Looking @ W.D. Gann – Part Four

In this lesson let’s look at Gann Angles.

What are Gann Angles?

From Gann’s courses it is obvious that to him Angles played a direct part in his work and had trading rules based on what price did around and at these angles.

Gann used Geometrical angles of varying % to gauge a price move

Let’s have a look at Gann’s 1 x 1 main angle, this is a 45 degree angle – the actions of this line basically “square” time and price because if price follows this angle it is moving at a similar rate as time too!:

Let’s add Gann’s 2 x 1 angle now:

These are Gann’s main angles that he used:

The 1 x 2 Gann angle controls price action 12 months apart to the MONTH!

Gann projected these angles from tops (usually downwards) and from bottoms (usually upwards) he also projected the 1 x 1 from ZERO on the price axis but we’ll not complicate matters.

Please note that in Gann’s famous “Wheat 120” article, he used his Angles to predict that Wheat would hit the price of 120 by a certain date – it hit it to the tick in the last hour of trading for that contract!

From this I can deduce that Gann knew when a time cycle was due to expire and used his angles to predict price levels – the ultra hard part in this is knowing what time cycle to use!

Take a peek @ the S&P500 of late:

Price adhered to a key Gann Level (downward slope) from May 2011 to August 2011, it then followed the 2 x 1 Gann Angle from August 2011 until April 2012 (Blue line directly above the Red line)!  This meant that prices rose twice as fast as time passed by or the equivalent of 2 points for every trading day.

You can see from these and other examples just how price respects some of these angles and completely disregards others too!

I’ve kept these charts as clutter free as possible, in reality, you would project Gann Angles from all major swing highs and lows this has the effect of have many lines Cris crossing on the charts up and down and for the purposes of this lesson it would add nothing but confusion

Please note I am not teaching you everything there is to know on Gann and his various methods, that is for you to research and look into if you find the subject interesting and want to delve deeper.  My aim is to introduce you the subject area only, so that you understand that over 100 years ago Gann was on the ball with many methods still used today.  Gann Angles are a complex subject area of which I have only touched on in this post.

Now I have to add that just as placing any Trendline on your charts there is NO certain method to ascertain when a move’s over.  In plain English, they are more of a lagging indicator than a leading one in my opinion – however, a trading strategy could be constructed to use them I’m sure.

Gann Angles and Trendlines are not the same – they have differing purposes.

Best of luck

The Hovis Trader

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