"The Great Gartley Controversy"
"The Great Gartley Controversy"
It is probably the best-known Harmonic Pattern in the trading community - the Gartley. Although many have written articles on this pattern, the origins of the Gartley Pattern range from erroneous to downright misinformation. H.M. Gartley first outlined the basic structure of this pattern in his book, Profits in the Stock Market, (Lambert-Gann Publishing, 1935) on page 222. Although contrary to what many have claimed, Mr. Gartley was NOT responsible for assigning Fibonacci ratios to this price structure. In fact, Profits in the Stock Market did not mention anything about Fibonacci ratios in the entire book. I know because I own it. It's not in there. I believe it is important to correct the prevailing misconceptions regarding this pattern.
It is important to note that there are others who have assigned different Fibonacci numbers to the framework of the Gartley Pattern. However, they have used a variety of Fibonacci numbers at the D points, essentially labeling any AB=CD pattern as a Gartley if it completes at a 0.618 or 0.786 without regard for the precise alignment. This has created much confusion among the technical community and it has challenged the reputation of the pattern.
This controversy was one of the earliest challenges that I faced when I initially refined the pattern. I argued with many people that “all Gartley Patterns are not the same.” If anything, the most effective Gartley Pattern required an exact specification of Fibonacci Ratios to validate the structure. Although the general structure has been outlined previously, it was not until The Harmonic Trader was released in 1999 that the exact rules for specific retracements of the B point at a 0.618 and the D point at a 0.786 were to be assigned to the pattern. This alignment has now become the standard in the technical community and it is now commonly referred to as the Gartley Pattern. The exact 0.618 B point requirement was just one condition in this interpretation of the structure. The Harmonic Trader also outlined the importance of the AB=CD pattern and the BC projection rules that required specific conditions to validate the structure. The Potential Reversal Zone (PRZ) of a Gartley possesses several other elements that differentiate the structure from other patterns. The pattern should possess a distinct and equivalent AB=CD pattern that converges in the same area as the 0.786 XA retracement. In fact, the completion of the equivalent AB=CD pattern and the 0.786 retracement are minimum requirements for a valid Gartley. Frequently, the 0.786 XA retracement overlaps the AB=CD pattern within the PRZ. In these cases, this convergence is the defining level of the PRZ. The BC projection is another specific condition to validate the structure and it must not exceed a 1.618. Although the BC projection is a less significant number in the PRZ than in other patterns, the 1.618 limit helps to differentiate the Gartley structure. Typically, a BC extension greater than a 1.618 is typically found in Bat structures. Regardless of the required numbers in the PRZ, the Gartley must possess a precise 0.618 B point retracement to validate the structure. In fact, the Gartley Pattern requires the most precise B point alignment of all the Harmonic Patterns to define the most valid opportunities.
Gartley Pattern Elements:
· Precise 61.8% B point retracement of XA leg.
· BC projection must not exceed 1.618.
· Equivalent AB=CD pattern is most common.
· 0.786 XA retracement.
· C point within range of 0.382-0.886 retracement.
It has been my experience, after working with the Harmonic Analyzer for the past several years that anything less than the ideal Fibonacci alignments for the Gartley usually results in “deeper” corrective structures, favoring a Bat Pattern completion. Although this strict application of the Gartley alignment reduces the number of pattern matches, it is critical in identifying valid patterns and effectively differentiating these two similar structures.
It is important to note that the Gartley Pattern is simply one type of "M" or "W" Elliott Wave corrective pattern. Although similar in structure, the Bat Pattern is a distinctly different entity, utilizing other rules to define the set-up. Such specification of price structures, quantified by Fibonacci calculations, is essential in Harmonic Trading. In terms of the Gartley Pattern, the set-up that yields the most valid reversals is the one illustrated in The Harmonic Trader.
As with all Harmonic Patterns, the specification of Fibonacci points within each structure is extremely critical in determining valid trading opportunities. The Gartley Pattern exemplifies the necessity of such specification, as the structure frequently resembles a Bat Pattern as it completes. The Harmonic Analyzer (HA) has been instrumental in the identification of valid Gartley Patterns. The software is able to find those Gartley structures that possess only the best Fibonacci alignments, including precise B point retracements.
On a final note about Harmonic Patterns, The Harmonic Trader outlined many unprecedented strategies that distinguished patterns based upon specific price point alignments. This differentiation increased the effectiveness and served to demystify the confusion of the overall application of these methods. Again, I must emphasize that although others have utilized a variety of Fibonacci numbers in their analysis of Price Patterns, the exact specification of price structures, quantified by Fibonacci calculations, is what separates Harmonic Trading from the rest.
It is probably the best-known Harmonic Pattern in the trading community - the Gartley. Although many have written articles on this pattern, the origins of the Gartley Pattern range from erroneous to downright misinformation. H.M. Gartley first outlined the basic structure of this pattern in his book, Profits in the Stock Market, (Lambert-Gann Publishing, 1935) on page 222. Although contrary to what many have claimed, Mr. Gartley was NOT responsible for assigning Fibonacci ratios to this price structure. In fact, Profits in the Stock Market did not mention anything about Fibonacci ratios in the entire book. I know because I own it. It's not in there. I believe it is important to correct the prevailing misconceptions regarding this pattern.
It is important to note that there are others who have assigned different Fibonacci numbers to the framework of the Gartley Pattern. However, they have used a variety of Fibonacci numbers at the D points, essentially labeling any AB=CD pattern as a Gartley if it completes at a 0.618 or 0.786 without regard for the precise alignment. This has created much confusion among the technical community and it has challenged the reputation of the pattern.
This controversy was one of the earliest challenges that I faced when I initially refined the pattern. I argued with many people that “all Gartley Patterns are not the same.” If anything, the most effective Gartley Pattern required an exact specification of Fibonacci Ratios to validate the structure. Although the general structure has been outlined previously, it was not until The Harmonic Trader was released in 1999 that the exact rules for specific retracements of the B point at a 0.618 and the D point at a 0.786 were to be assigned to the pattern. This alignment has now become the standard in the technical community and it is now commonly referred to as the Gartley Pattern. The exact 0.618 B point requirement was just one condition in this interpretation of the structure. The Harmonic Trader also outlined the importance of the AB=CD pattern and the BC projection rules that required specific conditions to validate the structure. The Potential Reversal Zone (PRZ) of a Gartley possesses several other elements that differentiate the structure from other patterns. The pattern should possess a distinct and equivalent AB=CD pattern that converges in the same area as the 0.786 XA retracement. In fact, the completion of the equivalent AB=CD pattern and the 0.786 retracement are minimum requirements for a valid Gartley. Frequently, the 0.786 XA retracement overlaps the AB=CD pattern within the PRZ. In these cases, this convergence is the defining level of the PRZ. The BC projection is another specific condition to validate the structure and it must not exceed a 1.618. Although the BC projection is a less significant number in the PRZ than in other patterns, the 1.618 limit helps to differentiate the Gartley structure. Typically, a BC extension greater than a 1.618 is typically found in Bat structures. Regardless of the required numbers in the PRZ, the Gartley must possess a precise 0.618 B point retracement to validate the structure. In fact, the Gartley Pattern requires the most precise B point alignment of all the Harmonic Patterns to define the most valid opportunities.
Gartley Pattern Elements:
· Precise 61.8% B point retracement of XA leg.
· BC projection must not exceed 1.618.
· Equivalent AB=CD pattern is most common.
· 0.786 XA retracement.
· C point within range of 0.382-0.886 retracement.
It has been my experience, after working with the Harmonic Analyzer for the past several years that anything less than the ideal Fibonacci alignments for the Gartley usually results in “deeper” corrective structures, favoring a Bat Pattern completion. Although this strict application of the Gartley alignment reduces the number of pattern matches, it is critical in identifying valid patterns and effectively differentiating these two similar structures.
It is important to note that the Gartley Pattern is simply one type of "M" or "W" Elliott Wave corrective pattern. Although similar in structure, the Bat Pattern is a distinctly different entity, utilizing other rules to define the set-up. Such specification of price structures, quantified by Fibonacci calculations, is essential in Harmonic Trading. In terms of the Gartley Pattern, the set-up that yields the most valid reversals is the one illustrated in The Harmonic Trader.
As with all Harmonic Patterns, the specification of Fibonacci points within each structure is extremely critical in determining valid trading opportunities. The Gartley Pattern exemplifies the necessity of such specification, as the structure frequently resembles a Bat Pattern as it completes. The Harmonic Analyzer (HA) has been instrumental in the identification of valid Gartley Patterns. The software is able to find those Gartley structures that possess only the best Fibonacci alignments, including precise B point retracements.
On a final note about Harmonic Patterns, The Harmonic Trader outlined many unprecedented strategies that distinguished patterns based upon specific price point alignments. This differentiation increased the effectiveness and served to demystify the confusion of the overall application of these methods. Again, I must emphasize that although others have utilized a variety of Fibonacci numbers in their analysis of Price Patterns, the exact specification of price structures, quantified by Fibonacci calculations, is what separates Harmonic Trading from the rest.