What it is
Harmonic trading, developed by H.M. Gartley and later Scott Carney and others, says certain zigzag shapes measured with Fibonacci ratios tend to finish near turning points. Each pattern has its own ratios. For example, a Gartley's B point sits near the 61.8% retracement of XA and its D point near 78.6%; a Bat's D sits near 88.6%; a Crab's D extends to 161.8% of XA.
Unlike Elliott Wave, this is pure arithmetic: measure each leg and see whether it lands inside the tolerance.
How it is calculated
1. Find the swing highs and lows using the swing size setting. 2. Take the latest five alternating swings as X, A, B, C and D. 3. Measure how far B retraced the XA leg, how far C retraced AB, how far D sits against XA, and how far CD extends against BC. 4. Compare each ratio with the pattern's rules, allowing the tolerance (8% by default) either side. 5. If every ratio fits, name the pattern and draw it. Bullish patterns end at a low D; bearish ones at a high D.
Settings
| Setting | Default | Range | What it changes |
|---|---|---|---|
| swing size | auto | auto, or a fixed 0.25%, 0.5%, 1%, 2%, 3%, 5%, 8%, 12% or 20% | How big a move must be to count as a swing. Larger finds bigger patterns. |
| tolerance % | 8 | 1 to 25 | How far each ratio may miss its ideal value. Lower is stricter and finds fewer, cleaner patterns. |
| pattern | any | any, Gartley, Bat, Butterfly, Crab, Shark, Cypher or ABCD | Search for every pattern or just one. |
How to read it
How to trade it
- 1
Wait for D to complete; do not enter while the CD leg is still moving fast.
- 2
Entry trigger: a reversal candle at D, such as a bullish engulfing on gold 1 hour, or a close back above D.
- 3
Stop: beyond X for Gartley and Bat patterns, or a little beyond the D extreme for Crab and Butterfly.
- 4
Target: the 38.2% and 61.8% retracement of the CD leg, measured from D.
- 5
Take partial profit at the first target and move the stop to entry.
A bullish pattern is proved wrong if price closes below the stop level (X for a Gartley or Bat, the D extreme for a Crab or Butterfly).
WickSpeak draws the X A B C D points and legs on the chart, names the pattern and writes a plain-English reading: what it is, how to trade the D point and what would prove it wrong. The 146 pattern scanner includes 18 harmonic patterns, and pattern conditions can be used in Playbook.
Best markets and timeframes
Harmonic patterns read best on 1 hour to daily charts of liquid markets such as gold, US30, NAS100 and the major forex pairs.
Common mistakes
- Entering before D completes and getting run over by the CD leg.
- Setting the tolerance so high that almost any zigzag qualifies.
- Ignoring the trend; patterns against a strong trend fail more often.
Works well with
Questions traders ask
What is the most reliable harmonic pattern?
No single pattern is reliable on its own. The Gartley and Bat are popular because the stop beyond X is clear and close. Check any pattern with confirmation at D.
What are the Gartley pattern ratios?
B retraces about 61.8% of XA, C retraces 38.2% to 88.6% of AB, and D completes near the 78.6% retracement of XA, with CD about 1.13 to 1.618 times BC.
What is the difference between a Bat and a Gartley?
The Bat has a shallower B point (38.2% to 50% of XA) and a deeper D point (88.6% of XA). The Gartley has B near 61.8% and D near 78.6%.
How do you trade a harmonic pattern?
Wait for D to complete, look for a reversal candle there, place the stop just beyond the pattern's limit and target the 38.2% and 61.8% retracements of the CD leg.