Gartley Pattern: Ratios, PRZ and Execution
Lesson 06 of 12. Measure the classic Gartley structure and build a confirmation-based trading plan.
1. Pattern geometry
A commonly taught Gartley has B near 61.8% retracement of XA and D near 78.6% retracement of XA. BC often retraces 38.2–88.6% of AB, with CD extending roughly 127.2–161.8% of BC.
2. AB=CD relationship
Many Gartley candidates also exhibit AB approximately equal to CD in price distance. This adds a PRZ component but exact equality is not mandatory across every published variant.
3. Numerical walkthrough
Suppose bullish X=100, A=120, B=107.64 (61.8% XA retracement). If C=115, a 78.6% XA retracement puts D=104.28. Compare that with CD projections from BC before labeling the zone.
4. How to locate D
Plot the 78.6% XA level and a BC extension. If projections are far apart, do not stretch the PRZ to make the pattern fit.
5. Entry confirmation
At D, wait for a measurable reversal trigger such as a close above a minor swing high. Entering merely because a ratio printed ignores momentum and volatility.
6. Stop and targets
A protective stop beyond the pattern invalidation level may be appropriate; calculate monetary risk from contract specifications. Conservative targets can be retracements of AD or nearby structure.
7. Common mistakes
Confusing a Gartley with a Bat, allowing B to drift far from 61.8%, and drawing D after the reversal all inflate apparent accuracy.
8. Student assignment
Find three possible Gartleys, calculate ratios in a worksheet and reject at least one that fails the stated rules.
Knowledge check
- What is the commonly cited B retracement of XA in a Gartley?
- How would you calculate the D retracement reference from X and A?
- What independent leg check could reject a visually appealing Gartley?
Answer using the worked example above. Record your calculations and one reason the setup could fail before revealing any chart outcome.
Worked numerical example: Illustrative bullish Gartley
XA = 20; AB = 12.36, so AB/XA = 0.618. A 78.6% XA retracement places D near 104.28. BC = 7.64; CD = 11, so CD/BC ≈ 1.44. This example is geometrical only; verify all pattern-specific conditions and market context before treating it as a candidate.
Practice and answer
Show worked answer
The 61.8% B retracement is commonly associated with the Gartley framework, but a candidate also needs compatible subsequent legs and completion-zone measurements. Measure each segment separately and reject patterns that fail the full rule set.
Independent worked analysis: Gartley completion is an internal retracement
Hypothetical worked example: If XA spans 200 pips, a 78.6% retracement is 157.2 pips of that leg. A potential D near this level is internal to the original X–A range, unlike extension-based patterns.
Calculation and decision exercise: Measure the B retracement and BC projection separately, then check whether their completion zones agree within a predeclared tolerance.
What this example cannot establish: A visually symmetric XABCD is not enough. Invalid intermediate ratios should disqualify the setup.
Evidence checklist for this specific lesson
- Write down the precise inputs used in the gartley completion is an internal retracement example, including their units and observation dates.
- Distinguish what can be computed directly from what must be inferred about future prices or policy.
- Test the opposite interpretation using a clearly stated alternative assumption, not a revised chart drawn after the outcome.
- Document transaction costs and the maximum hypothetical loss before treating any market view as an executable strategy.
Applied analysis: testing the lesson in context
The following exercise develops the specific decisions involved in gartley pattern: ratios, prz and execution. It is a hypothetical training workflow, not a prediction or an instruction to place a live trade. Keep the market, time zone, instrument, observation window and data source fixed before evaluating the idea. Separate what the chart shows from the interpretation assigned to it; two analysts can label the same sequence differently without either label being a verified market mechanism.
Case step 1: 1. Pattern geometry
Start with the lesson's 1. pattern geometry component. Source observation: A commonly taught Gartley has B near 61.8% retracement of XA and D near 78.6% retracement of XA. BC often retraces 38.2–88.6% of AB, with CD extending roughly 127.2–161.8% of BC. Record the exact candle or pivot at which this information first became available. If confirmation depends on a later close, mark that later close as the earliest legitimate decision point. A visually compelling retrospective drawing is not sufficient evidence that the setup was identifiable in real time.
Now construct a counterexample for 1. pattern geometry: imagine the price initially behaves as the lesson suggests but then fails to follow through. Write the invalidation condition as an observable price or time event, not as a vague change in confidence. Compare two annotated screenshots, one before the proposed confirmation and one after it. Explain what genuinely changed in the available evidence. For a trading-system study, record spread, slippage, position size, and whether the proposed stop could have been filled at the assumed price.
Case step 2: 2. AB=CD relationship
Start with the lesson's 2. ab=cd relationship component. Source observation: Many Gartley candidates also exhibit AB approximately equal to CD in price distance. This adds a PRZ component but exact equality is not mandatory across every published variant. Record the exact candle or pivot at which this information first became available. If confirmation depends on a later close, mark that later close as the earliest legitimate decision point. A visually compelling retrospective drawing is not sufficient evidence that the setup was identifiable in real time.
Now construct a counterexample for 2. ab=cd relationship: imagine the price initially behaves as the lesson suggests but then fails to follow through. Write the invalidation condition as an observable price or time event, not as a vague change in confidence. Compare two annotated screenshots, one before the proposed confirmation and one after it. Explain what genuinely changed in the available evidence. For a trading-system study, record spread, slippage, position size, and whether the proposed stop could have been filled at the assumed price.
Case step 3: 3. Numerical walkthrough
Start with the lesson's 3. numerical walkthrough component. Source observation: Suppose bullish X=100, A=120, B=107.64 (61.8% XA retracement). If C=115, a 78.6% XA retracement puts D=104.28. Record the exact candle or pivot at which this information first became available. If confirmation depends on a later close, mark that later close as the earliest legitimate decision point. A visually compelling retrospective drawing is not sufficient evidence that the setup was identifiable in real time.
Now construct a counterexample for 3. numerical walkthrough: imagine the price initially behaves as the lesson suggests but then fails to follow through. Write the invalidation condition as an observable price or time event, not as a vague change in confidence. Compare two annotated screenshots, one before the proposed confirmation and one after it. Explain what genuinely changed in the available evidence. For a trading-system study, record spread, slippage, position size, and whether the proposed stop could have been filled at the assumed price.
Evidence record and independent assessment
Create a small research log specifically labelled “Gartley Pattern: Ratios, PRZ and Execution”. For each candidate observation, store its date, instrument, session, timeframe, setup definition, entry eligibility, invalidation level, expected costs, and actual subsequent path. Include candidates that never triggered, rather than selecting only attractive examples. Compare at least two market regimes and note whether the interpretation changes when a nearby swing anchor or session boundary is chosen. If it does, classify the result as sensitive to analyst discretion rather than robust evidence.
Finally, write a three-part conclusion about gartley pattern: ratios, prz and execution: (1) which elements can be verified directly from historical prices, (2) which elements are hypotheses about participants or future behavior, and (3) what observation would cause you to reject the hypothesis. The exercise is complete only when a second reader could reproduce your markings using the written rules. Do not infer a profitable edge from a single worked example; that requires a separately designed, cost-aware and out-of-sample evaluation.