If you have been in the trading or investment business for a while, chances are you probably have heard of the Gann theory. Developed in the 1900s, the Gann theory is a concept originated by William D. Gann. He was a successful trader who believed that stock prices change from an angle. Based on his years of experience, he noticed that the price changes were related to natural geometric shapes and predicted future price movements in relation to time.
Inspired by astronomy, mathematics, geometry, and astrology, the Gann theory principles were so efficient that they still inspire modern traders and investors. It only makes sense why it’s regarded as the best analysis for investment.
However, if you are someone who is still untouched by its magic, here’s why you should learn more about the Gann theory for your benefit.
TIME, PRICE, AND RANGE
The Gann theory employ several techniques for analyzing price charts. The theory believes that every angle and pattern results from a set of unique characteristics that can be used for future studies. Gann angles, one of the indicator tools used in predicting support and resistance levels, are used to measure three key elements- Time, Price, and Range.
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Gann angles allow proper tracking of price movements with pivot levels predicting the future direction
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Time study offers traders and investors insights about when the stock value can reverse
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The pattern study helps one assess the stock movements and investor activity
Understanding the stock market can be overwhelming and complicated due to presence of several factors. The Gann theory focuses the entire understanding on three factors that primarily impact the major market.
IMPROVE MARKET READINESS
The time cycle understanding of the stock market conditions decoded by Gann angles improves an investor’s market readiness. The Gann indicators (the Gann angle) are based on the notion that markets move from one angle to another. Following are some of the rules falling under the Gann theory for trading:
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In a highly uptrending market weekly low happens on Tuesday
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When the price is breached low for the last four weeks, it’s an advance indication of higher prices
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If the market rises for 5 consecutive days, chances are the correction will be lasting for 3 days
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When the price is in a choppy phase, a sudden volume spike indicates that the trend is likely to change
The trading principles of Gann theory offer a rational and intellectual take rather than riddling decisions based on emotions and “gut instinct”.
BETTER FORECASTING
Gann identified nine angles (referred to as Gann Angles or indicators) which are as follows:
- 1 by 8
- 1 by 4
- 1 by 3
- 1 by 2
- 1 by 1
- 2 by 1
- 3 by 1
- 4 by 1
- 8 by 1
Every angle offer support and resistance levels based on a trend, with 1 by 1 being the most vital as it offers the strongest support. A deeper understanding of resistance and support further strengthen the time study theory which allows traders to estimate when the stock can fall. This way the Gann theory for investors and traders offers better control by preventing them from going over the same mistakes for more accurate forecasting.
The Gann theory can lead to many successful trades. However, it is only successful when applied correctly which requires time and experience. If you are intrigued to learn more about it, our experts can help you leverage its benefits with proper strategies to avoid draining your efforts in vain. Browse our website to learn more about us.