Thank you for visiting and Welcome to excellent way to learn about Harmonic Trading and The Gartley trading pattern. This site will be updated regularly with further details on the Gartley trading, especially confirmation methods illustrated with detailed examples. Your valuable comments will be added here or taken for further discussions on the TradingArsenal Forum . Harmonic traders live trade examples and forcasts you may follow on Harmonics Tube. Hope together we can learn faster and discover more. Note that from the TradingArsenal site you may download a test version of our korHarmonics - harmonic and price patterns recognition indicator (MT4 only). It will, in real time, find your Gartleys, ABCD patterns and more. Is Gartley pattern true or a myth? Is the described in the books success ratio possible? How to choose from so many Gartleys found by the pattern recognition softwares? You will find the answers here...

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Gartley pattern 70-80% success ratio



Most of the information that I've found over the internet regarding the Gartley pattern suggests a success ratio of 60 to 80% (70% the most common). My personal opinion is that it is not proper to state any success percentage without specifying applied money management rules, instruments traded, timeframes of the trades, tested period, trading experience and applied confirmation methods. Clearly, with 2:1 RR you may reach your Take Profit level more often than you would with 3:1 RR and therefore success ratio percentage itself is useless.

During my first years trading the pattern appeared to have a success ratio of no more than 60% and because of weak money MM I was losing with it. It all looked nice on Carney's and Pesavento's books, but I found that it was quite a different story on the charts. To locate a reasonable pattern on the chart was a challenge and to open a position in an optimal place was short of a miracle. This is one of the many reasons why korHarmonics was created (I'll write more on the other reasons on a later blog).
With more experience, I started to look at the Gartley pattern from a different view point. The market context/pattern position became more important than the Fibonacci relationships (for example the equality of AB and CD swings). I figured out the the differences between Mr. H.M. Gartley's pattern and Pesvento's "Gartley" version (with the specific Fibonacci measurements).

I enlarged my arsenal of confirmations, learned about 12345s and the ABCs of Elliott Wave, and started to apply market cycles, trendlines, and price actions elements. My Gartleys started to work and still are the best price patterns I know and use today. I aim for 3:1 Reward Risk ratio, but sometimes settle for 2:1 and call it a day. It is not uncommon for the Gartley pattern to offer 5:1 and even 10:1 and better ratios, but I rarely go for it, as "Just take the money from the market" is what my mentor keeps telling me and I've learned that you'll never go broke taking profits.

I now combine the harmonic trader eyes with an Elliottican's perspective. For Elliott Wave traders, Gartley gives us an opportunity to enter at the beginning of wave 3 or at least C, for harmonic traders it is the most known and most powerful harmonic pattern. For people using cycles, oscillators, divergences, trend lines, price action with support/resistance and Fibonacci levels, for the majority, if not all of them, Gartley patterns will meet their system's conditions. Due to this major confluence of trading systems/methods, Gartley offers a very strong move and because of market position and small risk involved, it is a highly profitable setup.
Even in scenarios when the patterns fail, you observe an initial market reaction at point D in your favor.


After including several confirmations described here and with time spent on the charts, you will reach the promised 70-80% success ratio (while always using reasonable MM). Note that if you add more confirmations your success ratio will increase but along with that your potential trades will decrease substantially. Thankfully there is never a lack of these patterns as they are present on all timeframes and instruments regularly.


The diagram below presents the equity curve for a system with a 70% success ratio and 3:1 Reward:Risk.




Use the tool  below (available also from http://hquotes.com/) to check our potential equity curves if our success ratio falls to 60%. Play around with the parameters to experience how little success ratio is needed if we keep our 3:1 Reward:Risk ratio. 50% and 2:1 isn't bad either is it? Bottomline is, you can be right less than 70% and still get paid nicely?



Note that I am using the MT4 platform, and while I do find it very good for developing and testing automats in real-time mode, it is poor for historical testing due to the limited data offered, low performance, and memory consumption.


I would like to offer you a detailed historic test but the MT4 limitations hinder me from doing this. I will soon be better acquainting myself with AmiBroker to have better access to backtesting tools.



Mare sure you check also:
Gartley pattern definition and market position
Construct PRZ (Potential Reversal Zone) for the Gartley pattern
Gartley pattern confirmation methods - trendlines
Gartley pattern confirmation methods - divergences
Gartley pattern confirmation methods - combining timeframes
Gartley pattern confirmation methods - reversal candlestick patterns
Gartley pattern confirmation methods - AB ?= CD
Gartley pattern confirmation methods - volatility
Gartley pattern confirmation methods - cycles
Gartley pattern failure setups
Confirmation methods - more to come...

4 comments:

  1. hello,

    can you tell me what is the name of that M5 cycles indicator or probably where i can download it..

    thanks

    :)

    ReplyDelete
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