Many Traders are interested in learning the Gann trading techniques for good reason. He amassed a fortune while trading. Gann is difficult to understand at first because he did write in riddles and metaphors. I have done extensive study of Gann and found some amazing things happen in the market place when using and applying his levels with Fibonacci. I will list three important keys you should start with.
Gann added an important component to the market trading equation. He added a time component, to market price. He said that when time met price the market is perfectly balanced and the move would reverse or zoom to the next level. Fibonacci levels also help gauge the markets intent. When we have a confluence of Fibonacci levels with Gann levels all the stronger the levels are. They can give us low risk areas to enter trades from. Our First Rule:
Price verse Time: The square Root Of Price is its time component. So in dealing in Foreign Exchange which is the market that I deal in. We would take the price and get its square root. If we find a key low or high we would calculate from here. A key high or low could occur at a Fibonacci retrace level the 1.382 and the 1.618 levels are good to look at(when done the proper way) for key levels to get the square root of price for the time component. Example we find a low at a 1.618 Fib extension level lets say its 1.5088. When get the square root of the price and find the factor to be 1.228. Move the decimal over one place to the right and get 12.28 or rounded down to 12. Project out 12 bars to see the next reactionary point of the market.
Flexibility: Gann believed in being very flexible in ones trading approach. Gann looked for certain things to happen within a certain time period. So you have to watch the market for clues as he believed it always told you what its intent was. The way I do this myself is use fibonacci levels and if they are violated I look for the next level to be tested. You can use very tight Stop losses this way.
Angles Of Gann: Gann angles are 7.5,15,18.75,26.25,45,63.75,71.25,75,82.5 degrees. The idea here is to plot the market from a significant low or high and apply the angles. If one angle is broken at the square of price(the time component) the market is signaling that a change of direction is in play. This give us the opportunity to get into low risk high reward positions. The 1×1 is the most important angle it is the 45 degree angle. If broken Gann called it the angle of death, he said that the current move was over.
These are the three basic things that you should know when going to use Gann Pivots in your Trading. It is important to get the Time component the square root of price. You then need to be flexible in your trading approach, don’t fall in love with one direction of the market place, look to trade both sides as the market tell you. in other words don’t fight the tape. And finally use the angle of death, the 45 degree angle to determine if the move is done and you should be escaping the trade and going the other direction.
