D must exceed B in order for the pattern to complete at D and be a valid AB=CD. C can be a 1.00 retracement of the AB leg, this is a rare pattern and a double top or bottom, but it is a valid pattern.ģ. Meaning the retracement of AB cannot exceed 1.00Ģ. Here are three items that would invalidate the AB=CD pattern:ġ. When studying this pattern it is important to know what invalidates the pattern. Tail closes in opposite direction of trade.As the CD leg forms and completes we will monitor the final leg for any warning signs that would alert us to a change in market conditions that may signal us to possibly pass on the trade or wait for further confirmation before entering the trade. Once we identify the CD leg forming we can project the potential pattern completion and form a trading strategy. Once price resumes in the same direction of the A-B leg the C-D leg then begins to form. (Note: Strongly trending markets will usually see only a retracement to the. This correction or retracement is labeled BC and is the second leg of the pattern. After the completion of the first leg, retracement or correction will occur that will usually find support or resistance at one of these Fibonacci levels. The first leg of the pattern is labeled A-B. There are three legs that form this pattern. It should be noted that the C-D leg can extend and will not always be exactly “equal.”

The pattern is a measured move where the second leg is “equal” to the first leg. The AB=CD pattern is found in all markets and on all time frames. He used mainly ratios of one third and half retracements. He also applied these lines to price ratios. Gartley spent several pages referring to these trend lines and parallel lines as excellent signals when used in conjunction with other working tools.

Abcd pattern trading