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.

http://www.larrypesavento.com/pdf/Gartley_Pattern.pdf

http://stockcharts.com/school/doku.php?id=chart_school:trading_harmonic_patterns

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Posted in Finance, Markets, STA charts, STA education, STA news, Technical Analysis, Trading, Trending
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The views and opinions expressed on the STA’s blog do not necessarily represent those of the Society of Technical Analysts (the “STA”), or of any officer, director or member of the STA.

The STA makes no representations as to the accuracy, completeness, or reliability of any information on the blog or found by following any link on blog, and none of the STA, STA Administrative Services or any current or past executive board members are liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use.

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About Nicole Elliott

Nicole Elliott

A graduate of the London School of Economics and Political Science (BSc Social Psychology) Nicole Elliott has worked in banks in the City of London for the last 30 years. Whether in sales, trading or forecasting technical analysis has always been the bedrock of her thinking. Key expertise lies within all areas of treasury: foreign exchange, money markets, fixed income and commodities.

She has also added to the body of knowledge of the industry writing the first western book on Ichimoku Cloud Charts. Strong media links and a cult following are due to her prescient calls on the markets and often entertaining format.

Nicole can be contacted at trending@sta-uk.org

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