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Chapter 17, Part III - Gartley's Patterns. Page 3

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 21, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Commander in Pips: Yes. Still, the CD leg easily could be an extension of AB in a “222” pattern, if, say, the AB leg is small and the initial X-A move is solid.

    Pipruit: And how we could estimate the initial X-A swing. It always has to be a reversal against previous trend, or what?​

    Commander in Pips: Not necessary. Simple observation will help us. First, the X point will be the high or low point of the swing and the starting point of the pattern itself. Sometimes it could be some significant low or high on daily and higher timeframes. But sometimes, it could be even intermediate low or high that appeared after retracement on a long-term trend.

    On non-24/5 markets, as on the stock market, these swings could form on daily basis, when the trading session is opened and the X point becomes an anchor price for X-A initial swing starting to form.

    Pipruit: And what advantage could this pattern give us?​

    Commander in Pips: Its major value is that it allows us to join to some move that has started recently. Most traders rarely buy or sell right on the bottom or top, so they need some retracement to join the move – and “222” pattern allows us to do it. Also, it allows us to place a tight and reasonable stop – generally speaking make our entry and position as comfortable as possible.

    Pipruit: And could we estimate the length of X-A move in advance?​

    Commander in Pips: I’m afraid not. This is a natural process. All that you can do is to wait when AB=CD retracement will start. Besides, if you’ll see gaps, long bars, tail closes in the direction of the X-A move then possibly you will have to wait some time. Very often this XA leg shows breaks of previous classical support or resistance lines. But the only way to determine that this initial move has finished – is to see the start of the AB leg. From time to time near A point could be formed some candlestick patterns that we know already – doji, engulfing or tweezers.

    Pipruit: Ok, I see – sit on our hands and wait for the X-A swing completion.​

    Commander in Pips: Right. Then time has come to watch the AB leg. Here we should look at:

    1. Fib retracement level from initial X-A swing that will be reached by AB leg;

    2. The number of bars in the AB leg.

    This will give us initial information about possible retracement of total AB-CD pattern. Say, if the AB pattern forms more than 8-10 bars, then probably whole AB-CD will reach 0.618-0.88 of initial swing – i.e. AB-CD move will be deep.

    The next crucial moment is watching over the BC leg. Remember, it should stay inside the X-A move.

    Pipruit: Well, It’s clear. Commander, could we apply here tools that we’ve studied in advanced Fibonacci chapters? I mean Agreement. After all, potential AB-CD target could coincide with some Fib retracement level and creates Agreement – this could clearly show us the potential level to watch for entering?​

    Commander in Pips: Absolutely, we not just can do it, but we have to do it. It’s very well that you’ve remembered about that. Nice work.
     
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