H.M. Gartley published the first description of what would become the harmonic pattern framework in his 1935 book Profits in the Stock Market, describing a specific price pattern he observed across different markets. The pattern he identified - subsequently refined by Scott Carney who defined its precise Fibonacci ratios - is the most widely traded harmonic pattern. Where the ABCD has four points, the Gartley adds a fifth: the X point that begins the defining initial leg. This additional point gives the Gartley its characteristic M or W shape and provides a more complete picture of the market structure at the point of the trade.
The Origin of the Gartley
Gartley described his pattern as an important retracement within a larger trend - a pause before continuation. He observed that certain price corrections followed a recognisable geometric structure and that trades placed at the completion of this structure had a high rate of success. Carney, in his 1999 book The Harmonic Trader, defined the precise Fibonacci ratios - most importantly the 78.6% retracement of XA at the D point - that define a valid Gartley versus other similar-looking formations.
The Five Points - X, A, B, C, D
The Gartley pattern consists of five points and four legs. The X point is the beginning of the pattern - the origin of the initial large move XA. A is the end of the XA leg. B is the end of the AB retracement. C is the end of the BC counter-retracement. D is the end of the CD leg and the completion point of the pattern - where the trade is entered.
X: 1.1100 (pattern begins - prior high) A: 1.0900 (XA = 200 pips down) B: 1.0985 (AB = 61.8% retracement of XA = 85 pips up) C: 1.0930 (BC = 38.2% retracement of AB = 55 pips down) D: 1.0943 (CD = 127.2% of BC upward AND 78.6% retracement of XA = 1.1100 − (0.786 × 0.0200) = 1.1100 − 0.0157 = 1.0943) At D (1.0943): Two Fibonacci measurements converge - 78.6% of XA and 127.2% of BC. This is the PRZ. Look for bullish signal.
The Precise Fibonacci Ratios
The Gartley pattern requires the following Fibonacci relationships between its legs. These ratios are mandatory - if any is significantly violated, the pattern is not a valid Gartley.
AB: Must retrace 61.8% of XA. (Key defining ratio of the AB leg.) BC: Must retrace 38.2% to 88.6% of AB. (Flexible range - allows for pattern variation while maintaining structure.) CD: Must extend 127.2% to 161.8% of BC AND simultaneously retrace 78.6% of XA. (The D point MUST be at 78.6% of XA - this is the non-negotiable defining characteristic of the Gartley.)
Bullish and Bearish Gartley
A bullish Gartley forms in a context where the prior larger trend is bullish. The XA leg is a decline - a correction within the larger uptrend. The pattern then develops the ABCD structure within the XA correction, completing at D at the 78.6% retracement of XA. This is a correction-within-a-correction that frequently sets up a resumption of the original uptrend after the pattern completes.
A bearish Gartley forms in a bearish market context. The XA leg is a rally - a correction within the larger downtrend. The pattern completes at D at the 78.6% retracement of XA from below, and a short entry is taken on confirmation.
Trading the Gartley PRZ
The trade entry methodology for the Gartley follows the same framework as all harmonic patterns: identify the pattern as D approaches the PRZ, wait for price to reach the PRZ zone, and then wait for a reversal candlestick signal before entering.
PRZ: 78.6% retracement of XA AND 127.2% extension of BC. Entry: When price reaches the PRZ, wait for bullish candlestick signal. Buy above the confirmation candle high. Stop: Below point D's extreme low. (Any close below D invalidates the pattern.) Target 1: B point - first significant resistance within the pattern. Target 2: A point - top of the XA leg. Target 3: X point - if the trade is catching a full trend resumption.
The most common mistake with Gartley patterns is trading them without candlestick confirmation - buying simply because price reached 78.6% of XA. At this level, price could continue lower before reversing, or fail to reverse at all. The confirmation candle is not optional - it is the signal that distinguishes a genuine reversal from a continuing decline.