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Intraday Trade Using Gann Angle

Intraday Trade Using Gann Angle

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Published by soumya ranjan panda
what is gann angle? how it is used in making the day trading decission is explained in this e-book. simple procedure to make day trading is explained.
what is gann angle? how it is used in making the day trading decission is explained in this e-book. simple procedure to make day trading is explained.

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Published by: soumya ranjan panda on Nov 26, 2010
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11/06/2013

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Intraday trade using gann angle principle
In my book on “Gann Method” though I have explained variousprinciples of W.D.Gann’s method and its application on the stockmarket but the one which inspired me a lot is “Gann angle” principle.The Gann angle is defined as the set of trend lines drawn from anindividual price point or from different price points(i.e. high, low, andmidpoint) in order to identify the supports and resistances of a futureprice move. At this stage, do not worry much about this definition. Itwill become simpler as you proceed to the next part of this article.The next big thing about the gann angle trend lines are that they aredrawn at a particular angle with respect to the X-axis or to the timeline. This concludes the basic formation of gann angle trend lines.Now let me explain this concept with the help of an example. Say Iwish to draw a trend line at 1X1 (read it “one by one”) gann angle.This means my trend line is a straight line drawn in the price timechart which makes an angle 45 degree with the X-axis. You must askme thathow I have derived the 45 degree. Quite simple!This is atrend line drawn assuming 1 unit of price change happens with 1 unitof time change. If I will plot 1 unit of price change with respect to 1unit of time change in a semi log scale and measure the angle withthe help of a protractor I will get the angular measurement as 45degrees.For making an intraday trade decision we need a point to make buyor sell entry. We need a stop loss point and couple of target points.Though this job can be done with any guess work but we needperfection. The perfection will be achieved only through themathematical calculation which is accepted by the market.W.D.Gann has given us 11 different trend lines which will guide us inmaking a trade decision. These trend lines are drawn based on thegeometrical angle proportion in X and Y axis. For example the 2X1 (2by 1) trend line is drawn assuming the 2 unit of price raise or fallhappens in 1 unit of time. This trend line makes geometrical angle of 63.75 degrees with X-axis when drawn from a lower price point andprojected towards the higher price points. Similarly this trend line willmake 26.25 degrees with respect to x axis when it will be drawn from
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a higher price point and project towards the lower price point. This isthe mathematical logic available in origin shifting, parallel linealgorithm.Now the 11 sets of trend lines from a lower price point towards thehigher price point are as follows 1X1,1X2,2X1,1X3,3X1,1X4,4X1,1X8,8X1,1X16 and 16X1.The geometrical angle made by these trend lines with the X axis in an
up move
corresponding to
2X1= 63.75
degrees, 1X2= 26.25degrees, 1X1= 45 degrees, 1X3= 18.75 degrees, 3X1= 71.25degrees, 4X1= 75 degrees, 1X4= 15 degrees, 8X1= 82.5 degrees,1X8= 7.5 degrees, 1X16= 3.75 degrees, 16X1= 86.25 degrees.The geometrical angle made by these trend lines with the X axis in a
down move
corresponding to 1X2= 63.75 degrees,
2X1= 26.25
degrees,1X1= 45 degrees,3X1= 18.75 degrees,1X3= 71.25degrees,1X4= 75 degrees,4X1= 15 degrees, 1X8= 82.5degrees,8X1= 7.5 degrees, 16X1= 3.75 degrees,1X16= 86.25degrees.
Gann Formula for calculating the support and resistance:
In gann study the 180 degree is considered as factor 1. This isbecause between the sun rise to sun set the solar motion happensapproximately 180 degrees and it is considered as 1 day time.The 2
nd
universal concept accepted by the financial analysts is thatthe supports are always calculated in a falling trend and it used to becalculated from the high.The 3
rd
universal concept accepted by the financial analysts is thatthe resistances are always calculated in a falling trend and it used tobe calculated from the low.
Gann formula for calculating the support and resistance is asfollows:
a.Support = (square root of (high)- Degree factor)^2b.Resistance = (square root of (low) + Degree factor)^2
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Trading Rules as per gann and as modified by me (SoumyaRanjan Panda Author of this article)
a.The 3rd support or resistance of any price move is important(as per W.D.Gann).b.In intraday trade 45 degree support break (1X1 support) willfavor sellers and 45 degree resistance (1X1 resistance) breakwill support the buyers. Provided the annual volatility of thetrading instrument must be higher than 50% (as per my ownresearch )c.In low volatile or medium volatile market (i.e. the annualvolatility of the trading instrument is less than 50 %) the (1X4=15 degree) resistance and (4X1=15 degree) support must beutilized for long and short entry provided no congestion or entryerror should be present in the calculated price. (as per my ownresearch )d.If sell entry price at 15 degree or at 45 degree greater than buyentry price at 15 degree or 45 degree price point then it isconsidered as error and rectified by changing calculationprocedure from the high and low to mid point of high and low.This says that instead of calculating the supports down fromhigh and up from low you can calculate the same from the midpoint of high and low (as per my own research )e.If the price unit of the trading instrument is a 4 digit number then between the buy entry and sell entry price at least 5 unitdifference is required to take unbiased decision as per thisprinciple or else it is considered as congestion and it is rectifiedby changing the high and low to mid point. (as per my ownresearch )f.If the price unit of the trading instrument is a 3 digit number then between the buy entry and sell entry price at least 3.5 unitdifference is required to take unbiased decision as per thisprinciple or else it is considered as congestion and it is rectifiedby changing the high and low to mid point. (as per my ownresearch )
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