{"id":7688,"date":"2021-03-29T11:40:51","date_gmt":"2021-03-29T08:40:51","guid":{"rendered":"https:\/\/roboforex.com/blog\/?p=7688"},"modified":"2026-05-26T10:57:22","modified_gmt":"2026-05-26T07:57:22","slug":"butterfly-how-to-trade-the-graphic-pattern","status":"publish","type":"post","link":"https:\/\/roboforex.com/blog\/blog\/2021\/03\/29\/butterfly-how-to-trade-the-graphic-pattern\/","title":{"rendered":"Butterfly: How to Trade the Graphic Pattern?"},"content":{"rendered":"\n

Technical analysis<\/a> suggests a whole range of patterns<\/a>. Each author tries to make their pattern unique and describe it in as much detail as possible. At a certain point, there even appeared a whole trend of adding the Fibo<\/a> grid to already existing patterns to enhance identification. Such price structures are called Harmonic patterns<\/a>.<\/p>\n\n\n\n

Many investors add Fibo levels even to such simple patterns as Head and Shoulders<\/a> to evaluate the position of Shoulders and whether it complies with the requirements to the pattern. For the Double Top<\/a> pattern, they have invented the Dragon pattern, in which the author also uses the Fibo grid to assess the correctness of the pattern and whether it will work.<\/p>\n\n\n\n

I have a reason to tell you all this. To the Butterfly pattern that I am describing below, the same principle is applied. To check whether the pattern has formed correctly, Fibo levels are used. The main issue is how to do it. Before answering this, let us get into the history and the specifics of the topic.<\/p>\n\n\n\n

<\/span>What is the difference between the Butterfly and Gartley?<\/span><\/h2>\n\n\n\n

The Butterfly pattern<\/strong> is very similar to the Gartley pattern (also called Gartley Butterfly<\/a>). We already have an article on it. Many traders mix these two up but if you look closely, they are absolutely different.<\/p>\n\n\n\n

The Gartley pattern was designed and presented by Harold Gartley in his book \"Profit on the Stock Market\". At that time, it did not include Fibonacci levels<\/a>. Later, Harmonic traders added the levels and concluded that the B point of the pattern must be near 0.618 of the correction and point D — at 0.786.<\/p>\n\n\n\n

As for Butterfly, point B is near 0.786, while point D is near the projection of 1.27 of the XA wave. This is the main difference between the Butterfly and Gartley patterns. As you can see, it would be a hard job to find this difference without Fibo levels.<\/p>\n\n\n\n

<\/span>How did the Butterfly pattern appear?<\/span><\/h2>\n\n\n\n

Butterfly has two \"fathers\": Bryce Gilmore<\/strong> and Scott M. Carney<\/strong>.<\/p>\n\n\n\n

Bryce Gilmore first described the pattern in his Wave Trader program and was more oriented on the graphic side of the pattern, i.e. he detected the structure just by the chart, without the Fibo grid.<\/p>\n\n\n\n

Scott M. Carney strictly tied all patterns up to Fibo and only afterward assessed the pattern itself. About Butterfly, he wrote in his book \"Harmonic Trading: Volume One\".<\/p>\n\n\n\n

There he notes that he has several combinations of the pattern that include Fibo levels; as the most efficient one, he prefers that in which point B is at 0.786 of the XA wave, and the pattern is expected to complete at 1.27 of XA. Other combinations can be neglected.<\/p>\n\n\n\n

<\/span>How does the pattern form?<\/span><\/h2>\n\n\n\n

Butterfly contains five points: X, A, B, C<\/a>, D. The points appear on the chart after ascending and descending impulses.<\/p>\n\n\n\n

The pattern looks like the simplest Double Top or Double Bottom pattern; however, here we use the Fibo grid to identify the pattern and only then open positions. Moreover, while by the Double Bottom<\/a> we sell, by Butterfly, we look for a signal to buy.<\/p>\n\n\n\n

<\/span>Does Butterfly work against the trend?<\/span><\/h2>\n\n\n\n

The pattern can appear on various timeframes. In the first books on Harmonic Trading, little attention was paid to the market trend, so you could trade the pattern in either direction. However, later, authors started to be more careful about the presence of a trend and its direction because the pattern works much better if it goes by the trend.<\/p>\n\n\n\n

Just for your information: Butterfly can work against the trend but most likely, it will be just a correction. If we trade the trend, the price will not just reach the first goal but go far beyond.<\/p>\n\n\n\n

<\/span>The structure of a bullish Butterfly<\/span><\/h2>\n\n\n\n

A bullish pattern gives the trader a signal to buy. Each of the five points of Butterfly coincides with its own Fibo level.<\/p>\n\n\n\n

Mind that even if the price reaches the marked level of point D, where we expect the pattern to end, do not rush at opening a buying position. This area is called the \"Potential reversal area\", which means that the price will not necessarily grow.<\/p>\n\n\n\n

The bullish Butterfly pattern forms as follows:<\/p>\n\n\n\n

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Butterfly pattern<\/figcaption><\/figure>\n\n\n\n