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Butterfly

Information is not investment advice

Butterfly is another form of a Gartley pattern. It was discovered by Bryce Gilmore and Larry Pesavento. This pattern usually forms near the extreme lows and highs of the market and foretells a reversal.

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The main Butterfly pattern feature is that CD extends beyond XA.

Here are the key parameters of a Butterfly pattern:

  • Point B is at up to 78.6% retracement of XA.
  • Point C can be at the 38.2%-88.6% retracement of AB.
  • Point D can be found at the 161.8%-261.8% extension of AB or at the 127.2%-161.8% extension of XA. The difference from a Gartley pattern is that D is not at the retracement of XA but at its extension.

How to trade Butterfly pattern

  1. The entry is at point D, which is a potential reversal zone.
  2. Take Profit may be at 61.8% of CD (TP1) and/or at 127.2% of CD (TP2). You can also target points B (a conservative approach) and A (an aggressive approach).
  3. Put Stop Loss in line with your rules of risk management.

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Point B is at the 78.6% retracement of XA. Point C is at the 76.8% retracement of AB. Point D is at the 127.2%-161.8% extension of XA. 

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