MarketClub is known for our "Trade Triangle" technology. However, if you have used other technical analysis indicators previously, you can use a combination of the studies and other techniques in conjunction with the "Trade Triangles" to further confirm trends.
W.D. Gann was a trader in the early 1900s who devised a unique and complex trading method that parallels some of these other theories. His technique is sometimes referred to as geometric because of his use of the mathematical properties of certain geometric figures and angles to predict price behavior. Gann had a cyclic view of market behavior and placed enormous emphasis on proportional relationships between price and time. He believed market events occurred at intervals that could be determined mathematically. And like Elliott, he believed the relationships he “discovered” reflected the natural law of the universe.
Gann calculated price retracements on percentages derived from dividing price action into eights, i.e. 2/8 = 25%, 4/8 – 50%, etc. He also included the Dow and Fibonacci retracements of 1/3 (33%) and 2/3 (67%) in his list of key percentages. He constructed support and resistance lines (Gann lines) based on varying ratios of time units to price units. His most important trend line, plotted at 45 degrees (up from a market bottom or down from a market top) represents one unit of time movement per one unit of price movement.
He also placed lines with other time/price ratios, like 1:2, 2:1, 1:3. 3:1, etc. The angle of these lines corresponds to the strength and speed of a trend. As long as pries stay above (or below, depending on the direction of the trend) the 45-degree line, the trend will continue. Once prices break that line, they will theoretically proceed to the next line of resistance, 1:2 or 1:3, for example, as the trend is played out.
Gann determined “anniversary dates” for timing market events based on the degrees of a circle (30, 60, 90, 180, 360 days) as well as periods of 12 months and 144 days (144 is the only square Fibonacci number). For example, when a market made a high or low, Gann looked for another significant price milestone 144 days or a year in the future.
He also predicted future support and resistance points using “cardinal squares.” Starting with a low price for a contract, he spiraled prices clockwise around it on a grid until the prices reached the current trading range. Prices that fell on the “cardinal cross,” the perpendicular lines equivalent to the X and Y axes of a graph, represented probable levels of future support and resistance.
Gann techniques are most effective when used together. Instances in which a trend reversal corresponds to a previously calculated retracement ratio, a cardinal square price, an anniversary date and the breaking of a trend line would represent important market cycles.
You can learn more about the Gann Theory by visiting INO TV.
4 thoughts on “Traders Toolbox: Gann Theory”
"This is being used to fooreign or domestic forces which are out to bankrupt the US or maybe to influence the election outcome. "
What? Surely you're aware that the U.S. has been borrowing like there is no tomorrow to finance consumer led national economy that thrives on innovations such as sub prime housing lending to families that have no business borrowing money.
You've outsourced your manufacturing to China, which just released stats that they've actually increased exports to the world.
As a nation, you need to get back to spending less than you earn and stop dreaming that the world will continue to finance U.S. spending on their savings and postpone their consumption.
I like a Gann box used with a fibonacci tool. However, there is no Gann tool Available in Market Club. Is there any chance of adding one to the indicator library??
We are always adding tools to MarketClub. I will suggest this to my technical director for possible future inclusion. I greatly appreciate the suggestion.
Director of New Business Development
INO.com & MarketClub
All technical analysis look great after the fact.Today we have new forces which many feel are putting drastic influence on the markets. Some have given it the name of Economic Terrerism. This is being used to fooreign or domestic forces which are out to bankrupt the US or maybe to influence the election outcome. Follow the money and look first to The Council on Foreigh Relations.
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