Harmonic pattern "Gartley's Butterfly" - history of creation and application in market trading
Good afternoon, dear trading beginners and practicing traders! We continue our fascinating course of lectures on the topic of harmonious Gartley patterns. And today we will talk about such a wonderful figure as Gartley Butterfly harmonic pattern!
The story of the discovery of the harmonic pattern "Gartley's Butterfly"
The Gartley's Butterfly pattern was graphically "discovered" in 1935, but all the ratios on the Fibonacci levels to clarify the "wings" of the butterfly were calculated in a later period by students and followers of the great Gartley. It was they who developed and gave mathematical definition to several basic variations of this harmonic pattern with different Fibonacci levels. To begin with, let us consider the reference classical patterns - the most beautiful and harmonious ones.
The Gartley's butterfly pattern - there's room for beauty.
In the previous chapter, we looked at harmonic pattern AB=CDand it was not accidental, because it is the main component of the harmonic model "Gartley's Butterfly". Let's take a closer look at it in Figure 1.
The Gartley's Butterfly harmonic pattern resembles a regular pattern corrected bywhich it is, plus it must necessarily contain the pattern AB=CD. Point B is at the Fibonacci level of 61.8% of segment XA and point D is in the area of 78.6%. Point C should be at the 78.6% level of the AB movement. By calculating the exact ratios of these corrections we really get a figure that resembles the wings of a butterfly. This is how the classic model of harmonic analysis "Gartley's Butterfly" looks like mathematically.
Figure 2 shows the harmonic pattern "Gartley's Butterfly" in a market environment. Everything is simple, beautiful and elegant.
Nonstandard ratios in the Gartley's Butterfly harmonic model
In addition to the classical plot of the formation of the pattern "Gartley's Butterfly", there are also some non-standard ratios of the "wings" of this pattern. For example, such as:
- A pattern in which point B is at 50.0% and D is at 61.8%. Point C is at 61.8% from the AB movement (Fig. 3).
- A pattern where point B is at 38.2% and D is at 50.0%. Point C is at 61.8% from the AB move.
- A pattern where point B is at 50.0% and D is at 78.6%. Point C is at 88.6% from the AB move.
Thus, Harmonic pattern "Gartley's Butterfly" gives the trader the opportunity to open trades on a pullback, very close to the maximum or minimum, which significantly reduces the potential risks of the transaction and increases the potential profit. And most importantly, this pattern is quite common in financial markets. So do not be afraid to use these graphical price patterns in your work, even if they were discovered more than 70 years ago.