This forex strategy is based on the Gartley trading pattern. The Gartley pattern is also called the XABCD pattern.
The “XABCD” represents the 5 key points from where lines can be traced to form the characteristic “W” and “M” shapes of the two Gartley patterns.
The Gartley pattern has a bullish as well as a bearish variety.
The XABCD points are derived from Fibonacci ratios of 38.2%, 50%, 61.8%, 100% and 161.8%.
MetaTrader4 Indicators: gartley-patterns.ex4 (custom indicator).
Preferred Time Frame(s): 5-Minutes, 15-Minutes, 30-Minutes, 1-Hour, 4-Hours, 1-Day
Recommended Trading Sessions: The pattern can be traded at any time.
Currency Pairs: Any
Long Entry Rules
A long position is initiated when the bullish Gartley pattern (“M” or inverted “W”) is displayed on the chart. The trade entry area is at point D. The trade is to BUY the asset.
Stop Loss for Long Entry: The stop loss is set at about ≥5-30 pips below the entry price, located at point D. This is shown on the chart.
Exit Strategy/Take Profit for Long Entry: Knowing when to exit a trade is very important so as to protect profits.
- The reference point for the Take Profit is the previous resistance which is seen within the bullish Gartley pattern at point A. It is expected that the upward price movement from point D will at least reach the previous resistance.
- Set the Take Profit to be at the same level as point A. When price starts to approach this area, use a Trailing Stop to protect profits and chase the trade to its logical conclusion.
Short Entry Rules
The Sell trade is initiated from point D.
- The bearish Gartley pattern should be allowed to form as identified by the Gartley_pattern.ex4 indicator.
- Once point D is identified, initiate a Sell trade at the open of the next candle.
Stop Loss for Sell Entry: Trace a horizontal line across the previous high at point X, and set the stop loss to a few pips above that line. This is shown on the chart.
Exit Strategy/Take Profit for Sell Entry: The exit strategy on a Sell position is very easy. Simply use the previous low at point A as the profit target.
About The Trading Indicators
The Gartley pattern was created by H.M Gartley and described in detail in a 1935 book known as Trading Chaos. The strategy is basically a reversal trade strategy based on Fibonacci ratios.
Each of the 5 points that make up the Gartley pattern are Fibonacci retracements or extensions of each other. Traders usually have a hard time deciphering these points on the chart. It is also time consuming to plot each of the points one after the other while trying to perform trade analysis on the charts.
It is for this reason that the Gartley_pattern.ex4 indicator has been created. By automatically detecting and plotting the 5 key areas on the charts, traders can just focus on the key points and set the trade entries and exits accordingly.