The Butterfly is an extension pattern: unlike the Gartley, its completion point D pushes beyond X, projecting to a new extreme. It aims to catch reversals at the exhausted end of a move rather than inside a pullback, which makes it more aggressive.
Defining ratios
- B retraces 78.6% of the XA leg.
- BC retraces 38.2% to 88.6% of AB.
- CD extends 161.8% to 224% of BC.
- D projects to 127.2% to 161.8% of XA — beyond X.
The defining feature is the 78.6% B-point combined with a D that reaches the 127.2%–161.8% extension of XA. Because D sits past X, the Butterfly targets a fresh high or low where the prior move is stretched thin and prone to snapping back.
Trading the Butterfly
Enter at D as price reaches the extension zone and shows rejection, expecting a reversal. Because D is already an extreme, the stop sits just beyond D — a short distance past the 161.8% projection — since there is no X to hide behind on the far side. Confirmation matters even more here, as catching an extended reversal is inherently harder.
The Butterfly reverses beyond X at the 127.2%–161.8% extension of XA — enter at D on rejection, stop just past the extension.