ONTRADE Forex

The Butterfly Harmonic Pattern: Complete Trading Guide

Butterfly Harmonic Pattern

The Butterfly harmonic pattern is one of the most reliable reversal patterns in technical analysis. Developed by Bryce Gilmore and later refined by Scott Carney, this pattern helps traders identify potential market turning points with exceptional accuracy.

🔑 Key Features:
✔ Distinctive M or W shape on price charts
✔ Precise Fibonacci ratios for high-probability entries
✔ Works across all markets and timeframes
✔ Provides clear stop loss and take profit levels


1. Origins of the Butterfly Harmonic Pattern

  • Initial Development: Bryce Gilmore (1990s)
  • Refinement: Scott Carney (early 2000s)
  • Name Origin: The pattern resembles butterfly wings when complete
  • Key Improvement: Added stricter Fibonacci requirements to original Gartley pattern

2. Butterfly Harmonic Pattern Structure & Fibonacci Ratios

Pattern Points (X-A-B-C-D)

LegFibonacci Requirement
AB78.6% of XA
BC38.2% – 88.6% of AB
CD161.8% – 261.8% of BC (Must reach 127.2% or 161.8% of XA)

Bullish vs. Bearish Butterfly

  • Bullish Butterfly: Forms at market bottoms (Buy at D)
  • Bearish Butterfly: Forms at market tops (Sell at D)

3. How to Trade the Butterfly Harmonic Pattern (Step-by-Step)

Step 1: Identify XA Impulse Move

  • Look for strong directional price movement

Step 2: AB Retracement (Critical 78.6%)

  • Must retrace exactly 78.6% of XA (key difference from other harmonic patterns)

Step 3: BC Retracement (38.2% – 88.6%)

  • Should stay within Fibonacci range

Step 4: CD Extension (Most Important)

  • 161.8% – 261.8% of BC
  • Must reach 127.2% or 161.8% of XA

Step 5: Enter at Point D

  • Buy (Bullish Butterfly) or Sell (Bearish Butterfly) with confirmation

4. Stop Loss & Take Profit Rules

Stop Loss Placement

  • Bullish Butterfly: Below point D
  • Bearish Butterfly: Above point D

Take Profit Targets

TargetFibonacci Level
TP138.2% of AD
TP261.8% of AD
TP3100% of AD

5. Confirmation Signals (Increase Accuracy)

Price Action: Reversal candles (pin bars, engulfing patterns) at point D
RSI/MACD Divergence
Volume Analysis: Increased volume at reversal point
Trendline/Support-Resistance Confluence


6. Butterfly vs. Gartley Pattern

FeatureButterfly PatternGartley Pattern
AB Leg78.6% of XA61.8% of XA
CD Leg127.2-161.8% XA78.6% XA
AccuracyHigherModerate
FrequencyLess commonMore common

7. Frequently Asked Questions (FAQs)

Q1: Why is the 78.6% AB retracement so important?

A: This exact retracement distinguishes the Butterfly from other patterns and increases reversal probability.

Q2: Best markets for Butterfly pattern?

A: Works well in Forex (major pairs), stocks (liquid equities), and crypto (BTC, ETH).

Q3: How to avoid false Butterfly signals?

A: Always wait for price confirmation at D point and check for RSI divergence.

Q4: Butterfly vs. Bat pattern – which is better?

A: Butterfly offers stronger reversals but appears less frequently than Bat patterns.


8. Professional Trading Tips

  • Be patient – True Butterfly patterns are rare but high-quality
  • Combine with trend analysis – Works best when aligned with higher timeframe trend
  • Use partial profits – Take 50% at TP1, move stop to breakeven
  • Practice on historical charts before trading live

9. Conclusion

The Butterfly harmonic pattern is a powerful tool for spotting high-probability market reversals. Key takeaways:

78.6% AB retracement is mandatory
CD must extend to 127.2%-161.8% of XA
Always use confirmation signals
Works across all timeframes and markets

Be careful at Economic News Times .

🚀 For best results, combine Butterfly patterns with other technical analysis tools for confluence.


Example :

Butterfly Harmonic Pattern
Butterfly Harmonic Pattern
Harmonic Patterns analysis Fibonacci Proportions
Harmonic Patterns analysis Fibonacci Proportions

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