The Gartley -Steps 5-8:
“Market forms a bear Candle pattern at the 61.8% or 78.6% fibonacci…".
Step 5: Here we want to have a candle pattern to confirm our possible Gartley. Most traders will use the parallelogram to estimate the location of “D” and place a Limit order at this level which usually is either 61.8% or 78.6%. I used to do this but most times the “D” point never formed or the market decided for a Double Top [or Bottom] instead.
To add a higher percentage of success to our trade, I wait for the Bear Candle pattern in this instance.
In this example we had a beautiful 4h Shooting Star (marked in the pink rectangle) and sell on the 1st “S” at the opening of that candle. But if this is not sufficient for you, as it did for me during this live trade , we can wait for the Evening Star and sell on the 2nd “S”.
Step 6: We enter short at this junction after either the Shooting Star or the Evening Star.
Step 7: We place the TP at the 127%. This is my prefer most conservative target. Based on my research, the market will hit my target a higher percentage of the time before turning around. Yes, I will miss a portion of profits between the 127 & 1618 but I don’t care. What I care is to have a higher strike rate and have a reasonable Risk:Reward that keeps me in profits.
Step 8: Move trade to freeroll after 1:1 or 1:1.5. This has nothing to do with the actual Gartley pattern. This now has to do with trade management. I trade 8 products, and I invest 2.5% on each trade making it a Max Open Risk of 20% of my bank. This is HIGH! in my opinion. I rather not risk more than 10% on all my open trades. However, I also don’t want to reduce my # of trades per year. So again, it is a matter of balance and preferences. For these reasons I move my stop to “free-rolling” as soon as the market either moves the same # pips as per my initial risk or at 1.5x that risk…
Example: if I am risking 50pips then I will move my stop to freeroll when the market has moved the same 50pips. There is no reason in my mind why I should end up in a loss when the market has made me 1:1. This is the same as backing a Horse that is a Favourite paying you $2.