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Advanced Patterns - Butterlfly

INDEX:DXY   U.S. Dollar Index
The Harmonic Pattern Butterfly is closely related to the Gartley 222 pattern with the main difference being that the Butterfly pattern’s CD extends beyond the XA leg. The Gartley Butterfly pattern is also identified by the classic ‘M’ and ‘W’ patterns.

The Butterfly pattern was one of the many harmonic patterns developed by H.M Gartley which were then fine tunes with the introduction of the Fib rations by Scott Carney and Larry Pesavento. Visually, the Butterfly pattern looks similar to the Gartley 222 pattern, especially the Fib ratios between the pivot points .

The Butterfly pattern can be found near key market reversal points, usually at intermediate highs and lows. The appearance of the butterfly pattern indicates reversals when it is validated. The chart below gives an illustration of the Bullish and Bearish butterfly patterns.

* The butterfly pattern therefore is an easy to trade harmonic pattern which offers a highly reliable trade probability. The risk/rewards may of course vary depending on how far the CD leg extends and therefore traders should be looking to trade only those butterfly patterns that offers a lower risk and higher reward trades.
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