Harmonic patterns are often used to predict trend reversals, and the corresponding harmonic patterns are drawn in combination with Fibonacci tools. In the last issue, we talked about the ABCD pattern of the 4-point expansion structure. In this issue, we will share two types of 5-point patterns: the 5-point retracement structure and the 5-point expansion structure.
5-point retracement structures include: Bat pattern and Gartley pattern
The 5-point extended patterns include: Butterfly and Crab
Today we will learn about the five-point retracement structure: the Bat pattern and the Gartley pattern. They are two common harmonic patterns, consisting of three trending bands and two counter-trend bands, of which the second and fourth waves are adjustment waves, retracing a certain proportion of the first and third waves respectively.
The main difference is the location of points B and D, and the application of the Fibonacci ratios.
Both patterns can identify and predict possible reversal points in the market, determine the timing of entry and exit, and set stop loss and take profit levels. Combined with other technical indicators or tools, it can improve the accuracy and efficiency of analysis.
Today's sharing content is as follows
Gartley Pattern
Example of using the Gartley pattern
Bat Form
Give an example to analyze how the bat form is used?
1. Gartley Pattern
The Gartley pattern, also known as the "Gartley 222 pattern", is one of the harmonic patterns. It is derived from the 5-point retracement structure. It was originally discovered by H.M. Gartley and further defined in detail by Scott Carney. It can be used in different cycles and markets.
The Gartley pattern is similar to the AB=CD pattern, it also has two directions and requires AB=CD. In addition to the common patterns, there is also a perfect Gartley pattern.
As usual, let’s first understand how each point is determined, and then look at the actual case.
X point: After determining the trading range, select the highest or lowest point of the main trend as the X point
Point A: Main trend, the highest point of the first wave
Point B: Falls between the retracement lines of XA (0.618~0.886)
Point C: Falls between the AB (0.382~0.886) retracement lines
Point D: Between the retracement lines of XA[0.786~0.886)
Similarly, the Gartley pattern also follows the corresponding principles in terms of stop-profit and stop-loss:
Take profit: T1=0.382AD, T2=0.618AD
Stop loss: X points, 1.13XA
In addition, the Gartley pattern is a controversial pattern. The 0.786XA pullback is an important element of the structure. The equidistant AB=CD within the pattern is the most important completion point in the potential reversal zone PRZ, and it is also the mandatory minimum requirement for all valid Gartley patterns.
2. Gartley real case
Take the bullish [Gartley pattern] as an example.
The following figure is the 1-hour chart of 1INCH/Tether. After a period of volatility, the market began to fluctuate and rise, forming a bullish [Gartley pattern]. It can be seen in the figure that AB and CD are almost equal (the red line in the figure). The entry position can be near point D
1INCH/Tether 1-hour chart
US Dollar Index 4-hour chart
Bearish [Gartley]
BTC 4-hour chart
CHILIZ 4-hour chart
3. Bat Form
The Bat pattern is also one of the harmonic patterns. Like the Gartley pattern, it has a 5-point retracement structure. The CD segment is smaller than the XA segment, and neither exceeds the X and A points. The biggest difference from the Gartley pattern is the retracement level of the B and D points, which is shown in the following diagram.
Harmonic patterns all have two directions: bullish and bearish. The bullish and bearish patterns of [Bat] are as follows:
The meaning and judgment method of each point:
X: The high or low point of a market
A: The end point of the first wave, which is also the price leg 1 of the bat, is used to determine point B and point D later.
B: At the [0.5~0.618) retracement of XA
C: Between the retracement of AB [0.382, 0.886), and not exceeding point A
Point D: At the 0.886 retracement of XA or the (1.618, 261.8) extension of BC
After determining the five points, use the XABCD tool to connect XABCD in sequence to get a bat shape.
There are the following principles for taking profit and stopping loss:
Take profit: T1=0.382AD, T2=0.618AD
Stop loss: X points, 1.272XA
4. Bat real case
Take the bullish [Bat Pattern] as an example.
The following figure is the weekly chart of the Shanghai Composite Index. After a rapid rise, the market began to fall strongly, and then began to rise, forming a large "M" shape, forming a 0.886 bat. Determine points X and A, call up the Fibonacci retracement line of XA, and determine the positions of points B and D.
Generally, point D is used to determine the reversal zone. Its position is just a price that may reverse, but it does not mean that the price will definitely reverse when it reaches point D.
Shanghai Composite Index Weekly Chart
Alibaba Group Holding 4-hour chart
Bearish [Bat]
FTT 4-hour chart
Gold spot against the US dollar daily chart
[Bat] and [Gartley] are both commonly used patterns in harmonic patterns. They mainly use the four points XABC to determine the reversal zone PRZ where point D is located. Although the winning rate of harmonic patterns is relatively high, risk control also needs to be strictly controlled. Even if the signal given by the pattern is theoretically consistent, in order to reduce the risk of trading, other trading tools can be combined to reconfirm the signals before trading, and then decide on the trading decision.
Finally, in order to facilitate your memory and distinction, I have compiled a small picture for you. I suggest you like and save it! ! !
The above is what I shared today. If you have gained something from this sharing, please like, forward and collect it! Follow [Paul Dahuige] to learn more trading knowledge and skills.
