Fundamentals of Gann

Fundamentals of Gann

Gann fell under the technical analysis category and is a highly favorable indicator that works the same function of support and resistance. One of the most important variables of this indicator is geometry, as according to the proponent, W.D. Gann, markets are geometrical. From his proposition, he developed geometric structures and mathematical tools crucial in revealing price movements in both stock and index context. 

Gann’s theory is centered on the ideology that geometry is relative to time and price. This is somewhat simplified through a chart called Gann square or the Gann Master Chart, which came to be the very foundation of Gann’s trading. It is composed of numbers with one as the middle point gradually continuing the count up to 81 in a spiral form. Gann Square is designed to accurately assess time and price with the main goal of identifying time alignment for swing trading and price alignment to predict price movements accurately. This too is a flexible tool that helps traders determine support and resistance level of stocks.

Fundamentals of Gann

Application of Gann Square 

Fundamentals of Gann

Note that there are specific sets of numbers that bear lasting significance when it comes to price prediction. These sets were represented in the form of a cross. The Gann square can also be viewed as a circle, which means the table can be divided into 8 equal parts, with each part equivalent to 45 degrees. Combining all these, they make up a total of 360 degrees or a complete circle.

Applying the principle, it can be noted that there are eight sets in the chart, which appears to be an ordinal and cardinal cross. Every arm of both crosses signifies 45 degrees of the 360. The cardinal cross (blue) determines the most viable supports and resistances, while the ordinal cross (yellow) reveals strong supports susceptible to breakouts.  

  • 0/360 degrees= (2, 11 ,28, 53)
  • 45 degrees= (3, 13, 31, 57)
  • 90 degrees= (4, 15, 34,61)
  • 135 degrees= (5, 17, 37, 65)
  • 180 degrees= (6, 19, 40, 69)
  • 225 degrees= (7, 21, 43,73)
  • 270 degrees= ( 8, 23, 46, 77)
  • 315 degrees= (9, 25, 49, 81)

Applicable Guidelines of Gann

  1. If the system revealed a high price during Friday, expect higher highs next week. The same principle can be applied when a low price appeared on Friday. 
  2. During a powerful bullish trend, weekly lows commonly occur on Tuesday, while during a strong bearish trend, weekly highs normally appear on Wednesday. 
  3. Once double bottoms or triple bottoms appear on a monthly chart after an interval of six months, one may conclude that it is a new downtrend. 
  4. Double tops and triple tops must show on the chart after six months to confirm a new downtrend.

Conclusion

The Gann indicator is an ideal approach in order to reveal distinct forms and patterns. Though there is a question when it comes to the viability of this approach, and many have grown skeptical of the utilization of such, it still holds relevance to other fields, including architecture and design. 

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Gann Square of Nine