Gartley Trader

By Ross Beck, FCSI

For the week of May 18 – May 22, 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. Data for our entry, exit and
resulting profit or loss will be based on continuous charts versus individual
contract months. Data is obtained from Reuters. For further information, go to
www.gartleytrader.com

Weekly Summary
Exchange Contract Month Setup Price Order Date

CME/SPOT EUR/USD Front Bear Gartley 1.3575 Sell New

CME/SPOT NZD/USD Front Bull Gartley .5710 Buy New

“Gartley Trader” is written by Ross Beck, FCSI, All rights reserved. Charting by Dynamic Trader. www.gartleytrader.com
Trade Setups of the Week
CME/Spot EUR/USD

Trade Set Up
We have a bearish Gartley setting up in the EUR/USD on the 5 min chart. The pattern is based
on a 78.6% Fibonacci retracement and a simple ABC zigzag that completes at 1.3559. If the
EUR/USD rallies this week to 1.3575 before it goes below 1.3467, the bearish Gartley 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 1.3575 with limit orders. Enter the protective buy stop on
all three contracts at 1.3615. Set the first profit target to buy one contract on a limit at 1.3555.

If the first target is hit - Move the protective buy stop on the remaining two contracts to 1.3595
and set the second profit target to buy one contract at 1.3535.

If second target hit - Move the stop on the remaining open position to 1.3575 and use a three
bar trailing stop on the 60 minute chart as long as the three bar trailing stop is below 1.3575.

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 60 minute chart.

Scale In Single Out (SISO)

Entry Order - Sell one contract at 1.3575 limit and set the profit target at 1.3535 to buy.

If the market rallies to 1.3615 - Sell two contracts and place limit orders to buy three contracts
at 1.3575.

If market rallies to 1.3655 - Sell four contracts and place limit orders to buy seven contracts at
1.3615

If market rallies to 1.3695 - PTP! (Pull the plug)

“Gartley Trader” is written by Ross Beck, FCSI, All rights reserved. Charting by Dynamic Trader. www.gartleytrader.com
Trade Setups for the Week
CME/SPOT NZD/USD

Trade Set Up
We have a Bullish Gartley pattern in NZD/USD on the 60 min. chart. The pattern is based on a
78.6% Fibonacci retracement on the impulsive trend move up. In addition, a simple ABC
correction against the uptrend completes at .5724. If the NZD/USD declines this week to .5710
before it rallies above .5976, the bullish Gartley pattern might be complete and we may choose
to enter with limit orders on the long 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 – Buy three contracts at .5710 with limit orders. Enter the protective sell stop on all
three contracts at .5610. Set the first profit target to sell one contract on a limit at .5760.

If the first target is hit - Move the protective sell stop on the remaining two contracts to .5660
and set the second profit target to sell one contract at .5810.

If second target hit - Move the stop on the remaining open position to ..5710 and use a three
bar trailing stop on the daily chart as long as the three bar trailing stop is above .5710.

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

Scale In Single Out (SISO)

Entry Order – Buy one contract at .5710 limit and set the profit target at .5810 to sell.

If the market declines to .5610 - Buy two contracts and place limit orders to sell three contracts
at .5710

If market declines to .5510 - Buy four contracts and place limit orders to sell seven contracts at
.5610

If market declines to .5410 - 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.

“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 and Indicators/Oscillators

Last week we discussed how to use Japanese candlesticks as a way to enter the market at the
completion of a Gartley pattern. This week we will consider the use of technical indicators as a
way to enter a trade at pattern completion.

Indicators by their nature are lagging. Often by the time the indicator has generated a buy or
sell signal, other trading strategies could have already liquidated positions for a profit. This
concern reminds us to focus on the optimal settings for their indicator of choice to ensure that
the buy and sell signals generated by the oscillator are not too slow. However, despite their
limitations, indicators can add value in their ability to identify a current rhythm of the market
that may not be quickly identified visually. The choice of indicator or oscillator to use with the
Gartley pattern will be left up to the individual if this method of entering the market is to be
used at all. The important point is that the trader understands the indicator or oscillator well
and has confidence in it.

For the purposes of this example, let’s assume that your favorite oscillator is the Stochastic. The
Stochastic oscillator measures where closing prices are relative to the high-low price range over
a given number of bars. The oscillator is displayed below the chart as a line with readings
ranging from 0% to 100%. In addition, the oscillator usually includes horizontal lines that
identify the 20% and 80% levels. One way to use the stochastic is to buy when the stochastic
crosses about the 20% line and to sell when it crosses below the 80% level.

In view of the foregoing, we could use the Stochastic oscillator to enter the market at the
completion of a bullish Gartley pattern in the following manner…

1) Wait for the market to touch our Fibonacci retracement level.

2) Buy at the market when the Stochastic oscillator crosses above the 20% level.
3) Place your stop just below the previous swing low.

The Stochastic oscillator is just one example of the many indicators and oscillators that you may
choose from to enter the market after the completion of a 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