MACD (Moving Average Convergence/Divergence)

MACD (Moving Average Convergence/Divergence): A technical indicator that helps to predict potential trend changes in direction, strength, and/or duration. The MACD indicator is generated by subtracting a fast moving average from a slow one.

The Gartley Pattern

Gartley Pattern - text

The Gartley pattern is named after H. M. Gartley who described the pattern in a book he wrote in 1935 called “Profits in the Stock Market”

In simple terms a Gartley pattern is a specifically shaped retracement.

It is used to spot potential turning points.

The specifically shaped retracement has 3 distinct parts generally referred to as waves.

The first part called the A wave is the beginning of the retracement

The second part called the B wave goes in the opposite direction of the first part

And the third part called the C wave goes in the same direction as the first part.

Here is a diagram to help you to visualize the Gartley pattern retracement shape.

This is a bullish Gartley setup and a potential buy trade near the bottom of the C wave.

Three key points about the gartley pattern

  1. The consensus among Gartley enthusiasts is that the B wave should retrace a minimum of 38.2% of the A wave and preferably 50% or more.
  2. The length of the C wave when all is said and done should be somewhere between 75% and 125% of the length of the A wave.
  3. To put together a specific trade strategy the trader must decide on the percentage retracement of the original move up he or she wishes to trade.

The most popular are 50%, 61.8%, and possibly 78.6% (our focus here is on the 78.6% retracements).

So what have you learned?

  • A Gartley pattern is a specifically shaped retracement.

  • It consist of waves A, B and C linked to Fibonacci retracement levels

  • It is best used to spot potential turning points and find profitable trading opportunities.