Forex trading platforms are highly organized, and apart from using indicators to forecast trend movements and enhance profitability, the use of trading skills and ability to professionally read the indicators play a role in determining the outcome of each trade. Gartley Pattern Indicator is one of those tools every trader needs to be able to study the reactions of the market and make an informed decision to enter or exit a trade.
In this article, we shall consider what Gartley pattern indicator is, rules for trading with the indicator, the advantages of the indicator, and the drawbacks as well. So, let’s start by looking at what the indicator is.
What is the Gartley Pattern?
The Gartley Pattern is a harmonic chart pattern that is built on Fibonacci numbers and ratios, which assist traders in recognizing reaction highs and lows. It is a retracement and continuation pattern which occur when there is a momentary reversal in trends before continuing in the initial direction. While it provides setups for low-risk entry when there is a completion of the pattern, and price begins to reverse.
Gartley is the commonest harmonic chart pattern. Harmonic patterns function on the ground that one can make use of the Fibonacci sequences in building geometric structures, such as breakouts and retracements, in prices.
Technical analysts pay special attention to Fibonacci ration because of its usefulness in tools like Fibonacci retracements, fans, extensions, clusters, and tie zones. The Gartley pattern is mostly used in combination with other technical best mt4 indicators or chart patterns. For instance, the pattern can give you an insight into the probable direction of the price over the long-term, thereby enabling traders to perform short-term trades along the course of the trend forecast.
Traders can as well use the breakout and breakdown price targets as support and resistance levels.
Advantages This Forex Trading System
The Gartley Pattern Indicator comes with some advantages which a good trader should be able to recognize and leverage. Some of the advantages of the indicator include:
1. The better risk to reward: Should be Gartley trade pattern be correctly set up and the trade goes as prearranged, this system gives an excellent risk to reward.
2. It offers a good buy or sell signal: All you need to do to be able to recognize the best buy or sell signal at point “D is to have a better understanding of forex reversal candlestick patterns.
3. More profitable pips: You can trade entry position on point “D” which is the ideal position for taking a trade entry. If you make the correct analysis and there is a reversal in price as expected, it moves down or up fairly, thereby allowing you to make some profitable pips easily. Besides, you can also move your stop loss to break-even to limit your trading risks.
The Gartley Pattern Indicator is not without a few drawbacks. Here are some of the drawbacks to observe when trading with the indicator:
1. Gartley patterns are sometimes not textbook perfect, making traders personal in their decisions. Therefore, the chances of trading a pattern that is actually not Gartley patterns increases when your level of subjectivity increases.
2. You will always need a tool to help in recognizing the Gartley pattern since the patterns are precise to Fibonacci retracement levels.
3. Gartley patterns and plenty of the Harmonic trading patterns act as both reversal and retracement patterns. They are difficult to predict until there has been a reversal or correction in price.
4. It requires that you use it in conjunction with other indicators or tools.
Rules for trading with Gartley Pattern
Every point in the wave or the turning point needs to stick to an exact Fibonacci retracement since the Gartley pattern is a part of the harmonic patterns’ family. These points help to add shape to the Gartley pattern
The general outline for the Gartley pattern includes the following:
Wave XA: This is the point where the Gartley pattern begins to form. There are no qualification criteria for the wave XA.
Wave AB: Work commences in the second leg of the Gartley pattern. The distance in this leg should be roughly 61.8% of the XA leg. The movement of AB is in the opposite or counter direction to XA.
Wave BC: This is the third leg of the Gartley pattern, and its movement is in the direction of the initial leg XA. The wave BC reverses the course from B. It’s either this leg completes close to 38.2% Fibonacci level or spreads to 88.6 of the AB leg.
Wave CD: This is a reversal wave, and the price turns around close to point C. You can make a choice here. If there is a completion of the BC wave close to 38.2% of AB, this leg should spread to 127.2% of BC. Nevertheless, if there is a completion of the BC wave close to 88.6% of AB, this leg should spread to 161.8% of BC.
Wave AD: This is the last and final rule of the Gartley pattern, and it completes the CD leg. It retraces to 78.6% of the XA move. As a result, the price is anticipated to post a reversal or retracement.
Final Remarks On Gartley Pattern Indicator
Manually studying the Gartley pattern is not an easy task. The use of the Gartley Pattern Indicator makes it easier to recognize a definite pattern that you can use to make an informed decision regarding the market. However, using the indicator alone may not give you the result you expect; you need to use it with other indicators or tools.
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