The Gann Studies

  1. 11.6k
    Posts

    The following is taken from:http://www.investopedia.com/articles/technical/04/042804.aspIt would appear that this is not everyone's cup of tea and can be extremely complex but i am finding it interesting reading. I would be interested in hearing of other peoples experiences with this methodology. Is Trader Paul the only Gannster here?:) PerdyPredicting the future is impossible, right? If he were around today, W.D. Gann would beg to differ. His first prophecy is believed to have happened during World War I when he predicted the Nov 9, 1918, abdication of the Kaiser and the end of the war. Then in 1927, he wrote a book entitled "Tunnel through the Air", which many believe predicted the Japanese attack on Pearl Harbor, and the air war between the two countries.His financial predictions were perhaps even more profound. In early 1929, he predicted that the markets would probably continue to rally on speculation and hit new highs until early April. In his publication, The Supply and Demand Letter, he delivered daily financial forecasts focusing on both the stock and commodity markets. As this daily financial publication gained notoriety, Gann published several books - most notably "Truth", which was hailed by the Wall Street Journal as his best work. Finally, he began releasing the techniques that he used to make these forecasts: the Gann studies.What Are the Gann Studies?In 1908, Gann discovered what he called the "market time factor", which made him one of the pioneers of technical analysis. To test his new strategy, he opened one account with $300 and one with $150. It turned out to be wildly successful: Gann was able to make $25,000 profit with his $300 account in only three months; meanwhile, he made $12,000 profit with his $150 account in only 30 days! After his results were verified, he became famous on Wall Street as one of the best forecasters of all time.Here's how his techniques work. Gann based predictions of price movements on three premises:* Price, time and range are the only three factors to consider.* The markets are cyclicalin nature.* The markets are geometric in design and in function.Based on these three premises, Gann's strategies revolved around three general areas of prediction:* Price study This uses support and resistance lines, pivot points and angles.* Time study This looks at historically reoccurring dates, derived by natural and social means.* Pattern study This looks at market swings using trendlines and reversal patterns.Figures such as these are the building blocks of the Gann studies.Constructing Gann AnglesBefore we begin, it is important to realize that this form of analysis - like most forms of technical analysis - is not set in stone but constructed out of empirical methods. Without further ado, here is the process used to construct a Gann angle:Determine the time units - This is one of the empirical processes. One common way to determine a time unit is to study the stock's chart and take note of distances in which price movements occur. Then, simply put the angles to the test and determine their accuracy. Most people use intermediate-term (such as one to three-month) charts for this as opposed to long-term (multi-year) or short-term (one to seven-day) charts. This is because, in most cases, the intermediate-term charts produce the optimal amount of patterns.Determine the high or low from which to draw the Gann lines - This is the second empirical process, and the most common way to accomplish it is to use other forms of technical analysis--such as Fibonacci levels or pivot points. Gann himself, however, used what he called "vibrations" or "price swings." He determined these by analyzing charts using mathematical theories like Fibonacci.Determine which pattern to use - The two most common patterns are the 1x1 (left figure above), the 1x2 (right figure above), and the 2x1. These are simply variations in the slope of the line. For example, the 1x2 is half the slope of the 1x1. The numbers simply refer to the number of units.Draw the patterns - The direction would be either downward and to the right from a high point, or upward and to the right from a low point.Look for repeat patterns further down the chart Remember this technique is based on the premise that markets are cyclical.Again, this requires some fine-tuning with experience in order to perfect. Because of this, the results will vary from person to person. Some people, like Gann, will experience extraordinary success, while others - who don't use such refined techniques - will experience sub-par returns. However, if the system is followed and sufficient research is put into finding the optimal requirements, above-average returns should be attainable. But remember, technical analysis is an odds game -add more technical indicators to increase your chances of a successful trade.Using Gann AnglesGann angles are most commonly used as support and resistance lines. But many studies have support and resistance lines. What makes this one so important? Well, Gann angles let you add a new dimension to these important levels - they can be diagonal.Here you can see how Gann angles can be used to form support and resistance levels. Diagonal trendlines are commonly used to determine times to add to existing long positions, to determine new lows and highs (by finding significant breaks of the trend line), and to help discern the overall trend.ConclusionIs it possible to predict the future? W.D. Gann probably thought so, and seemingly proved it with his wildly successful returns. The system is relatively simple to use, but difficult to master. After all, it was Gann's uncanny ability to fine-tune his techniques that led him to enormous profits - the average investor is not likely to obtain these kinds of returns. Like many technical tools, Gann angles are best used in conjunction with other tools to predict price movements and profit.

  2. 2.7k
    Posts

    Hi Perdy

    You will recall that the charting package im using for ETOs and CFDs is a program shaped around Ganns studies. This program im using(there is a thread on this program from me somewhere)is by SITM, developed by David Bowden, an Australian and only one of a hand full of 'students' in the world to date, that has the ability to successfully decipher Ganns writings.

    The reason for my selection is the fact all the other charting programs uses what I call lagging indicators....after the event, as it were. Gann uses time, as your posts clearly reports, and the fact that history repeats itself.....time after time. In the past....and guaranteed....in the future.

    Both ABC and swing are my primary indicators for entry and exit signals(see recent AMP and BSL posts), with a good degree of accuracy.

    It is then up to me too decide if conditions are suitable to finally take the trade or not.

    cheers

    DC

  3. 11.6k
    Posts

    Thanks for your response DC. I think the post you are refering to is here: http://www.topstocks.com.au/asx_discussion_forum_home.php?action=readpost&;pid=75214#d3Kwmz77-w34175214

    I have downloaded some more light reading for the holidays.

    :) Perdy

  4. 11.6k
    Posts

    Any other Gannsters?

  5. 2.7k
    Posts

    Ahh yes me Perds...

    Just like to show how spot on GANN is with his time and swing indicators in my charting package.

    The supplied chart is the daily of BSL using todays EOD data included. My putt options are increasing in value, as long as share holders continues to dump their script to the market at a lower price. No sign of a correction yet, so will continue to hold. Entry for me was between the 25-33% trend lines, which was around the $11.00 price.

    I have only one thing to say......

    AH McGANN.....YOU'VE DONE IT AGAIN...... :)

    cheers

    DC

    PS...about to enter AMP...because of the same senario materialising.

  6. 1
    Post

    Hello Perdant,

    I just read your post on this subject (having joined this forum a couple of days ago, and searched your thread out), and can see that you are venturing into this area of technical analysis.

    Preamble:

    I suppose you could call a lot of what I do Gann based since I use a range of geometric approaches pioneered by Gann and developed and interpreted by Gann revisionists. But I am first and foremost a pattern trader, and have developed a hybrid approach using Elliott Wave fused with Geometric Gann techniques (as opposed to astrological Gann although I have studied this and am continuing to investigate it), with a focus on time cycles. However, I see the use of technical analysis is primarily an art, more than a science, although of course science has its uses in the process.

    I am convinced that there is an inherent order to financial markets, and that it is possible to make accurate forecasts into the future using a range of techniques in concert. However, I also hold strongly the axioms ventured by Mark Douglas in Trading in the Zone that every moment in the market is unique, and that anything can happen.

    Let me say from the outset that no system no matter how sophisticated is guaranteed to be right 100% of the time so there can be no ambiguity here. Whether you subscribe to chaos theory or not (the actual discipline, not the vernacular usage), there can be extraneous events that can upset even the highest probability trade set up. Essentially any trade can fail despite the best efforts of the trader.

    My point being at the outset that I firmly believe that trading is about assessing uncertainty, and evaluating probabilities hence aiming to apply Douglas concept of the probabilistic trading mindset. Hence even though you can make very accurate forecasts that work, that will be times that the forecast fails, and it is knowing what the failure criteria is when trading in order to exit a trade to protect capital.

    The main revisionist I draw from is Bill Mclaren, but have delved into a range of other works by people like Bryce T Gilmore, Cowan, Ferrera, Jenkins, Green, Marisch, and Ive looked at some of David Bowdens work, to name a few. On the astrology side I have looked at Larry Pesavento for example.

    I am not an astro trader, but have seen Paul Nipperess work in action (often with the user name in many forums as Yogi-in-oz, and Trader Paul).

    Geometric concepts:

    You correctly identified what in my view are the three key elements in using geometric styles of technical analysis Pattern, Time, and Price (and in that specific order in terms of importance although in learning the stages should be pattern, price, then the most difficult element, time).

    Now, as for angles, this is almost an art in itself there being a range of different types of angles with a specific functions:

    Time angles (constructed from geometric locations determined by time and price techniques arguably the most powerful of the angles and the most difficult to master).

    Zero angles (constructed from 0 in price drawn by intersecting the origin point on a key high or low).

    General angles - usually drawn from pivot highs or lows.

    Now the difficulty is firstly knowing when to use these, and secondly how to calibrate them. This is actually fraught with difficulty until pattern is understood. In my view it is critical to learn pattern first, then price, then time, then angles.

    In my view angles are the weakest of the three key areas of time increments, price increments, and the intersection of the two in order to correctly calibrate an angle, when it is appropriate to do so.

    Time cycles and price ranges are usually divided up into eights and thirds, and the most powerful (in my view) of the angles time angles result from a mastering of the other two aspects of the chart. Without this, correct and useful calibration is almost impossible in my view.

    Angles (especially time angles) are NOT like trend lines. They can, often are, and should be broken. If they are recovered (in context in pattern, time and price), then this can be a sign of strength of the trend (attribution McLaren spells this out in his Time Factor DVD).

    This comment is of course a first cut into a very involved subject that takes literally years to master, and is only suitable to people who have an inclination towards this style of technical analysis, the capacity to imagine the future, and the diligence and determination to research, learn and persevere.

    I hope that is of interest.

    Regards

    Magdoran

Your browser is too old for TopStocks and not secure. Please update your browser