Today we will talk about another method of analysis that will help you make significant profits.
HM Hartley in 1935 in the book “Profits on the stock market” first revealed the patterns of Hartley. Gatli patterns are used in technical analysis and are based on Fibonacci values. The patterns are reversal patterns and have clear rules and an excellent risk-reward ratio.
Hartley patterns perform better than most known chart formations, which also use different Fibonacci levels, but not as clearly as Hartley patterns. designations
Hartley decided to designate waves with 5 letters for simplicity:
the letter x – is the beginning of the trend;
The letter “A – is the end of the trend;
the letter b – it is the first retracement of the trend;
the letter c – it is a retracement correction (without breaking the level of point A);
the letter d – is the goal of the letter C.
The zones for the letters B, C, D are determined using the Fibonacci relationship between XA and AB.
Patterns are divided into types and have their own names, moreover, the patterns work for any direction of the market.
Let’s take a closer look at the patterns.
Pattern Formation – Price reaches the high/low of wave XA and forms a point B at the 38.2-50% Fibonacci retracement level. Using the XA points, you can find the value of point D, which generally tends towards the 88.6% Fibonacci retracement level relative to XA.
In this case, CD is most often longer than segment AB.
When wave B ends its formation at the 78.68% Fibonacci retracement level, they speak of the formation of a butterfly pattern. At the same time, the target for wave D will be values beyond XA and it will be 1.27-1.618 XA.
This pattern is formed when the price touch and bounces off the XA swing high/low and forms a B point at the 38.2-61.8% Fibonacci retracement level. The point D target is outside the original XA segment and is 1.618 XA
Simplify pattern identification
With careful study of the patterns, it can be seen that pattern formation depends on the location of wave B relative to XA. Other than controllers and patternsthere is an easier way to identify the remaining patterns.
Let’s divide the wave B values by the Fibonacci levels.
1) 38.2%: Bat, crab
2) 50%: bat, crab
3) 61.8%: Bat, crab, AB = CD
4) 78.6%: Butterfly
5) 88.6%: Deep-sea crab.
If you see one of these values, you can understand what pattern is forming. For example, if you see on the chart that the price reaches the 50% level, you can expect a bat or crab figure.
To calculate where point C will be, you can use the Fibonacci levels relative to point AB: at 38.2%, 50%, 61.8%, 78.6% and 88.6%.
Now let’s define the objective D.
1) Mtd: 88.6% Fibo HA or 2618
two) Mtd alternative: 113% Fibo XA (below X) OR 2.0 BC
3) Crab: 161.8% Fibo (below X) OR 3.14
4) Hartley: 78.6% Fibo HA or 1.27
5) Butterfly: 161.8% Fibo (under X) OR 1.618 BC
6) Deep Sea Crab: 161.8% Fibo (below X) OR 2618 AC
How to trade?
It is necessary to open a position at the level, on a confirmation signal or on a momentum breakout, using pending orders at Fibo levels.
Confirmation – In this case, you should wait for the reversal candlestick pattern at the Fibonacci level. Breakout – in this case, the price bounces off the Fibonacci level and breaks the trend line in the expected direction.
It is worth paying attention to the following clarifications: trading on wave B goes in the direction of the trend, but with a limited purpose (on the letter C). The wave C trade is a trade against the trend, but with a good risk-reward ratio (with a target on the letter D). Trading the letter D can be thought of as trading in the direction of the trend (very close to support and resistance levels) and also with a good benefit/risk ratio (target can be the top in an uptrend, the bottom in a downtrend or any Fibonacci level of the CD segment).
These patterns are quite common and the success rate is quite high.
Use the patterns correctly and they will bring you a lot of profit.
Traders, if you liked this idea or if you have your own opinion about it, write in the comments. I’ll be happy