A Gartley pattern is a popular reversal pattern that occurs frequently in the forex market and can be used to trade the trend. The Gartley pattern consists of five swing lows and three swing highs. It is also called the “Grand Supercycle” because it can be used to forecast long-term trends.
Trading the Gartley Pattern
The first thing you need to know about the Gartley pattern is that it will only form in uptrends and downtrends. In order for this pattern to form, there must be at least two consecutive swings in one direction followed by two or more swings in the opposite direction. The first four swings should be identical, and then there must be an outside reversal bar (this can be either a pin bar or a doji). This outside reversal bar signals the continuation of the trend, but not necessarily its end. If there are additional swings along with another outside reversal bar, then it is likely that a complete Gartley is forming.
Once you have identified a potential Gartley formation, you can use technical analysis tools such as Fibonacci retracement levels to determine where price may reverse again and continue moving in its current direction. You should always wait until this happens
How to Trade Gartley Pattern
A Gartley pattern consists of five waves that move in an upward direction and then downward before returning to the starting point:
A wave 1 is always longer than wave 4 (which may be equal).
Wave 2 should move more than 80% of wave 1, but less than 100%.
Also, Wave 3 (the largest) moves against wave 1 and must be at least 0.618 times wave 1’s length.
Wave 4 should be similar in length to wave 1 and should end near the same price as wave 2 began (but not necessarily at it).
Best Technical Indicators
The best technical indicators for swing trading are those that allow you to spot trends, build your positions and manage risk.
The best indicators to use in swing trading are trend and momentum oscillators, which help you identify direction of price movement and momentum. Indicators such as stochastic and MACD (moving average convergence divergence) are great because they show oversold or overbought conditions when prices are moving too far in one direction. This gives you an idea of when it’s time to buy or sell a stock. You can also use them to confirm your own analysis. For example, if a stock is showing signs of strength but its price is still significantly below its 200-day moving average, then maybe it’s worth waiting for a better entry point than buying now and risking being stopped out later on when the stock returns back down to its moving average line.
You should also look at volume indicators such as accumulation/distribution lines. Or accumulation/distribution histograms in order to see whether buyers or sellers have been more active. During the current uptrend or downtrend. These may give you an idea of whether there will be enough buyers interested in maintaining an uptrend. Or whether any given pullback is likely to continue falling lower (and vice versa).
read more at: zeelase