What it means
The harmonic Butterfly (distinct from the options butterfly spread) is a 5-point pattern where the D point extends BEYOND the X point — a deeper-than-Gartley structure. AB = 0.786 of XA; BC = 0.382-0.886 of AB; CD = 1.27-1.618 of XA (so D extends beyond X). Reversal expected at D back toward XA direction. Discovered by Bryce Gilmore and Larry Pesavento.
Why it matters
Butterfly patterns produce strong reversal signals when correctly identified. The deeper D point provides better risk-reward than Gartley (CD targets are typically larger relative to risk). However, the lower probability of all ratios aligning makes Butterfly patterns less frequent than Gartley.
How to use it
Confirm AB = 0.786 of XA and CD extends 1.27-1.618 of XA. Enter at D in direction back toward X. Stop beyond D extreme. Target 0.382, 0.618 retracements of CD plus the X level.
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