The butterfly pattern is an extension pattern in which the D point is reached beyond the X point. You still want an AB of 382, 500, 618, or 786 (618 and 786 are the strongest). The D point should fall at 1.272 or 1.618 of XA. Anything beyond 1.618 is risky and the trend will probably continue past the D point.
i may be wrong, but i’l put forward my thoughts so that if i am indeed wrong the more experienced traders can correct us both at the same time!
the BC leg must retrace a minimum of .382. if it retraces between .382 - .500 without passing the .500, it is likely that a butterfly pattern will form since it shows that we are in a strong trend.
further, if the BC leg retraces above .500 without exceeding 1.000 (which will invalidate the pattern as C cannot be above X in a sell pattern or below in a buy pattern) then it is likely a gartley will form.
for both gartley and butterfly patterns to be valid there must be a visable AB=CD. ie the length of CD must equal if not exceed that of AB. that is why we measure the fibs from B to A and move the tip of the fib to point C. In doing so we ONLY look for convergence above 100% of that fib because that is the point in which AB=CD.
i hope that makes sense otherwise iv been trading these patterns wrong!
There is a Gartley and Butterfly pattern identified on each of their own attachments in the 4 Hour TF. They each point to the same exact convergence. The third attachment is a view of the daily TF, showing that the convergence of 100% XA and 200% CD identified by the first two attachments also coincides with a strong line of support/resistance throughout the past.
All this evidence should point to a strong and viable pattern forming on this pair.
can somebody let me know if this is a tradeable formation please? the attached chart shows a current snapshot of the GU m30. Since the C leg is an .886 retracement of the AB leg, should that not suggest that a gartley is in formation? however, the convergence at the 100% of the XA and CD did not hold and the next convergence is at the 1.272.
i was under the impression that if the C leg retraces <.500 a butterfly will form… what i want to know is, would anybody trade this as a butterfly formation, if so what would be your TP?
Here are two patterns that I was able to identify and trade around the start of the NY session today. Good luck
I hope that by me posting these patterns it gives those who are just learning more images to look at, in case your a visual learner like myself, as well as opens up my patterns to scrutiny so as to help me learn something new or prevent me from trading a bad pattern. So please, comment on my stuff if you see it as wrong!
Hi racerdude … i dont understand how you drew that G/U pattern you got . it seems you have drawn B and C on the same candle. ? Also do you always use the very first swing high/low after XA as B and the very first swing high/low after B as point C.
We’ll see what happens with this, I wasn’t too excited about the set up but couldn’t take away the coincidence with that line of resistance on the Daily chart. I am watching it closely as it is not my most confident trade however, I did commit to it and am looking for it to go positive. It looks like it has at least stalled out at the convergence for the time being.
Dan89,
The reason for the B/C on the same candlestick is that I was drew the pattern on the 30 min and put the attachment on as though it was a pattern drawn on the hour TF. See the following attachment to help clear that up. The convergence isn’t as good as say at the 50% XA but the line of support there is why I took the trade where I did. I try to, but only if it fits the criteria set forth by TMB, if it isn’t a drastic swing high but there is a more defined one a couple bars later, I will take a look at how that one lines up. If there are any convergences that result. If there are then i’ll evaluate further. Hope that helps!
Good day to you TMB,
Dear tmb, though .382 doesnot retraced for c leg, but still its playing and its given more than 650 pips… Is the trend changed to downside ?
your view would be appreciated …
