Trading with Gann Theory

William Delbert Gann is known for his market forecasting abilities, such as Gann Square of nine that contains mix of geometry, astrology, and ancient math techniques. Gann theory is useful for interpretation, but it requires understanding and lot of practice.

What is Gann Theory?

Gann Theory is useful for predict the future movement of market. The main purpose of Gann theory is to understand that at various times, different aspects will influence the market.  For example, a pattern may have influence on the movement of share, while at another time it will be time and price that will influence the market. This relationship is the key to get success using Gann theory.

Gann theory identifies the best combination of price, time & pattern that helps trader to find successful trade. This theory revolves around natural law and mathematics. The theory of Gann is based on Gann angles. Now let’s understand the Gann angles in detail.

What are Gann Angles?

W.D. Gann develop several unique techniques for analysing price charts. He believes that different patterns and angles have unique characteristics that could be used to predict the price action. Equal time and price interval are used on the charts for Gann’s techniques.

Here for Gann Angles, Rice/run of 1 × 1 will always equal to 45-degree angle. Gann says that the ideal balance between price and time exists when price rise or fall at a 45-degree angle relative to the time axis.

For drawing Gann Angles between a significant top and bottom (or vice versa) at various angles. In the Gann Angles, 1 × 1 trend line signifies a bull market if prices are above the trend line or a bear market if below. Gann felt that a 1 × 1 trend line provides major support and resistance during an up-trend and when the trend is broken, it signifies a major reversal in the trend.

Gann identified nine angles, where the 1 × 1 is most important.

1 × 8 – 82.5 degrees

1 × 4 – 75 degrees

1 × 3 – 71.25 degrees

1 × 2 – 63.75 degrees

1 × 1 – 45 degrees

2 × 1 – 26.25 degrees

3 × 1 – 18.75 degrees

4 × 1 – 15 degrees

8 × 1 – 7.5 degrees

Gann observed that the all the angles provides support and resistance level based on the trend. During the up-trend 1 × 1 angles tends to provide strong support. When the price starts going down and fall below the 1 × 1 angled trend line it gives major reversal sign.

Basics of Gann theory

With the help of gann angles you can easily understand the basics of gann theory for intraday trading. Let’s understand it with simple example. When the market is in an uptrend and stays above the ascending angle without breaking, then it clearly says that the market will continue to remain in un uptrend until the angled trend line is break.

Gann theory is useful for traders for making good returns in the market.  You can easily find out Gann theory books available online and offline in the market. You can get detailed knowledge from the books and apply it for your trading.

Here we explained basic concepts about application of Gann Theory.

Application of Gann theory

As explained above Gann price and time theory & study of patterns.

• Price Study: With the help of Gann Angles you can observe the price movement of the stock. The future price movement of stock can be identified by thr pivot levels, support and resistance level.
• Time Study: The time study model of gann theory gives the idea to traders that at which time the stock price can be reverse. For that you need to read historical data and do analyse the movement of price at different time period.
• Pattern Study: The study of patterns helps to find the activity of investors and movement of a stock. In the Gann theory, pattern study includes the trend and patterns that indicates the reversal in the stock.