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Gann
Description
W.
D. Gann (1878-1955) designed several unique
techniques for studying price charts.
Central to Gann's techniques was the use of
geometric angles in conjunction with time and
price. Gann
believed that specific geometric patterns and
angles had unique characteristics that could be
used to predict price action.
All
of Gann's techniques require that equal time and
price intervals be used on the charts, so that a
rise/run of 1 x 1 will always equal a 45 degree
angle.
Gann
believed that the ideal balance between time and
price exists when prices rise or fall at a 45
degree angle relative to the time axis.
This is also called a 1 x 1 angle (i.e.,
prices rise one price unit for each time unit).
Interpretation
Gann
Angles are drawn between a significant bottom and
top (or vice versa) at various angles.
Deemed the most important by Gann, the 1 x
1 trendline signifies a bull market if prices are
above the trendline or a bear market if below.
Gann felt that a 1 x 1 trendline
provides major support during an up-trend and when
the trendline is broken, it signifies a major
reversal in the trend.
Gann identified nine significant angles,
with the 1 x 1 being the most important:
1
x 8 - 82.5
degrees
1 x 4 -
75 degrees
1 x 3 -
71.25 degrees
1 x 2 -
63.75 degrees
1 x 1 -
45 degrees
2 x 1 - 26.25
degrees
3 x 1 -
18.75 degrees
4 x 1 -
15 degrees
8 x 1 -
7.5 degrees
Note
that in order for the rise/run values (e.g., 1 x
1, 1 x 8, etc.) to match the actual angles (in
degrees), the x- and y-axes must have equally
spaced intervals. This
means that one unit on the x-axis (i.e., hour,
day, week, month, etc.) must be the same
distance as one unit on the y-axis.
The easiest way to calibrate the chart is
make sure that a 1 x 1 angle produces a 45 degree
angle.
Gann
observed that each of the angles can provide
support and resistance depending on the trend.
For example, during an up-trend the 1 x 1
angle tends to provide major support.
A major reversal is signalled when prices
fall below the 1 x 1 angled trendline.
According to Gann, prices should then be
expected to fall to the next trendline (i.e., the
2 x 1 angle). In
other words, as one angle is penetrated, expect
prices to move and consolidate at the next angle.
Gann
developed several techniques for studying market
action. These
include Gann Lines, Gann Fans, and Gann Grids. HotTrader
Software is an excellent program with which to
study Gann (also MetaStock) |
