Butterfly Pattern
Reference values based on Bulkowski's "Encyclopedia of Chart Patterns". Data is primarily from U.S. markets and may differ for other markets.
A 5-point (X-A-B-C-D) harmonic pattern proposed by Bryce Gilmore and Larry Pesavento. The key difference from the Gartley is that point D extends beyond the original X point (1.27 XA extension). B is positioned at the 0.786 retracement of XA. This pattern captures reversals after overshoot at point D.
Enter when point D (1.27 XA extension) is reached and a reversal candlestick pattern (pin bar, engulfing, etc.) is confirmed. Long at point D for a bullish butterfly, short for bearish.
First target: 0.382 retracement of C to D. Second target: B level. Maximum target: A level. Since reversals from point D tend to produce large moves, staged profit-taking is effective.
Place a stop-loss beyond point D (near the 1.414 XA extension). Allow some overshoot at point D while cutting losses on significant deviation.
A volume surge at point D's reversal is important. Ideally, high volume on X-A, decreasing volume during pattern formation, and volume increase again at point D.