Swing Trading With The Gartley Pattern In Forex

Swing Trading With The Gartley Pattern In Forex – The Gartley pattern is a harmonic chart based on Fibonacci numbers and ratios that helps traders identify reaction highs and lows. In his book Profit in the Stock Market H.M. Gartley laid the foundation for harmonic diagram patterns in 1935. The Gartley pattern is the most commonly used harmonic pattern. Larry Pesavento later applied Fibonacci ratios to pattern in his book Fibonacci Ratios with Pattern Recognition. The Gartley pattern is one of the many advanced trading strategies used by harmonic traders. It is very specific and not often found in the market, however being patient and waiting for a harmonic pattern to set up can be very rewarding as it will reduce the risk of the trade as it is so accurate in its own right. Fibonacci measurements. Because of its complexity, beginners are not advised to use this or any harmonic pattern strategy, however, it is definitely an advanced strategy to consider.

The Gartley pattern requires knowledge of the Fibonacci retracement tool and a bit of Elliott wave theory. The Gartley pattern comes in two forms: bullish, shaped like the letter “M” and bearish, shaped like the letter “W”.

Swing Trading With The Gartley Pattern In Forex

To identify a Gartley pattern, it must have 5 points, which we define as X, A, B, C and D. The 5 points are part of the Elliott wave movement from the motif to the corrective phase, CD as the start. to change

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For Garth’s bullish pattern, XA is the impulse wave 5 Elliott wave. Point B should retrace to 61.8% of XA, while AB forms a corrective A wave. Point C should be at an angle of 38.2% from XA and 88.6% on the flip of AB. BC then forms corrective wave B. Finally, point D can be a 127.2% or 161.8% extension from AB, but at the same time, completes a 78.6% change from XA. Then CD creates a corrective wave C.

For a defensive Gartley pattern, it is opposed to its bullish counterpart. XA is the impulse wave 5 Elliott wave. Point B should retrace to 61.8% of XA, while AB forms a corrective A wave. Point C should be at an angle of 38.2% from XA and 88.6% on the flip of AB. BC then forms corrective wave B. Finally, point D can be a 127.2% or 161.8% extension from AB, but at the same time, completes a 78.6% change from XA. Then CD creates a corrective wave C.

After identifying the Gartley pattern, we look to trade based on whether the pattern is bearish or bullish.

For bullish bulls, entry is determined by price action. Stoploss can be placed at point X or 100% changes in XA. The profit taking level can be taken at point C.

Harmonic Patterns In Trading

For a defensive setup, entry is determined by price action. Stoploss can be placed at point X or 100% changes in XA. The profit taking level can be taken at point C.

The positive side of using the Gartley pattern trading strategy is that it is very accurate due to the specific measurements using the Fibonacci strategy. This allows traders to identify price reversal areas, stop losses and profit targets with high accuracy. However, due to the lack of frequent occurrences in the market, it requires patience and discipline from the trader, which in turn leads to potential costs where other potential trades may be missed. Furthermore, although the specificity of the pattern is within the range of Fibonacci ratios, the degree of specificity also determines the reliability of the pattern. A pattern can display several red flags during its formation, and one of the biggest that will cause it to fail is mismatched Fibonacci ratios. Finally, it’s a really beginner-unfriendly strategy because it’s tedious and hard to understand knowing Fibonacci and Elliott waves as a prerequisite.

To find out the profitability of the Gartley pattern trading strategy, we decided to do a backtest based on the past 5 trades from June 26 to June 21 on the M1 timeframe. Entry rules will be the same as above. We will again test this in 3 types of trading machines, namely EURUSD for forex, US30(DJI) stocks and BTCUSD for cryptocurrency. For simplicity, we will assume that all trades executed have an account risk of 1%.

Definitions: Average Risk-Reward Ratio = (Total Risk-Reward Ratio of Winning Trades / Total Profit) Profitability (% Profit) = (Number of Profits * Reward) – (Number of Losses* 1) [Risk is 1%]

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For backtest results, trading the blue and yellow zones indicates overall profit with the blue zone as reward and the yellow zone as risk.

As shown in our backtest, the win rate of this strategy for EURUSD (Forex) is 60%, AAPL (Stocks) is 60% and BTC (Crypto) is 80%

The average risk reward ratio of this strategy for EURUSD (Forex) is 1.13, US30 (Stocks) is 1.27 and BTC (Crypto) is 1.18.

The profitability of this strategy for EURUSD (Forex) is 2.77, AAPL (Stocks) is 3.62 and BTC (Crypto) is 7.44.

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In conclusion, the Gartley pattern trading strategy is really profitable because of its high win rate and average risk-to-reward ratio. Due to its high specificity, the Gartley pattern still has a chance to fool traders. In such cases, traders may consider using indicators to base their trading plan or watch for certain red flags that may be occurring, such as price action. Even then, it comes with trading experience and subjectivity. Therefore, this advanced technique is not recommended for new traders who have just started their financial journey in the world of trading. Needless to say, mastering these techniques will definitely increase your knowledge of the trading world and allow you to approach each trading plan from a broader perspective. After all, price action and chart patterns are a common way for traders to “communicate” all over the world.

Ezekiel Chew, Founder and Head of Training at Asia Forex Mentor is not your typical forex trainer. He is a recognized expert in the forex industry where he is frequently invited to speak at major forex events and trading panels. His insights into the live market are highly sought after by retailers.

Ezekiel is considered one of the best forex traders who really cares about giving back to the community. He makes six figures in his own trading, and Ezekiel is behind the scenes coaching traders who work for banks, fund management companies and advertising trading firms.

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Traders interested in technical analysis should have come across chart patterns or even use them in trading. However, there are lesser-known but much more accurate patterns that can predict future price movements in any time frame.

Harmonic Trading Patterns Explained In Detail

This overview is about harmonic patterns in trading. Here are not only geometric features, but also the measurement of specific legs of the sample. Read on to learn how harmonic patterns are created and how they differ. The article also describes the types of trading signals provided by harmonic patterns and the rules for successfully trading these formations.

Harmonic patterns are based on geometric patterns, but they also use Fibonacci proportions to more accurately define pivot points. Many outstanding minds have worked on the theoretical foundations of harmonic patterns. Harold Gartley developed the idea of ​​Gartley’s five-point pattern in his book Profits in the Stock Market, and Larry Pesavento established the basic rules of trading using Fibonacci levels. Scott Carney expanded the theory of harmonic patterns by adding crabs, sharks, and bats.

Harmonic patterns are structures that combine graphic and mathematical components. They are considered one of the most accurate technical analysis tools as they allow traders to predict the direction of future price movements and potential trend targets.

Also, unlike many other technical tools, the number of false signals produced by harmonic patterns is less. This is because harmonic patterns must develop in the correct proportions in addition to certain geometrical features.

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Harmonic and graphic patterns can overlap to form composite harmonic patterns. Therefore, studying the market on different time frames often allows one to see signals that complement each other

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