The Gartley pattern is a harmonic trading pattern that appears on price charts in financial markets. It is named after its creator, H.M. Gartley, who introduced the pattern in his book “Profits in the Stock Market” in 1935. The Gartley pattern is considered a type of harmonic pattern and is used by technical analysts to identify potential trend reversal points.

The Gartley pattern is defined by specific geometric shapes and Fibonacci ratios. It is characterized by the following key points:

1. **X to A Leg:** The pattern begins with an initial price move, referred to as the “X to A leg.” This move represents the initial impulse or trend.

2. **A to B Leg:** After the X to A leg, there is a retracement called the “A to B leg.” This retracement typically occurs at a Fibonacci level, often around 61.8% of the X to A leg.

3. **B to C Leg:** The next move is the “B to C leg,” which is an extension of the retracement. This leg ideally reaches a 78.6% Fibonacci level of the X to A leg.

4. **C to D Leg:** The final move is the “C to D leg,” which is another retracement and typically reaches a 78.6% Fibonacci level of the A to B leg. The D point is the potential reversal point, and it is often the completion of the pattern.

The Gartley pattern is visually represented by a distinct “M” or “W” shape on the price chart, depending on whether it is a bullish or bearish pattern. The completion of the pattern at the D point suggests a potential reversal of the prevailing trend.

Traders and investors use the Gartley pattern as part of their technical analysis to identify potential buying or selling opportunities. It’s important to note that while harmonic patterns like the Gartley can be useful, they should not be used in isolation, and other technical indicators and analysis methods should be considered for confirmation.

Additionally, traders often use stop-loss orders to manage risk, as the success of pattern-based trading strategies is not guaranteed, and prices may not always follow the expected patterns.