William Gilbert Gann, who was the founder of Gann’s strategy, was an expert in market forecasts. His expertise in geometry principles led him to create the famous Gann theory. These theories given by him are popular and reliable among traders. Most traders take their position by looking at the price and relying on the Gann angles.
Gann trading strategy guides are still in use and can predict an asset’s movement up to at least 90% accuracy. These theories were discovered based on natural geometric shapes, astrology, astronomy, and ancient mathematics.
The Gann indicator has cardinal and ordinal numbers. W.D. Gann explained that any number that falls on these numbers works as strong support or resistance depending on the stock.
Basics Of Gann Theory
To understand the Gann theory calculations in detail, one is required to study the behavior of the following things in the market.
Price Study
The Gann angles let us see the angles suggesting the price pattern of the stock. Its prediction of the price movement in the stock relies on pivot levels, support, and resistance points.
Time Study
Time study models tell when the stock price shall reverse. Additionally, time study also helps us in reading the historical data, helping deriving the future rate of the market
Pattern Study
The activity of the movement and investors of a particular stock is checked with a pattern study. It studies the trends and patterns that indicate a probable stock reversal.
Drawing Different Gann Angles
To draw the Gann angles with a definitive source of technical analysis, you need to have a substantial-top or bottom. If the prices are above the trendline, it is a bullish market. Otherwise, it is a bear market. The exclusive use of patterns and angles of an asset on the market can be used as a predictor for the price’s future movements. Hence, Gann’s theory is an important technical analysis tool traders use.
Conclusion
Gann’s theory can be used when studying prices, time, and patterns in the stock market. However, remember that prior testing is necessary as it can backfire also.
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