FOREX THEORY
Gartley a.k.a. “222″ Pattern
The Gartley “222″ pattern is named for the page number it is
found on in H.M. Gartleys book, Profits in the Stock Market. Gartleys are
patterns that include the basic ABCD pattern we’ve already talked about, but
are preceded by a significant high or low.
Now, these patterns normally form when a correction of the
overall trend is taking place and look like ‘M’ (or ‘W’ for bearish patterns).
These patterns are used to help traders find good entry points to jump in on
the overall trend. A Gartley forms when the price action has been going on a
recent uptrend (or downtrend) but has started to show signs of a correction.
What makes the Gartley such a nice setup when it forms is
the reversal points are a Fibonacci retracement and Fibonacci extension level.
This gives a stronger indication that the pair may actually reverse.
This pattern can be hard to spot and once you do, it can get
confusing when you pop up all those Fibonacci tools. The key to avoiding all
the confusion is to take things one step at a time. In any case, the pattern
contains a bullish or bearish ABCD pattern, but is preceded by a point (X) that
is beyond point D. The “perfect” Gartley pattern has the following
characteristics:
1.Move AB should be the .618 retracement of move XA.
2.Move BC should be either .382 or .886 retracement of move
AB.
3.If the retracement of move BC is .382 of move AB, then CD
should be 1.272 of move BC. Consquently, if move BC is .886 of move AB, then CD
should extend 1.618 of move BC.
4.Move CD should be .786 retracement of move XA
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