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Gann Indicators: What Are They and How Do You Use Them?
What Are Gann Indicators?
Gann indicators, most notably Gann angles, are trading techniques developed by W.D. Gann. They are widely seen as innovative and still studied and used by traders today. Gann used angles and various geometric constructions to divide time and price into proportionate parts. Gann indicators are often used to predict areas of support and resistance, key tops and bottoms, and future price moves.
Key Takeaways
- Gann indicators—based on trading techniques developed by W.D. Gann—are used in predicting support and resistance levels, as well as predict tops, bottoms, and future price moves.
- Gann studies have been used by active traders for decades, and even though the futures and stock markets have changed considerably, they remain a popular method of analyzing an asset's direction.
- Gann angles are a popular analysis and trading tool that are used to measure key elements, such as pattern, price, and time
Understanding Gann Indicators
Gann indicators are based on the notion that markets rotate from angle to angle and when an angle is broken, the price moves towards the next one. Several angles together make up a Gann Fan. Gann studies have been used by active traders for decades, and even though the futures and stock markets have changed considerably, they remain a popular method of analyzing an asset's direction.
Newer trading areas, such as the foreign exchange market and the invention of exchange-traded funds (ETFs), have made it necessary to revisit some of the construction rules and application concepts. Although the basic construction of Gann angles remains the same, this article will explain why the changes in price levels and volatility have made it necessary to adjust a few key components.
Gann angles are a popular analysis and trading tool that are used to measure key elements, such as pattern, price, and time. The often-debated topic of discussion among technical analysts is that the past, the present, and the future all exist at the same time on a Gann angle.
When analyzing or trading the course of a particular market, the analyst or trader tries to get an idea of where the market has been, where it is about that former bottom or top, and how to use the information to forecast future price action.
Gann Angles vs. Trendlines
Drawing angles to trade and forecast is probably the most popular analysis tool used by traders among all W.D. Gann's trading techniques. Many traders still draw them on charts manually and even more use computerized technical analysis packages to place them on screens.
Because of the relative ease traders today have at placing Gann angles on charts, many traders do not feel the need to actually explore when, how, and why to use them. These angles are often compared to trendlines, but many people are unaware that they are not the same thing.
A Gann angle is a diagonal line that moves at a uniform rate of speed. A trendline is created by connecting bottoms to bottoms in the case of an uptrend and tops to tops in the case of a downtrend. The benefit of drawing a Gann angle compared to a trendline is that it moves at a uniform rate of speed. This allows the analyst to forecast where the price is going to be on a particular date in the future.
This is not to say that a Gann angle always predicts where the market will be, but the analyst will know where the Gann angle will be, which will help gauge the strength and direction of the trend. A trendline, on the other hand, does have some predictive value, but because of the constant adjustments that usually take place, it's unreliable for making long-term forecasts.
Special Considerations
Gann took the perspective that the past, the present, and the future are all connected by the same influence along a given angle. This being said, the Gann angle can be used to forecast support and resistance, the strength of direction, and the timing of tops and bottoms.
Support and Resistance
Using a Gann angle to forecast support and resistance is probably the most popular way they are used. Once the analyst determines the period for the trade (monthly, weekly, daily) and properly scales the chart, the trader simply draws the three main Gann angles: the 1X2, 1X1, and 2X1 from main tops and bottoms. This technique frames the market, allowing the analyst to read the movement of the market inside this framework.
Uptrending angles provide the support and down-trending angles provide the resistance. Because the analyst knows where the angle is on the chart, they can determine whether to buy on support or sell at the resistance.
Traders should also note how the market rotates from angle to angle. This is known as the "rule of all angles". This rule states that when the market breaks one angle, it will move toward the next one.
Another way to determine the support and resistance is to combine angles and horizontal lines. For example, often a down-trending Gann angle will cross a 50% retracement level. This combination will then set up a key resistance point.
The same can be said for up-trending angles crossing a 50% level. This area becomes a key support point. If you have a long-term chart, you will sometimes see many angles clustering at or near the same price. These are called price clusters. The more angles clustering in a zone, the more important the support or resistance.
Strength and Weakness
The primary Gann angles are the 1X2, the 1X1, and the 2X1. The 1X2 means the angle is moving one unit of price for every two units of time. The 1X1 is moving one unit of price with one unit of time. Finally, the 2X1 moves two units of price with one unit of time. Using the same formula, angles can also be 1X8, 1X4, 4X1, and 8X1.
A proper chart scale is important to this type of analysis. Gann wanted the markets to have a square relationship so proper chart paper, as well as a proper chart scale, was important to the forecasting technique. Since the charts were "square", the 1X1 angle is often referred to as the degree angle. But using degrees to draw the angle will only work if the chart is properly scaled.
Not only do the angles show support and resistance, but they also give the analyst a clue as to the strength of the market. Trading on or slightly above an up-trending 1X1 angle means that the market is balanced.
When the market is trading on or slightly above an up-trending 2X1 angle, the market is in a strong uptrend. Trading at or near the 1X2 means the trend is not as strong. The strength of the market is reversed when looking at the market from the top down. Anything under the 1X1 is in a weak position.
Timing
Finally, Gann angles are also used to forecast important tops, bottoms, and changes in trend. This is a mathematical technique known as "squaring", which is used to determine time zones and when the market is likely to change direction. The basic concept is to expect a change in direction when the market has reached an equal unit of time and price up or down.
This timing indicator works better on longer-term charts, such as monthly or weekly charts; this is because the daily charts often have too many tops, bottoms, and ranges to analyze. Like price action, these timing tools tend to work better when "clustered" with other time indicators.
Gann angles can be a valuable tool to the analyst or trader if used properly. Having an open mind and grasping the key concept that the past, present, and future all exist at the same time on a Gann angle can help you analyze and trade a market with more accuracy. Learning the characteristics of the different markets regarding volatility, price scale, and how markets move within the Gann angle framework will help improve your analytical skills.
What Is the Best Gann Indicator?
While it is impossible to identify the "best" indicator when it comes to chart analysis, the most commonly-used Gann angles are the 2X1 angle, the 1X1 angle, and the 1X2 angle, reflecting the predicted price changes for each unit of time. A price movement that crosses over one of these lines can be a sign of changing market sentiment.
Is Gann Analysis Reliable?
Gann analysis is controversial in the investing world, with some comparing it to financial horoscopes. Indeed, Gann was a strong believer in astrology and numerology, and frequently wove mysticism into his trading techniques. Although he claimed to have made millions from trading, later researchers learned that Gann's estate was worth only $, at the time of his death.
How Do You Calculate Gann Angles?
Gann angles are calculated by drawing lines at certain angles from a significant price point, such as a high or low. The slopes of these lines are determined by the Gann angles, e.g. 1X1 (for a 45 degree angle), 2X1 (for a 60 degree angle) and so on.
The Bottom Line
Gann indicators represent a form of chart analysis that relies on geometric lines to predict future price movements. Although the techniques are unproven, Gann lines remain a popular technique for chart analysis in order to predict future support and resistance levels.
Forex Trading Using Gann's Square of 9
How to use Gann's Square of Nine Forex Calculator
Forex Gann Square of 9 - Introduction Gann relied heavily on geometrical and numerical relationships and created several tools to help with his work. Among these tools are the Square of Nine, Square of , and the Hexagon. The Square of Nine, or Square as we will refer to here, can be constructed in at least two ways. The static Square has the number 1 at the center and the dynamic Square has the historic low of the time series in the center. The Square of 9 is basically a spiral of numbers. The initial value can be found in the center of the spiral. This value is then increased by moving in a spiral form. Normally the center value is 1 and the step is one creating the spiral Read more 1. This calculator is meant for forex trading and only intraday.2. Enter the LTP ( or WAP - Weighed Average Price )of any forex / currency pair anytime during the market hours.
3. The ideal time is 15min - 1hr after market opens.
4. If you are unable to find the WAP price, you can also enter average or last trade price of the stock / underlying.
5. After entering the price, click calculate button.
6. You will get the buy and sell recommendations.
7. Follow the recommendations you get to trade.
8. For More Detailed explanation, please download the help document given above.
W.D. Gann Interview by Richard D. Wyckoff: The Law of Vibration Governs Stocks, Forex and Commodities Movements
Audiobook14 minutes
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About this audiobook
It appears to be a fact: W. D. Gann has developed an entirely new idea about the principles governing market movements. He bases his operations on certain natural laws which, though existing since the world began, have only in recent years been subjected to the will of man and added to the list of so-called modern discoveries. We have asked Gann for an outline of his work, and have secured some remarkable evidence about the results he has obtained. W. D. Gann's description of his experience and methods is given here. It should be listened to while keeping in mind that his predictions have proved correct in a large majority of in
Related to W.D. Gann Interview by Richard D. Wyckoff
The Gann Square of 9 a trading strategy that can be used to calculate future market prices and movements. The strategy has been used since the early 20th century. Its creator was a successful stock investor named William D. Gann.
Also Read: How to Trade Futures – A Beginner’s Guide
Contents
Who is William D. Gann?
William D. Gann was a successful stock investor who earned over US$2 million in the American stock exchange using his Gann Square of Nine investing strategy. He never taught anyone his strategy, wrote a book about it, or had adherents to teach others how to use it. Currently, traders only use a few aspects of it and no one fully understands it.
Despite the lack of instructional material on the Gann Square of Nine, traders have been able to successfully use it to make profitable trades and predict market behavior. It is rumored that Gann developed the strategy while traveling overseas and implemented it when he returned to the USA. The strategy is the result of integrating his knowledge of biology, mathematics, astrology, physics, and other areas of study into an investment strategy.
According to its adherents, Gann theory works because it integrates a certain harmonic pattern found in nature into forecasting securities prices. Since all these are bound by natural law, reliable stock predictions can also be made using the applicable elements of natural law.
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What is the Gann Square?
The Gann square has Nine rows and 9 columns. The market price that you want to extrapolate from is placed in the center of the square, that cell is called the base. From the base, the numbers increase by one with every additional square. The squares are assigned a numerical value by moving away from the base in a spiral. Overall, there are 81 numbers in the Gann square.
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Gann Square Crosses: Cardinal Cross and Ordinal Cross
The Gann square can be used to predict the price at which there will be future resistance and support levels. These prices are located in the cells that are at 45 degree angles on the chart. Gann calculated that numbers along the 45 degree angle were the strongest and had the greatest influence over market behavior.
The values with the greatest weight, according to Gann, are located along the ordinal and cardinal cross.
Cardinal Cross
The cardinal cross angles are 90, , , and degrees. The angles are more significant and of higher importance than the angles on the ordinal cross.
Ordinal Cross
The ordinal cross numbers are 45, , , and degree angles. These angles, while important, are less weighty and influential than the cardinal angles.
Also Read: Death Cross: A Complete Guide
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Predicting Resistance and Support Levels Using Gann&#;s Square of Nine Calculator
The most popular way to use a Gann Square of Nine chart is to use it to predict the resistance and support level of a security. You can do this by performing the following steps with a Gann chart.
- Look at the market chart candlestick and select the lowest relevant market price on the chart.
- Put the lowest market price in the center of the Gann square and calculate the Gann square of 9 using it.
- Next, locate the current price of the security on the chart and highlight it.
- To find the resistance level, move away from the current price in a clockwise manner (with prices increasing). The price values that you are looking for will be on the cardinal and ordinal crosses (ignore the price values closest to the current market price). The values on the cardinal and ordinal crosses are the Gann square of 9 calculator forecasted resistance levels.
- To find the support levels, move away from the current market price in a counter-clockwise manner. The values on the cardinal and ordinal crosses are the Gann square of 9 calculator forecasted support levels.
If you don&#;t want to use a Gann chart and work out or spend the time learning how to use one, you can easily calculate the next resistance level for your market price.
To find the next resistance, level perform the following steps with a calculator.
- Take the square root of the lowest relevant market price. For example, let&#;s say the market price is US$
- If the square root of the number of has a digit in the tenths position that exceeds 1, add it to the number in the ones position. In our example, the square root of 28 is So, add the 2 to the number 5 to get
- Square the new number. In our case it will be ()^2 which equals 53, Round the number down and you get The next resistance level will occur at US$
- The tenths number must be added to the one position because if the tenths number is greater than 1, it means that the next resistance level value is in a different quadrant of the graph. Adding the number 2 to the ones positions moves the resistance level calculation one quadrant to the right.
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Learning to Use the Gann Square of Nine Calculator
Since there are no experts, university courses, books, or other instructional materials on the Gann Square of Nine, its practitioners read the work of its adherents, work together, or figure it out themselves using Gann&#;s work.
To use the Gann theory to trade is not easy or quick. It takes concentrated effort, lots of time, and a great deal of experimentation. Moreover, the Gann square of nine calculator is not an intraday calculator. It was never intended for intraday trading. It was intended for long-term trading (e.g., weeks, months, years). Still, there are intraday traders who use it to predict resistance and support levels during the trading day.
Also, Gann&#;s methods cannot be used when the market opens. The traders must wait for at least an hour before doing their Gann square work.
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Key Takeaways
Gann Square of 9 trading strategy has proven itself to be a reliable way to trade in the modern market. Traders who studied it and understand it say that it is 90% accurate.
For new or unsophisticated traders, Gann&#;s theory is likely to be very difficult to understand and use. Also, traders should not use trading strategies that they do not understand and have not tested. So, if you master Gann theory, you, like Gann, may earn millions of dollars in the stock market.
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FAQs
Why are people skeptical of the Gann Square of 9 trading strategy?
Many traders are skeptical of Gann&#;s Square of Nine trading strategy because he used astrology to create it. Since astrology is not considered a real science (by scientists) they think that the theory lacks a scientific and mathematical foundation.
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Introduction to Gann Trading
Gann Trading is a method of technical analysis that uses mathematical calculations to predict future price movements in the financial markets, including the forex market. The method is named after its creator, W.D. Gann, who was a trader, financial analyst, and mathematician.
The Gann Method is a comprehensive guide to forex trading that will introduce you to the basics of Gann Trading and its applications in the forex market.
What is Gann Trading?
Gann Trading is based on the idea that there is a mathematical relationship between price and time in the financial markets. Gann believed that by analyzing the price movements of an asset over time, traders could identify patterns and predict future price movements with a high degree of accuracy.
Gann Trading is different from other technical analysis methods in that it involves the use of geometric patterns and mathematical calculations, rather than just chart patterns and trend lines.
The Gann Trading Tools
Gann Trading involves the use of several tools, including the Gann Square of Nine, the Gann Fan, the Gann Angle, and the Gann Box.
The Gann Square of Nine is a chart that consists of a series of concentric circles with numbers around the edges. Traders use this chart to calculate support and resistance levels, as well as potential price targets.
The Gann Fan is a set of lines that are drawn at different angles from a price point. Traders use this tool to identify potential trend lines and support and resistance levels.
The Gann Angle is a line that is drawn at a specific angle from a price point. Traders use this tool to identify potential trend lines and support and resistance levels.
The Gann Box is a tool that is used to identify potential support and resistance levels based on the price movements of an asset over time.
How to Use Gann Trading in Forex Trading
To use Gann Trading in forex trading, you first need to identify the price movements of the asset you are trading. You can then use the Gann Trading tools to identify potential support and resistance levels, as well as potential price targets.
For example, you could use the Gann Square of Nine to identify potential support and resistance levels for a currency pair. You could then use the Gann Fan to identify potential trend lines and support and resistance levels.
Gann Trading is a powerful method of technical analysis that can help traders improve their forex trading strategies. By using the Gann Trading tools, traders can identify potential support and resistance levels, as well as potential price targets. If you are interested in improving your forex trading strategies, then the Gann Method is an excellent resource to help you get started.
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