The Gartley Pattern: ‘Harmonic Trading’
I always enjoy going to the STA’s monthly meetings. Sometimes the speakers are entertaining and amusing, more often than not they make me sit up and listen. Occasionally I learn to see things in a different way, and even if they’re dull, there’s always the drinks and networking afterwards. There too, you never know what you might learn, as I did at this month’s one (8 May 2018).
Chatting to members, Andrew Duck introduced himself. A relatively recent graduate of the STA Diploma Course, he’s keen on taking a hands-on approach to his pension and investments. To this end, he subscribes to the Investors Chronicle magazine and claims to enjoy reading my Trader’s column. Flattery will get you everywhere!
He then mentioned the Gartley Pattern, something I had never heard of. Intrigued, I quizzed him about it and the next day he sent me internet links on the subject; the seeds of this blog were sown. ‘Profits in the Stock Market’ was written by H.M. Gartley (I can’t seem to find his first names; just known as HM) in 1935. On page 222 (of 446) he outlines his new trading methodology which claims: ‘’The difference between losses and profits frequently hinges upon trading in a hit-or-miss fashion, or systemizing one’s speculation.’’
His retracement pattern, which has links to Fibonacci, Gartley himself used ratios of one third and two thirds between each of the five points of the move. Think of it as a sort of A, B, C-type correction which can correct either a prior bull or bear trend. A bearish Harmonic Gartley Pattern retraces and initial sell-off (X high to A low), followed by an A to B corrective bounce taking prices up to two thirds of the initial drop. A subsequent B to C dip can retrace up to 88.6 per cent of the rally from A to B. From the C interim low another corrective rally begins and can be between 1.2 to 1.6 of the height of A to B – which introduces vague elements of Elliott Wave Theory.
Further patterns and measurements were outlined by Scott Carney in his books on ‘Harmonic Trading’, and Larry Pesavento wrote another called ‘Trade What You See: How to Profit from Pattern Recognition’.
Personally, I’m not sure whether I’ll add this to my tool box of technical analysis. I think I’m a more visual, rough and ready type of chartists, but here are what I think are the two best internet links so that you, dear readers, can decide for yourselves.
Tags: Chart patterns, correction, Harmonic, Technical Analysis Courses, Waves
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