Quote:
Originally Posted by Sweet Pip
Alrighty then...homework lesson #1..lol
Here's a long e/j on the m15...a bullish gartley. I missed the optimal entry area (circled) due to "distractions"...lol but took it anyway...still on demo.
I marked my original stop loss with the red line. then the entry is obvious, and a some green profit target line. IF I had entered optimally, my first target (that was reached) would have been 30 pips, but thus was only 15ish. So seeing that the macd was curving upwards, I waited it out, and not too long it hit my 2nd target for the full 30, and I see it's still going up...  |
That pattern you show has been happening very frequently. To clarify, Price has been faking out the initial 100% retracement (even though you can steel 30 pips from the market) testing the bounce a second time (creating a double bottom... simply confirming the support) and give you the true retracement active time. Remember how I said this pair will fake you out around 9pm-11:30est and notice how at 11:30pm est it began to move and complete the pattern.
Also note that in the charts bellow I have shown you a daily pattern responsible for the movement upward. This is also the reason for the support in the area where you have purchased.
Identifying a Gartley and avoiding a failed pattern:
The number one rule to this is that the BC leg of the pattern must have atleast a .500 fib retracement in order for it to develop a true Gartley. This means that the BC can retrace from the .500, .618, .786, .886, 100.0 fib levels and still be considered a gartley. You will know when the true gartley is formed because of the fact that an avg of 80% of the time it will bounce (find support or resistance) when it reaches symetry with AB. As a result you will see that the 100% of CD will converge with x fib point. You see this in the last trade I made. The BC leg bounced of the .886 and its 100% completed in the proximity of the .618 of XA.
A butterfly pattern is the result of a failed Gartley. This is why a number of traders would sell a pair if it closes bellow the 100.0 fib and have an entry waiting for them at the 1.272 for a buy or vice versa. In addition, 80% of the time if BC leg reaches the .382 and retraces (without ever touching the .500), the Gartley will fail an reach the 127%. This doesn't mean that it always has to reach the 1.272 of XA it simply states that the CD leg will retrace when cd = 127% of AD and still be considered a gartley if it hasnt passed the 1.000. Personally, these trades that do not hit the 1.272 of the XA are less symmetrical and should not be traded until you have more experience pattern trading.
Times when most D's develop on any given pair (EST time):
6pm-8pm, 12am-3am, 5am-6am, 10am-11:30pm
Times when D's tend to "Fake out"
9pm-11:00pm, 7am-9:30am, 2pm-4:30pm
(These times can be traded, simply note that it typically fail towards a more profound D).
This is why I normally begin to analyze the market from 2-4am and initiate my trade at 5-6am (I typically set my entry around 3am or 4am using the 30 min time frame).
-Fib levels-
The following Fib levels should be added to your Fibonacci tool:
0.000, 0.236, .382, .500, .618, .786, .886, 1.000, 1.272, 1.618, 2.000, and 2.618.
.236 and .382
If you are using visual stops and wish to trade these pattern conservatively, I recommend that you draw your fib points from the Base price of your high low swing to the wick of the low or high swing and place a physical stop once price reaches the .236 fib level. Your limit should be a the .382 as price usually tends to test this zone before it continues towards the target or before it fails to become a bigger pattern.
.500, .618, .786, .886, 1.000
These are your major ratracement zones and are typically the "D" area of a gartley pattern. Please note that these fibs depend on the pair that you are trading. For example, the EURO/JPY, AUD/USD and the GBP/USD for the most part have major resistance at the .500. and typically if price does not respect this area for these pairs it will continue towards the extreme levels (1.272, 1.618, etc). The EURO/USD, USD/CHF, and the NZD/USD Typically retrace from the .618 (the .500 will normally allow price to "breathe" before reaching this fib). In addition, the EUR/GBP finds support or resistance at the .786 (you can draw your fibs from high to low swings in history and you will see that 9 out of 10 times it will bounce from this point or reach its vicinity before doing a true retracement).
1.272, 1.618, 2.000, 2.618
These are your extreme levels and where your butterfly patterns will form. The 1.272 will be your major retracement level. If price for example closes bellow the 1.272 (bullish trade) the pattern typically fails and retraces from the 1.618. If I want to be risky, I can trade price towards the next "target". The close should always be the time frame where you found the pattern. The 2.000 and 2.618 are basically the most extreme zone and if price does not respect these it will typically continue the trend and not give you a retracement.
Please note that the 100-2.618% levels of CD should always be used to finding convergence with XA. You can see this on the example bellow where the 1.272% of CD finds convergence with the .500 fib level of price on the EURO/YEN. In effect indicating a D in that zone (You use convergence to identify where possible D's will develop).
Bellow I have corrected the pattern you previously posted. Always try to take the first swing after you XA as your AB. Your AB was invalid and would have not been considered a pattern according to Gartley 222 and Butterfly rules.
Simple mistake, at least you "saw" a pattern was there
