W.
D Gann’s
Theory Explained
W.D. GAnn specialist Pak-chung
Wong explains one of the most
complicated technical tools and also
one of the most powerful.
William Dilbert Gann (1878 - 1955)
Introduction
I
n recent years, the name of William
Dilbert Gann has been gaining attention
among market technicians. It is said that
his market forecasting technique is one of the
most complicated technical analytic methods ever
in the world and that few people could fully
understand it. Nevertheless, W. D. Gann had
proven himself to be one of the greatest stock
and commodity traders in the last century.
W.D. Gann was not a contemporary man. He
was an American who traded US stock and
futures markets in early Twentieth Century. He
became famous among the investment
communities by making several accurate calls.
One of his most famous calls was his timing of
the black Friday in September 1929 when the
US long bull market ended all of a sudden. The
end of the bull market was also the beginning of
the Great Depression in the western world in
1930s. He made his forecast in November 1928,
ten months before the collapse.
There were several legendary stories about W. D.
Gann. One of the stories was about his forecast
of the wheat market in 1909. According to Gann’s
friend William Gilley, “One of the most aston-
ishing calculations made by Mr. Gann was dur-
ing last summer [1909] when he predicted that
September Wheat would sell at $1.20. This meant
that it must touch that figure before the end of
the month of September. At twelve o’clock, Chi-
cago time, on September 30th (the last day) the
option was selling below $1.08, and it looked as
though his prediction would not be fulfilled. Mr.
Gann said, ‘If it does not touch $1.20 by the close
of the market it will prove that there is some-
thing wrong with my whole method of
calculation. I do not care what the price is now,
it must go there.’ It is common history that
September Wheat surprised the whole country
by selling at $1.20 and no higher in the very last
hour of trading, closing at that figure.”
In over 50 years of trading, it was said that W. D.
Gann had made US$50 million from the
market. The wealth of that scale compared with
the purchasing power at his time was indeed very
substantial. Apart from trading, W. D. Gann also
wrote several books on his trading methods.
However, he kept his core method veiled and
confined only to a chosen group of people, who
vowed not to give the materials out to others.
After W. D. Gann passed away in 1955, there
was a long period of time that the name of W.D.
Gann was not mentioned in the investment
communities.
The name of W. D. Gann regained the market’s’
attention beginning from late eighties when some
of his materials resurfaced and his books were
reprinted. Many researchers and analysts tried to
reconstruct his methodology. In the Nineties, an
array of schools arose on the basis of his
research in time cycle, market geometry and
financial astrology.
Basis of W. D. Gann’s Techniques
What are the essences of W. D. Gann’s theory?
In W.D. Gann own words in an interview, “I dis-
covered that the law of vibration enabled me to
accurately determine the exact points at which
stocks or commodities should rise and fall within
a given time.” In his book “The Tunnel Thru’
the Air” published in 1927, which was written in
veiled language, he wrote, “In making my pre-
dictions I use geometry and mathematics, just as
the astronomer does, based on immutable laws.
My calculations are based on the cycle theory and
on mathematical sequences. History repeats it-
self. That is what I have always contended, that
in order to know and predict the future of any-
thing you only have to look up what has hap-
pened in the past and get a correct base or start-
ing point.” In explaining his cycle theory, Gann
said, “Time is the great factor that proves all
things. The measurement of time first originated
and based on the earth’s motion upon its axis.”
In a nutshell, W. D. Gann made his market pre-
dictions based on the law of vibration, natural
cycles, mathematical sequences and geometry
with reference to the correct base or starting point
in terms of market price and time.
Law of Vibration
Nowadays, most Gann analysts agree that the law
of vibration refers to time and price ratio analy-
sis as applied to a market chart. Gann was one of
the originators of the famous 50% rule. In his
Stock Market Course, he emphasised the impor-
tance of the division of three, division of four
and division of eight.
Hong Kong’s Hang Seng Index demonstrated a
perfect match of Gann’s Law of Vibration. In Fig-
ure 1, it is shown that the market experienced
major supports or resistances at the level of one-
eighth (12.5%), one-fourth (25%) and one-half
(50%) of the all time high of 18397.57 on 28
March 2000, i.e. 16100, 13800 and 9200 ap-
proximately.
Natural Cycle
Gann mentioned that natural cycle and math-
ematical sequences are the major approaches to
market forecasting. In his writings, he mentioned
two major types of cycles: division of the natural
cycle, i.e. a year, and division of the cycle of 360.
From Gann’s perspective, the major low of
8894.36 (Hang Seng) on 21 September 2001 has
a special meaning. That day was the Autumn’s
Equinox of the year or half the natural cycle
measured from the beginning of an astrological the changes in trends, after the balance between time and price was broken. Currently, Singapore
year on Spring’s Equinox. Based on this cycle market is on an medium term uptrend, with major 1 x 1 line support at 1570, where buying oppor-
theory, 22 June 2002 will be another important tunity may emerge.
date to watch out for trend reversal when the date
will be 90 degrees from the Spring’s Equinox. Figure 2: Singapore Straits Times Index and Gann’s 1 x 1 Line
For a holistic approach
Cycle of 360 is of equal importance to Gann. to market forecasting,
Using Hong Kong’s Hang Seng Index demon- W. D. Gann emphasised
strated in Figure 1 again, it is shown that the the importance of con-
major market low at 8894.36 on 21 September vergence that various
2001 was the 361 trading days after the all time methods confirm with
high at 18397.57 on 28 August 2000, i.e. a com- each other. Ratios, time
pletion of the cycle of 360, and a major trend cycle and Gann angle
change took place. analysis should point to
the same conclusion.
Way forward, half of the cycle of 360, i.e. 180
trading days, would be an important date to The major low of Ma-
watch. This cycle date will fall on 23 June 2002, laysia’s Kuala Lumpur
the same as the natural cycle date mentioned Stock Exchange Com-
above. The other major cycle date will be 22 July posite Index (KLCI) at
2002, which is 120 weeks, i.e. one-third of the 547.72 in April 2001
360 weeks, from the all time high at 18397.57 can be used as an exam-
on 28 August 2000. ple (Figure 3). It was a
retracement supported at the five-eighth (62.5%) of the uptrend from 261.33 of 1998 to 1021.2 of
Figure 1: Daily Chart of Honk Kong’s Hang 2000. Besides, it was 60 weeks from the major high 1021.2 of 2000, i.e. 60 weeks are one-sixth of a
Seng Index 360 weeks cycle. Lastly, it was supported by a 1 x 2 Gann line drawn from the 1998’s low at 261.33.
The three approaches confirmed with each other that a change in trend has
been imminent.

Figure 3: Gann Analysis on Malaysia’s KLSE Index

Market Geometry
Geometry is a study of relationship between X-
axis and Y-axis of a two-dimension diagram. Ac-
cordingly, Market Geometry is a study of rela-
tionship between time-axis and price-axis. Gann
had a famous rule on market geometry, “When
time squares price, a change in trend is immi-
nent.” This statement means when the time and
price come to the same magnitude or on a one-
to-one basis, the market trend might be changed.
Using Singapore’s Strait Time Index (STI) as an
example in Figure 2, the Gann 1 x 1 line (with
time/price ratio of 1 week for 10 points) from
major market high and low accurately indicated
More information about the life of W. D. Gann, his writings and his methods can be found from:
http://www.acrotec.com
Mr. Pak-chung Wong is a well- known technical analyst in Hong Kong, who specializes in W.D. Gann
trading and forecasting techniques. He published five popular Chinese TA books, including: W.D. Gann’s
Theory, Fibonacci and Spiral Rhythm of Markets, Day Trading Forex, Principles in Technical Analysis with
Technical Indicators; and Options Trading Strategy. He also developed software for Gann analysis, including
Gann Forecaster, a time / price calculator, and the Time Trader Charting Software.
Mr. Wong will be conducting a Gann Seminar in Malaysia on 25 July 2002 and in Singapore on 27
July 2002. Further details of the seminar can be obtained on page 25, www.chartpoint.biz or e-mail
sales@chartpoint.biz