Technical Definition
The Gartley Pattern is a harmonic reversal pattern that forms within an existing trend and signals a potential trend correction or reversal at a precise price zone. It is defined by a specific sequence of price legs (XA, AB, BC, CD) governed by Fibonacci retracement and extension ratios. The pattern completes at point D, where multiple Fibonacci levels converge, creating a high-probability reversal area.
Ideally, it is a complex pullback that looks like a letter "M" or "W". It uses math ratios to tell you exactly where the pullback should end and the main trend should resume.
Reversals often occur at Fibonacci confluence zones
Market Psychology
Direction
The XA leg reflects strong conviction. One side of the market is dominant.
Healthy Pullback
AB retracement shows profit booking without panic, maintaining structure.
Balance
During BC, buyers and sellers reassess value, leading to smaller, controlled swings.
Reassessment
At Point D, participants reassess risk-reward, often leading to a reversal.
Pattern Anatomy
XA Leg (Impulse)
Strong directional move establishing the trend foundation.
AB Leg (Retracement)
Price retraces approx 61.8% of XA. A healthy correction.
BC Leg (Correction)
Price moves in XA direction, retracing 38.2%-88.6% of AB.
CD Leg (Completion)
Final leg completing at 78.6% retracement of XA (The PRZ).
Pattern Rules
XA
Identify a clear impulse leg.
AB
AB should retrace approx 61.8% of XA.
BC
BC retracement 38.2% to 88.6% of AB.
CD
CD completes near 78.6% retracement of XA.
AB=CD
AB=CD symmetry within the pattern strengthens reliability.
Tactical Execution
Enter at D (0.786 of XA)
Stop loss below X
Target 0.382 and 0.618 of AD
Signal Confirmation
- Reversal candlestick patterns at PRZ (Point D)
- Momentum divergence near point D
- Volume slowdown or rejection
- Break of short-term structure