What it is
The Butterfly Pattern is a harmonic reversal pattern identified by Scott Carney where point D extends beyond point X, completing at the 127.2% or 161.8% extension of XA. This is the key difference from the Gartley — the Butterfly is an extension pattern, not a retracement pattern.
In a bullish Butterfly, D drops below X to the 127.2% extension, creating a new low before reversing. This means the Butterfly catches reversals at more extreme levels, often at the absolute bottom of a move.
The pattern is powerful precisely because D extends into "no man's land" below the prior low, where most traders are panicking. The precise Fibonacci completion provides confidence to buy when everyone else is selling.
The psychology
The Butterfly extends beyond the obvious support/resistance. Where the Gartley reverses at 78.6% within the XA range, the Butterfly pushes through X to trap breakout traders and stop-hunters before reversing.
Point D at 127.2% of XA is where stops below X get triggered. Smart money uses this liquidity event to build positions. The stop hunt becomes the fuel for the reversal.
The pattern works because the extension to 127.2% is the natural Fibonacci expansion of the XA move. Combined with the internal ABCD structure arriving at the same level, it creates a precise zone where selling exhausts.
Identification
- 01XA leg — Defines the initial range
- 02AB retracement — 78.6% of XA
- 03BC retracement — 38.2–88.6% of AB
- 04D extends to 127.2–161.8% of XA — Beyond point X
- 01CD = 161.8–261.8% of BC — Confirms the extension
- 02Volume spike at D — Stop-hunt/capitulation
- 03Reversal candle at D — Hammer, engulfing, pin bar
- 04D aligns with Fibonacci from another swing — Cluster zone
- 01D doesn't exceed X — That's a Gartley, not a Butterfly
- 02AB is not near 78.6% of XA — Wrong pattern
- 03D extends beyond 161.8% of XA — May be a Crab instead
- 04No reversal signal at D — Price continuing through
Execution framework
Enter at D (127.2% extension of XA) with reversal confirmation. This is below the prior low, so you need conviction from the Fibonacci level and candle signals.
Below 161.8% of XA. This gives the pattern room while defining clear invalidation.
T1: Point B. T2: Point A. T3: 161.8% of AD for extended moves.
Often 1:3 or better. Buying below the prior low with a measured stop gives excellent R:R.
Context matters
Butterflies are contrarian by nature — you're buying below the prior low or selling above the prior high. This requires conviction in the Fibonacci levels and pattern structure.
- 01Precise 127.2% completion with reversal candle
- 02Volume spike at D (stop-hunt/capitulation)
- 03Higher timeframe support cluster at D
- 04RSI divergence at the new extreme
- 01D extends well beyond 161.8%
- 02No reversal signal at D
- 03Fundamental catalyst driving the extension
- 04No structure confluence at the completion zone
Butterflies catch the stop-hunt. When price breaks below a major low and you see a 127.2% extension with a hammer, that's the Butterfly doing its thing.
Compare the full pattern set
Use the library to compare similar structures before deciding what the chart is actually building.