Gartley Harmonic Pattern: Rules, Ratios and Indian Examples

What the Gartley pattern actually is

The Gartley is a harmonic chart pattern first described by H. M. Gartley in his 1935 book Profits in the Stock Market. Larry Pesavento and Scott Carney later attached the specific Fibonacci ratios that traders use today. It is a five-point structure labelled X, A, B, C and D. The first leg XA is the impulse. The next three legs, AB, BC and CD, are retracements and extensions that must fall inside tight Fibonacci windows. When all four legs line up, point D becomes a high-probability reversal zone where you take the trade in the opposite direction to the CD leg.

A bullish Gartley looks like an M or a stretched W and signals a possible move up from D. A bearish Gartley is the mirror image and signals a possible move down from D. The pattern is popular in Indian markets because it gives you a defined entry, a defined stop and a defined first target before you commit a single rupee. That structure is what separates it from vague pattern reading.

The exact Fibonacci rules (the part most people get wrong)

This is where the original version of this page was wrong, and it is the single most important thing to get right. The Gartley is defined by ratios, not by round prices. Each leg has to measure inside its window or it is simply not a Gartley. Here are the standard ratios used by harmonic traders:

Notice the two anchors. Point B must be at 61.8% of XA, and point D must be at 78.6% of XA. These two numbers are the heartbeat of the Gartley. If B retraces 50% or 78.6% of XA you are looking at a different pattern (a Bat or a Butterfly), not a Gartley. The 88.6% retracement of XA, not D, is also a hard line. If D pushes past XA entirely, the pattern is dead.

A correct worked example on Reliance (cash equity)

Let us build a bullish Gartley with numbers that actually satisfy the ratios, using Reliance Industries on the NSE. These prices are illustrative, chosen so the maths is clean and you can verify every leg yourself with a calculator.

• Point X = Rs 1,200. Point A = Rs 1,400. So the XA impulse leg is 200 points up.
• Point B = 61.8% retracement of XA. That is 1,400 minus (0.618 times 200) = 1,400 minus 123.6 = Rs 1,276.4, so roughly Rs 1,276.
• Point C = a retracement of AB back up. The AB leg fell 124 points (1,400 to 1,276). A 50% bounce puts C at 1,276 plus 62 = Rs 1,338. C must stay below A (1,400), which it does.
• Point D = 78.6% retracement of XA. That is 1,400 minus (0.786 times 200) = 1,400 minus 157.2 = Rs 1,242.8, so roughly Rs 1,243. Cross-check: the CD leg falls from 1,338 to 1,243 = 95 points, which is about 153% of the BC leg (62 points), inside the 127% to 161.8% window. Everything ties out.

Compare this with the old broken example on this page, which used Rs 100, 150, 130, 140 and 120 and claimed B was a 61.8% retracement and D a 78.6% retracement. Check it: B at 130 on an XA of 50 points is only a 40% retracement (20 divided by 50), and D at 120 is a 60% retracement (30 divided by 50). Neither number matched the ratio it claimed. The corrected Reliance figures above do match, and that is the whole point of a harmonic pattern.

Turning the pattern into a rupee trade

You enter long at point D, around Rs 1,243. The classic stop-loss sits just below X, because a close under X invalidates the pattern. Put the stop at Rs 1,194, which is about Rs 49 below entry. The first target is the 38.2% retracement of the AD leg, and the second target is the 61.8% retracement of AD, with many traders booking part and trailing the rest. The AD leg here is 157 points (1,400 to 1,243), so target one is around 1,243 plus 60 = Rs 1,303 and target two is around 1,243 plus 97 = Rs 1,340.

Say you buy 200 shares of Reliance as delivery (CNC). Cost at entry is 200 times 1,243 = Rs 2,48,600. Risk per share is about Rs 49, so total risk is 200 times 49 = Rs 9,800 if the stop hits. If target two at Rs 1,340 is reached, gross profit is 200 times 97 = Rs 19,400. That is a reward to risk close to 2 to 1, which is the minimum most disciplined traders demand. Equity delivery STT is 0.1% on both buy and sell, brokerage on delivery is often zero at discount brokers, and you also pay exchange charges, GST, stamp duty and SEBI fees, which together trim a few hundred rupees from the net. Always net these out before you celebrate the gross.

Trading the Gartley on Nifty and Bank Nifty F&O

On indices you cannot buy the index directly, so a Gartley on the Nifty or Bank Nifty chart is usually expressed through futures or options. Remember the contract sizes set by SEBI and the exchange: Nifty lot is 75, Bank Nifty lot is 15, FinNifty is 25 and Sensex is 10. These lot sizes turn small point moves into large rupee swings, so the same pattern is far riskier on an index future than on 200 shares of stock.

Suppose a bullish Gartley completes on the Nifty daily chart at point D near 24,000, with the X invalidation around 23,800. A trader who buys one Nifty future lot (65) risks 200 points to the stop, which is 65 times 200 = Rs 13,000 of risk on a single lot, before charges. If instead you express the view with options, a popular lower-risk route is buying a slightly in-the-money or at-the-money call, or selling a put spread, so your maximum loss is the premium and not an open-ended futures move. For example, buying one 24,000 call at a premium of Rs 180 costs 65 times 180 = Rs 11,700, and that premium is the most you can lose if the pattern fails. If Nifty rallies to 24,400 and the call is worth Rs 470, the gross gain is 65 times (470 minus 180) = 65 times 290 = Rs 18,850, again illustrative.

Mind the expiry mechanics. Nifty and Sensex options now have one weekly expiry plus the monthly, and Bank Nifty trades on the monthly expiry after the 2024 to 2025 rationalisation of weekly contracts. If your Gartley needs several days to play out from D, do not buy a weekly option that expires in two days, because time decay (theta) will eat the premium even if you are right on direction. Match the option expiry to how long the pattern realistically needs.

Bullish versus bearish Gartley side by side

Confirming the pattern before you trust it

A clean Gartley by itself is not a signal to bet the farm. It tells you where a reversal is likely, not that it is certain. Smart Indian traders stack confirmation on top of the geometry. The reversal zone at D is much stronger when it lines up with an independent reason for price to turn, such as a prior support or resistance level, a round number, a moving average, or a momentum reading.

• RSI showing oversold (below 30) at a bullish D, or overbought (above 70) at a bearish D, adds weight.
• A bullish or bearish candlestick reversal (hammer, engulfing, pin bar) printed exactly at D is one of the strongest confirmations.
• Volume drying up into D and then spiking on the reversal candle suggests real participation, not a dead-cat bounce.
• Confluence with a key level, such as the 200-day moving average or the previous swing low, raises the odds.
• Wait for the candle at D to close before entering, rather than trying to catch the exact tick, which often gets you stopped out by noise.

Common mistakes that turn a Gartley into a loss

The most expensive error is the one this page used to make: forcing prices that do not fit the ratios into a Gartley label. If B is at 40% of XA, it is not a Gartley, and trading it as one means your stop and targets are built on a structure that does not exist. The second common error is ignoring the stop. The Gartley gives you a clean invalidation at X, so there is no excuse for letting a losing trade run past it.

• Mislabelling the legs so B or D sits at the wrong percentage. Always measure, never eyeball.
• Skipping the stop below or above X. Without it, one failed pattern can wipe out several winners.
• Trading a Gartley against a strong trend. In a powerful Nifty uptrend, a bearish Gartley reversal often fails as price simply continues.
• Buying a same-week option for a pattern that needs a week or more, so theta kills you even when direction is right.
• Oversizing on indices because the lot value (65 for Nifty, 30 for Bank Nifty) makes the rupee risk far larger than it looks on the chart.

How profits from a Gartley trade are taxed in India

Tax treatment depends on how you took the trade, and it changes your real net return. For cash equity like the Reliance example, if you sell within 12 months the gain is short-term capital gain taxed at 20% (the rate raised in the July 2024 Budget). If you hold longer than 12 months, it is long-term capital gain taxed at 12.5% on gains above Rs 1.25 lakh in a financial year. A 4% cess applies on the tax. STT is paid on the trade itself.

For Futures and Options, the treatment is completely different. F&O profit on Nifty, Bank Nifty or stock derivatives is treated as business income, not capital gains. It is added to your total income and taxed at your applicable slab rate, and you can also deduct related expenses like brokerage, data and internet costs. Because it is business income, frequent traders may need to maintain books and, depending on turnover, get a tax audit. None of this is optional, and it materially changes whether a Gartley trade was actually worth taking after tax. Treat these as general pointers and confirm with a qualified chartered accountant for your situation.

Sources and further reading

For tax rules, contract specifications and authoritative learning, refer to Zerodha Varsity, NSE India and Investopedia. Always confirm current STT rates, lot sizes and expiry schedules on the official exchange source before you trade, because these change.

Sources and Further Reading

For authoritative data and further reading on this topic, refer to Zerodha Varsity, Investopedia and NSE India. Always confirm current rules, rates and contract specifications on the official source before you trade.