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The “M-W” Gartley CHEAT Code (Best Price Action Harmonic Pattern) - YouTube
Channel: The Secret Mindset
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Let me tell you a secret: the success rate
of harmonic patterns is actually higher compared
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to the other classic price patterns, like
triangles, wedges or flags.
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And not many traders use them, despite the
fact they provide very precise conditions
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for entering, and offer a high reward to risk
ratio when traded properly.
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Today we’ll highlight one of the best harmonic
patterns – the Gartley formation.
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So if you could, like, subscribe to the channel,
and stick around for the full video.
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What is the Gartley pattern?
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The Gartley pattern resembles an M/W shape
on the chart, depending on whether it is a
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bullish or a bearish Gartley and consists
of five points on the chart.
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These points are marked with X, A, B, C, and
D.
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Gartley is a retracement and continuation
pattern at the same time, depending on its
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location in a trend, that is formed when a
trend temporarily changes direction before
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continuing in its original direction.
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And it provides a low-risk opportunity for
traders to enter the market where the pattern
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finishes and the trend comes back.
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How to identify the Gartley pattern?
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The Gartley pattern depends on several movements
in price.
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Every swing has to confirm certain Fibonacci
levels.
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To make it very simple, let’s look at each
component of the Gartley structure.
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X to A swing
The movement begins with X to A and there
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are no specifics for this leg.
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This first leg gets formed when the price
sharply rises or declines from point X to
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point A.
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This is the longest leg of the pattern.
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A to B swing
This is where Fibonacci becomes relevant to
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the pattern.
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The A-B leg will not retrace pass point X
– if it does, the pattern is considered
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invalid.
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The AB swing should be approximately 61.8%
of the XA leg.
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B to C swing
This movement should be a retracement of 38.2%
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or 88.6% of the movement of A to B. If the
B to C move retraces above point A, the Gartley
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pattern is invalid.
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C to D swing
This should be an extension of the B to C
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leg.
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If BC is 38.2% of AB, then CD should respond
to the 127.2% extension of BC.
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If BC is 88.6% of AB, then CD leg should be
the 161.8% extension of BC swing.
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A to D swing
After the completion of C-D, you measure the
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overall movement of A to D. It should be a
78.6 percent retracement of the change in
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price of X to A.
I know it might seem complicated at first,
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but if you use Tradingview, you can use this
tool and you can start drawing the pattern.
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You just need 4 price swings.
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Just place the tools at the extreme of the
swings and start backtesting.
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Ideal Gartley
The ideal Gartley will be defined by specific
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Fibonacci retracements.
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One of the most important numbers in the pattern
is the completion of point D at the 0.786
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of XA.
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Although the price action might exceed this
number slightly, it should not exceed point
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X.
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Another important point in the pattern is
the 0.618 retracement of the XA leg.
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The AB leg should reverse very close to this
retracement.
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The .618 retracement at point B is critical
because it will establish another Fibonacci
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projection - usually a 1.27 of BC - in the
Potential Reversal Zone at point D.
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The best part about Gartley patterns is that
they indicate both the timing and magnitude
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of price movements.
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Bullish Gartley Pattern
The Bullish Gartley starts with a bullish
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XA move.
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AB is then bearish.
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BC is bullish, and CD is bearish again.
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And you expect a reversal of the CD move.
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This means that a bullish Gartley implies
a price increase from Point D.
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The full target of the pattern is the 161.8%
Fibonacci extension of the AD move, which
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resembles the AB=CD harmonic pattern upon
completion.
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And, we have three intermediary targets before
that.
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Target 1: B Swing
Target 2: C Swing
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Target 3: A Swing
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Bearish Gartley Pattern
The bearish Gartley has a bearish XA move,
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a bullish AB move, a bearish BC move, and
a bullish CD move.
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A bearish Gartley implies a price decrease
from Point D.
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The expected price target of the bearish pattern
is the 161.8% extension of the AD move, with
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the intermediary targets at swings B, C and
A.
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How To Trade Gartley Harmonic Pattern
To enter a Gartley trade you should first
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take note of the pattern and then confirm
if it is valid or not.
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First, you outline the four price swings on
the chart and you make sure they respond to
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their respective Fibonacci levels.
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You mark every price action swing with the
important letters X, A, B, C, and D.
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By doing this, you will be able to estimate
the overall size of the pattern and get a
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clear idea about the parameters.
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If you have a bullish Gartley for example,
you open a long trade if CD leg founds support
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at 127.2 percent or 161.8 percent Fibonacci
level of the BC move.
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You should always use a stop loss order regardless
of your preferred entry signal, to protect
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yourself from any rapid or unexpected price
move.
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The stop loss order of a bullish Gartley trade
should be found below the X point of the chart
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pattern.
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For a bearish Gartley, your stop loss order
should be found above the pattern’s X point.
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As for take profits, you enter a position
after the bounce at point D and then scale
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out at different levels.
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Target 1: B Swing
Target 2: C Swing
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Target 3: A Swing
Target 4: 161.8% of AD
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These four levels on the chart are the four
minimum targets of the bullish Gartley.
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That doesn’t mean that the bullish trend
will end when the price completes point E.
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You are always free to use additional price
action rules or a trailing stop to exit your
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trade.
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If the price momentum continues to show signs
of strength, you can keep a small portion
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of the trade open.
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Use price action clues such as trend lines,
support and resistant techniques, candle patterns
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and volume to find the right entry and exit
point.
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And generally, if the price action shows no
signs of interrupting the new trend, just
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stay in the trade for as long as you can.
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Gartley after a Strong Price Move
This pattern is even more significant, if
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it is preceded by a major price move.
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Often, after a major price move, the Gartley
will begin with a strong counter move, which
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becomes the X to A leg.
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The price will appear to be consolidating,
attempting to stabilize before making another
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strong move.
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If a Gartley forms after such price action,
from my backtesting, this pattern will prove
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to be a substantial opportunity.
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In addition, the stop loss required in the
trade will be relatively small relative to
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the potential reversal.
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The primary reason for this powerful opportunity
is that a successful reversal will resume
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the trend that was established by the initial
XA price move.
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The Bullish Gartley after a strong sell-off
is a difficult opportunity to perceive.
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When the price forms this pattern, it might
seem as if the market is making lower highs,
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especially since point C is below point A
after the initial bounce.
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However, the pattern is indicating a potential
buy at the Potential Reversal Zone.
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The beauty of this set-up is that it requires
a very small amount of risk to see if the
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trade will work out.
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Since this is an unusually good set-up, the
potential profit is very large in comparison
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to the amount needed to be risked.
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The stop loss should be placed, of course,
just below X point.
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This is a great example of a Gartley after
a severe decline.
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The Potential Reversal Zone was very clear.
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It had three harmonic numbers within a very
narrow range.
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AB is 61.8% of XA, BC is 88.6% of AB, CD is
the 161.8% extension of BC.
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At the same time, AD is 78.6% of XA.
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Since this is a bullish Gartley setup, the
expected price move is to the upside.
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For this reason, you would prepare to buy
when CD finishes at the 161.8% of BC and the
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price action bounces upwards.
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The stop loss would have been placed just
under X point.
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You can see that this situation required only
a small stop to risk in exchange for a bigger
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gain.
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The first target of this long trade is located
at the level of point B.
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The second target is at point C and it also
gets accomplished.
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The price action also reaches the level of
point A, which is the next target on the chart.
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And our last target, located at the 161.8%
Fibonacci extension of the AD price move.
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Bearish Gartley after a Strong Rally
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A Bearish Gartley after a strong rally is
a very powerful reversal signal, as well.
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Essentially, a market that can’t rally to
new highs after a considerable move usually
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indicates serious weakness.
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In this example, the pattern forms after a
strong rally.
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In this set-up, point X is usually an important
high for the price.
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The figure starts with a bearish XA move.
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AB is then bullish and BC is bearish.
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CD then reverses the bearish BC move.
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The pattern should complete in an area where
several harmonic projections converge.
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AB takes 61.8% of XA.
BC is the 88.6% level of AB.
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CD reaches the 161.8% extension of BC.
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When the CD move is finished and the price
creates a bearish bounce from the 161.8% extension
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of BC, we confirm that the bearish Gartley
is valid.
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So a good sell zone is here, placing a stop
loss order above the swing at point X.
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The first target at point B gets completed
rapidly.
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The next targets located at point C and A,
also reached.
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And the final target, located at the 161.8%
extension of the AD move.
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The Gartley is a great pattern that occurs
frequently on all time frames, in all types
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of markets and is 100% price action based.
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The thing that works about Harmonic Patterns
in general is that they use the confluence
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method, meaning that they expect reactions
from clusters of certain levels defined by
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Fibonacci retracements.
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They work because Fibonacci retracements are
used by many traders and their visibility
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makes reactions more likely, thus increasing
the predictive power of the patterns.
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If you are interested in seeing more harmonic
patterns and price action videos, leave us
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a like.
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This way we’ll know if you'd like to see
more videos like this one.
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And check out our academy program if you want
to further level up your trading.
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Until next time.
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