying pattern and an equally powerful bearish / short / selling pattern. Much like you would find with a head and shoulders pattern you buy or sell based on the fulfillment of the set up.
Learn Forex: Buy & Sell Gartley Chart Pattern
Here is a stripped down version of patterns so you can see what the look like without price and time on the chart.
The buy pattern will always look like an "M" with an elongated front let. The sell pattern will always look like a "W" with an elongated front leg.
Gartley Strategy Tools
The three important tools to use on your chart when finding a Gartley are:
Fractals - The important part about trading the Gartley pattern is that you will trace the pattern from turning points or swings in the market. One of the better indicators to trace swings is Fractals. Fractals show up as arrow above swings in price.
Fibonacci Retracements – The Fibonacci retracements will make or break the patterns validity. Below are the specific retracements that make up the pattern. Fibonacci retracement lines are horizontal lines that display support or resistance in a move.
Add Line Tool (Optional) – This tool will allow you to clearly draw connecting points like X to A, A to B, B to C, and C to D for easy measuring.
Gartley Strategy Rules
* Point B should retrace 0.618 from the XA move.
* Point D should retrace 0.786 from the XA move and create the entry zone.
* Point D should be a 1.27 or 1.618 extension of the BC move
* Point C should retrace anywhere from 0.382 – 0.886 of the AB move.
* Buy or Sell at point D depending on whether the pattern is bullish or bearish
* Place stop either below the entry for the tightest or Risk: reward ratio or below Point X.
* If the market trades through Point X, the Gartley pattern is invalid and you should exit or not take the trade.
When these rules are met, you can find yourself on the cusp of a trade at the Entry Zone. Recognizing these points in the market is truly like riding a bike. Once you get the hang of it, the levels will pop out on the chart to you.
The EURNZD set up an ideal Bearish Gartley Pattern leading into the Reserve Bank of New Zealand Interest Rate Announcement.
Learn Forex: EURNZD chart where Bearish Gartley played out
Another set up is forming on the EURJPY and has begun to play out. If you liked the set up, you could sell at Point D and place a stop above point X. Point X is the start of the pattern and is an extreme point on the chart.
Learn Forex: EURJPY chart where Bearish Gartley is forming
Closing Tips on Using This Pattern
When trading the Gartley pattern, the pattern is meant to be traded at D only. If you believe a pattern is unfolding but we’re only at point B, be patient and hold off until we get to D. The power of the pattern comes from converging Fibonacci levels of all points from X to D and using the completed pattern for well-defined risk.
Lastly, this can be traded on any time frame you prefer. The reason this method has a stable track record is that it is based on unusual market positions where most traders are afraid to enter. Take advantage of the risk: reward set up available and trade with proper trade size.
This pattern occurs rather frequently. When you get comfortable with using Fibonacci retracements for support and resistance you'll find yourself looking for the points to complete a Gartley pattern. It is very important to watch for the D point to be at 78.6% of the XA leg and to keep your stops rather tight in case the pattern is invalidated.
Many people think that trading foreign exchange (FX) requires a lot of time to research the market and to identify trading opportunities. However, I believe the 24 hour nature of FX makes it easier for traders to take advantage of trends in currencies because they are not bound by when an exchange allows them to trade. So regardless of what your busy schedule is like, there are trends in the market you can take advantage of with as little as 30 minutes of time invested per week. There are several different ways to approach the market if you are short on time. Today, I want to share with you one of these strategies to trading FX in your spare time. Today’s strategy is called the Simple DNC Breakout. I chose this strategy because the tools involved in identifying trades are fairly intuitive even if you have never traded FX previously.Before I get into some specifics of the strategy, you may be wondering how a trader can effectively find good trades if they are not constantly watching the market? You see, the essence of this approach is that you will place orders to enter into the market at strategic price points. When the market trades through these prices, this will be our signal to enter the trade and your resting order with your broker will take care of the entry and exit automatically.So the strength of this strategy depends upon the strength of the trend. We want to utilize the strongest trends in the market at the moment…the stronger the trend the better. When these strategic price points are reached, we want to enter the trade in the direction of that strong trend.As a result, there are 2 significant benefits to this type of strategy.1 No need to baby sit the trades. Place orders to enter the market at specified prices then simply let the market enter you into these trades at these strategic prices. Many of these trades will trigger while you are away from your computer, sleeping, or busy with other time commitments.2 This strategy can keep you out of SOME losing trades. Don’t get me wrong…you will still have losing trades. However, it happens frequently where you will be wrong on a trading idea but you never get entered into the trade…which would have been a losing trade. You see, if the market never trades to your strategic price point, then your entry into the market does not get triggered. This means you are kept away from the losing trade.The Simple DNC Breakout StrategyTools Needed:*A price chart set to the daily bar*The Donchian Channel (DNC) indicator*A strong trend*30 minutes of time to identify strategic price pointsTo get started, open up a price chart of a currency pair that has been in a strong trend. The Australian Dollar has been one of the strongest currencies for the past 3 years. So the AUD/USD is a good place to start. A daily price chart means each bar or candle on the chart represents one day’s worth of price action.Secondly, add the DNC indicator to the chart (most charting packages include this for free). The DNC indicator will calculate the highest high and the lowest low price for the past X number of bars.Set the input value of the DNC indicator to 8. This means we want to see the highest high price and the lowest low price for the past 8 days worth of trading. Your chart should look like this. Identifying the Strategic Price PointsNow comes the fun part. Since the AUD/USD has been in a strong up trend for the past 3 years, we want to filter our trades so that we are only looking to buy this strong up trend. Conversely, if we were trading a strong down trend (like the EUR/AUD), then we would filter for only sell trades. Setting up the trade is a simple 4 step process. Rules to Buy:We will use the upper DNC line as are strategic price point to enter1 our position as a buyer (green circles).2 We will use the lower DNC line as our stop loss.3 Manually trail the stop loss at the lower DNC line.4 Exit the trade when price reaches the lower DNC line (pink circles).The opposite is true for selling a strong down trend.1 Use the lower DNC line as the strategic price point to enter a sell trade.2 Use the upper DNC line as the stop loss point.3 Manually trail the stop loss at the upper DNC line.4 Exit the trade when price reaches the upper DNC line.You can see in the above chart, there were 3 trading opportunities from October 2011 to the present. When price tagged the upper line, we are entered into the market as a buyer. Our exit point in the trade is the lower DNC line.Spare TimeWhile logging into your charts, most of your time will be spent reviewing the location of the upper and lower DNC lines. If the location of these lines moved since your last review, then you would change the entry orders in your brokerage account according to the strategy rules.Since we are interested in the highest high price for the past 8 trading days, these price points likely won’t move much on a day to day basis which affords us the opportunity to check on them at least 1 time per week. As you can imagine, it doesn’t take very long for check the change in the strategic price points and it can usually be completed within 30 minutes.
One of the more compelling entry triggers via price action is the Pin Bar.Pin Bar, which is short for ‘Pinocchio Bar,’ is a single candlestick setup that clues price action traders into potential reversals in the market. A pin bar is an elongated wick that ‘sticks out’ from price action. Traders will usually look for one-sided wicks that are two times the size of the candlesticks body.When traders see elongated wicks sticking out from price action, they can look for the momentum that created the long wick to continue by looking for a reversal.So if a trader sees a long wick sticking out below price action; they can look to go long. If a trader sees a long wick sticking out above price action, they may want to look to go short. Much like Pinocchio’s nose – the elongated wick of a pin bar can tell us that a lie is being told.But not all long wicks are created equal. As a matter of fact, many of these long wicks will not be Pin Bars at all; but that does not mean that they can’t be used by Price Action traders. This article will walk through how to trade ‘fake’ Pin Bars, or long wicks that do not stick out from price action.What separates a Pin Bar from a Fake Pin Bar?The difference between a Pin Bar and a Fake Pin Bar is determined by recent price action.If the long wick sticks out from recent prices, that is a Pin Bar. This is the ‘lie’ that the market may be telling us: That a movement to a previously untested level has brought a new group of buyers (or sellers in the case of a bearish Pin Bar).If the long wick does not stick out from previous price action; they are not a genuine Pin Bar, but rather ‘Fake Pin Bars.’ The picture below will illustrate with further detail: As you can see above picture, the fake pin bar doesn’t quite stick out from previous and recent price action.With a genuine pin bar leaving a long wick above the candle, traders could look to open a short position to take part in the momentum that created the long wick in the first place.However, as you can see from the above setup – that would not have worked out too well.Trading Fake Pin Bars requires additional analysis, as the signal of a short-term reversal in prices may not be as consistent as that of a genuine pin bar.How to Trade Fake Pin BarsThe first thing we want to get comfortable with when looking for Pin Bars, or Fake Pin Bars, is what it is that we are looking to take part in by trading that setup. Let’s take a closer look at a legitimate Pin Bar below: From the above graphic, we can see what makes the pin bar attractive is the fact that price has reversed enough to leave a long wick exposed underneath price action (all taking place during the pin bar candle).But what if a long wick isn’t sitting outside of recent price action?This might mean that the potential for a reversal on fake pin bars could be smaller than that of genuine pin bars. But that doesn’t mean that price action traders can’t use this information to our advantage – we merely have to qualify which fake pin bars might be favorable and which are not.We can do this by looking at the trend of the currency pair, and attempting to enter ONLY in the direction of the longer term trend. Traders can even use price action analysis to qualify and analyze trends, much like we looked at in our Introduction to Price Action.To do this, we would want to scroll out on our charts and analyze more previous prices than if we are trading a genuine pin bar; and the reason for this is so that we can get a better assessment of the long-term trend and look to only trade in that direction. The picture below will illustrate an up-trend with a bullish fake pin bar. From the above graphic, we can see that after price had established an up-trend by creating a series of higher highs, and higher lows a fast price movement to the downside was corrected before the candle had completed (leaving the long wick circled above).Traders can look to trade this fake pin bar by going long after this candle has formed, placing a stop slightly below the low of the fake pin bar wick. That way, if price happens to reverse against us (and move down while we are in a long position), we can exit the position if a lower price is printed below the bottom of the fake pin bar wick (picture illustrating further is below):
What is Future Cryptocurrency: Cryptocurrency is the most recently added twig in the arm of the financial market, which is proving a shot in the arm for its traders. They are corrugating their capital from elsewhere to invest in it following the rearing benefits that seem to from it. In 2019, the total cryptocurrency market value was pegged at USD 1.03 billion. As per the projections, it may grow up to USD 1.40 billion by 2024. However, the cumulative market cap of the cryptocurrency as of 5 August 2020 was $337.28 billion. There are overall 6088 digital currencies available in the online market for trading. (Data from CoinMarketCap. In 2016 the market cap value was lower than USD 18 billion and rose to 128.78 billion by 2018. As of 19 August 2018, there were mere 1600 cryptocurrencies available on the internet. The price of bitcoin peaked at nearly USD 20000 in the year 2017. Glancing at the growth prospects, the future of cryptocurrency seems bright and shiny. Future Cryptocurrency Definition It is a computer-generated digital currency which utilises the algorithm of encryption for securing the procedure involving creating of different coins and performing transactions. It is mandated as an ecosystem thriving to gulp down the current financial territory and policies. The advanced techniques of encryption are referred to as cryptography. These coins or digital money doesn’t have any physical presence or property of collateral for evaluating their values. Read More: How to Make Money Investing in the Cryptocurrency Market Some Characteristics of Cryptocurrencies - There is a universal discourse on whether cryptocurrencies should have a regulatory authority looking over their transactions. But even after more than eleven years of the launch of the first cryptocurrency bitcoin, no government in the regulates it. - As there it is available only in virtual form, there’s no over the counter platform for investors to buy and sell them. All the other cryptocurrencies that formed after bitcoin are also known as altcoins or alternative coins. - Experts consider it as a disruptive concept and force against the prevalent notion of fiat currency. - Bitcoin has the advantage of being the first of its kind. Hence, it captures the significant share and belief of investors compared to others. - Cryptocurrencies offer compliance free remittance and ease of transactions seeing through the boundaries of nations. - The ability to break the cross-border barrier of transaction makes the currency popular among classes. Advantages Enveloping Cryptocurrencies That Can Trigger its Future Prospects - It gives enhanced and compact advanced security for transactions. - All trades done have logs. Thus, they are transparent but at the same time far from anyone misusing the digital currency of another trader. - It comes with a decentralised system, which enables users to access it from different parts of the globe. - The international transfer is quicker than an eyeblink. - Low fees and prevention from scamsters and fraudsters are qualities that are dictating in an investors mind, and they are adopting the technology. - Protection from consumer chargebacks is one of the reasons that is triggering interests in industries and traders per se. Europe May Emerge as the Power Hub of Cryptocurrencies Currently, Europe holds the second spot in terms of cryptocurrency-related transactions and exchanges. The main markets comprise the UK, Germany, East Europe, and France. Besides, the rest of Europe contributes to its growth too. APAC Tops The Chart APAC, aka the Asia Pacific region, is on the top of the list where volumes of investors and transactions are mammoth and magnifying. It primarily includes Japan and South Korea and the RoAPAC, which has Australia, New Zealand, Malaysia, India, Thailand, China, and Singapore. Japan sits on the hilt when it comes to awareness and technology surrounding cryptocurrency. The government is apparently favouring the cryptocurrencies.