Gartley Trader

By Ross Beck, FCSI

For the week of March 30 – April 3, 2009

The Gartley Trader is a weekly publication that focuses on high probability trade
set ups in the U.S. Futures market. The Gartley Trader is a purely technical
newsletter with a focus on pattern recognition, Market Geometry and Fibonacci
ratio analysis. As such there will be no fundamental bias as to whether the trade
set ups discussed should be long or short. It will be left up to the individual to
filter these setups with additional fundamental analysis. In addition to the set ups,
all examples will use SEME (Single Entry Multiple Exit) and SISO (Scale In Single
Out) advanced money management techniques. For further information, go to
www.gartleytrader.com

Weekly Summary
Exchange Contract Month Setup Price Order Date

COMEX GC Front Bear Retest 1005 Sell New

NYBOT OJ Front Bear Retest 79.00 Sell New

“Gartley Trader” is written by Ross Beck, FCSI, All rights reserved. Charting by Dynamic Trader. www.gartleytrader.com
Trade Setups of the Week
COMEX Gold

Trade Set Up
We have a bearish retest setting up in COMEX Gold on the daily chart. The pattern is based on a
100% Fibonacci retracement and a simple ABC zigzag that completes at 1001.10. If GC rallies
this week to 1005, the bearish retest pattern will be complete and we will want to enter with
limit orders on the short side.

“Gartley Trader” is written by Ross Beck, FCSI, All rights reserved. Charting by Dynamic Trader. www.gartleytrader.com
Entry/Exit Strategies
Our two favorite methods of entering/exiting our trade set ups are with SEME (single entry,
multiple exits) and SISO (scale in, single out). SEME dictates that we enter with a minimum of
three contracts and exit the position in thirds. The SISO strategy is a pure martingale and will
double the position size at specified intervals if the position moves against us. Once the position
moves in our favor by a single interval, we will liquidate all open positions. The SISO strategy is
VERY AGGRESSIVE but has the highest probability of winning.

Single Entry Multiple Exits (SEME)

Entry Order - Sell three contracts at 1005 with limit orders. Enter the protective sell stop on all
three contracts at 1020. Set the first profit target to buy one contract on a limit at 997.50.

If the first target is hit - Move the protective buy stop on the remaining two contracts to
1012.50 and set the second profit target to buy one contract at 990.

If second target hit - Move the stop on the remaining open position to 1005 and use a three bar
trailing stop on the weekly chart as long as the three bar trailing stop is below 1005.

Three Bar Trailing Stop - The three bar trailing stop in the above example would put a stop
above the highest high of the previous three bars (ignoring inside bars) on a weekly.

Scale In Single Out (SISO)

Entry Order - Sell one contract at 1005 limit and set the profit target at 990 to buy.

If the market rallies to 1020 - Sell two contracts and place limit orders to buy three contracts at
1005.

If market rallies to 1035 - Sell four contracts and place limit orders to buy seven contracts at
1020

If market rallies to 1050 - PTP! (Pull the plug)

Entry strategies like the Gartley Pattern are only one part of a trading strategy. The most
important aspect of trading is the exit. In addition to the strategies described above, Majestic
Peak Trading offers a number of different money management techniques to empower traders.
For more information on expert exit strategies, go to www.majesticpeaktrading.com

“Gartley Trader” is written by Ross Beck, FCSI, All rights reserved. Charting by Dynamic Trader. www.gartleytrader.com
Trade Setups for the Week
NYBOT Orange Juice

Trade Set Up
We have a Bearish retest pattern in orange juice on the 60 minute chart. The pattern is based
on a 100% Fibonacci retracement on the impulsive trend move down from the Jan. 9th high at
78.95, down to the Feb. 17th low at 64.60. In addition, a simple ABC correction against the
down trend will be complete at 79.65. If orange juice rallies this week to 79.00 before it drops
to 69.30, the bearish retest pattern might be complete and we may choose to enter with limit
orders on the short side.

“Gartley Trader” is written by Ross Beck, FCSI, All rights reserved. Charting by Dynamic Trader. www.gartleytrader.com
Entry/Exit Strategies

Single Entry Multiple Exits (SEME)

Entry Order – Sell three contracts at 79.00 with limit orders. Enter the protective buy stop on all
three contracts at 84.00. Set the first profit target to buy one contract on a limit at 76.50.

If the first target is hit - Move the protective buy stop on the remaining two contracts to 81.50
and set the second profit target to buy one contract at 74.00

If second target hit - Move the stop on the remaining open position to 79.00 and use a three
bar trailing stop on the daily chart as long as the three bar trailing stop is below 79.00.

Three Bar Trailing Stop - The three bar trailing stop in the above example would put a stop
above the highest high of the previous three bars (ignoring inside bars) on a daily chart.

Scale In Single Out (SISO)

Entry Order – Sell one contract at 79.00 limit and set the profit target at 74.00 to buy.

If the market rallies to 84.00 - Sell two contracts and place limit orders to buy three contracts
at 79.00

If market rallies to 89.00 - Sell four contracts and place limit orders to buy seven contracts at
84.00

If market rallies to 94.00 - PTP! (Pull the plug)

Entry strategies like the Gartley Pattern are only one part of a trading strategy. The most
important aspect of trading is the exit. In addition to the strategies described above, Majestic
Peak Trading offers a number of different money management techniques to empower traders.
For more information on expert exit strategies, go to www.majesticpeaktrading.com

“Gartley Trader” is written by Ross Beck, FCSI, All rights reserved. Charting by Dynamic Trader. www.gartleytrader.com
Weekly Technical Analysis Review
The Gartley Pattern – Part 5

One of the most important aspects of adhering to any particular trading strategy is to believe
that the strategy is a high probability strategy. It is very hard to believe in a trade strategy if you
don’t know how it works (I.E. Black Boxes.) With this in mind, let’s carefully consider each of the
individual legs that unfold in the Gartley Pattern to understand the Psychology behind this high
probability set up.

Referring to the first example “A” in figure 27 from H.M. Gartley’s book, Profits in the Stock Market,
Gartley first identifies a bearish A-B leg . This leg appears to be a significant trend move or impulsive
phase with minor rallies punctuating the down trend. At the completion of this A-B leg, we notice a
significant rally that is labeled as the B-C leg. This B-C rally exceeds the previous rallies in the A-B
downtrend in both price and time. This B-C price action indicates that the previous downward trend
might be complete and that the B-C leg might be indicating the beginning as a new impulsive trend
move in the opposite direction of the previous A-B move down. This B-C leg is very typical of what
happens when traders all begin to cover their short positions after a sustained bearish trend. The B-C leg
completes when the short covering is complete. With this in mind, the assumption is that the market
will not take out the low at point B as a new trend up will probably continue higher and never look back.
Based on this information, Gartley puts his protective sell stop just below point B. Though Gartley
mentions the A-B leg in his book, most educators of the Gartley Pattern omit this important aspect of
the pattern.

At the completion of the B-C move, Gartley mentions that there will be a minor decline that cancels a
third to a half of the preceding minor advance (B-C). In other words, Gartley is looking for a 33% to 50%
retracement of the B-C move up. Why does this minor decline take place? This minor decline could be
caused by traders that were anxious to get short in the previous A-B decline. These bears were waiting
for a significant pullback during this bearish trend down, however the market kept missing their sell limit
orders on the rallies. Now that the market has had a significant rally against the downtrend they start
selling at point C and push the market down. Depending on where they get filled, they will put their
stops just above point C. This selling from the “late bears” pushes the market down into what Gartley
describes as a minor decline.

“Gartley Trader” is written by Ross Beck, FCSI, All rights reserved. Charting by Dynamic Trader. www.gartleytrader.com
This original Gartley Pattern ends up having a very different look and feel compared to how it is being
taught today. In part 6 we will continue to look at the “improvements” that have been made to the
Gartley Pattern.

Ross Beck, FCSI

To obtain a free subscriptions to the Gartley Trader Futures Newsletter, go to www.gartleytrader.com

“Gartley Trader” is written by Ross Beck, FCSI, All rights reserved. Charting by Dynamic Trader. www.gartleytrader.com