GEOMETRIC TRADING

The Gartley Pattern – Part 6

As noted in part 5 of this series of articles, the original Gartley Pattern was quite a simple pattern. Gartley did not discuss any Fibonacci ratios, Elliott Wave, etc. In Gartley’s bullish example, it would appear that all he is looking for is a significant rally off of a bottom, followed by a retracement of 33% to 50%. Based on Gartley’s original example, the original pattern only included four data points or three legs. It is of interest that the modern version of the Gartley Pattern does not include Gartley’s A-B leg. In Elliott Wave terms, the original pattern would appear to be the completion of a Wave Two. That means that if the pattern works, you would be trading a Wave three, a trade that most Elliotticians would consider very difficult to identify.

If you search the internet for information about the Gartley pattern, you will at some point come across the following picture provided by Scott Carney at harmonictrading.com.

As you can see, the pattern above is a complex five point pattern that has to conform to specific Fibonacci ratios on each of it’s four legs.

The main differences between the modern Gartley Pattern above and the original Gartley Pattern are…

1. The labels in the original pattern are A,B,C. The labels for the modern pattern are X,A,B,C,D.
2. The modern Gartley omits the original A-B leg.
3. The modern Gartley emphasizes the equality of the A-B leg and the C-D leg whereas the original does not.
4. The original Gartley pattern did not include any Fibonacci ratios.
5. The completion of the original pattern was at 33%-50% whereas the modern pattern completes at the 78.6% retracement of the XA move.

In part 7 of this series we will continue to examine the benefits of the some of the modern day Gartley improvements.

Ross Beck, FCSI