GANN MASTER FOREX

Trading Course
Section 1
• In the previous course material we studied how to
calculate the resistance levels or price support, fixed
ones and time resistance levels in a range. In this
week's course material we will study a few aspects of
the way to construct a "Gann Box".
• The Gann box is a geometric method of dividing a
square in fourths, horizontal thirds, vertical and
diagonal.
• The standard square is a geometric square: the 90 bars
square (time units) on 90 points (pips etc).
• Just like not all financial instruments have a perfect
time-price relationship, a one on one relationship, in
practice we must adjust this square depending on the
price and time. For this reason we must confuse things
and consider that a Gann square is synonymous with a
geometric square.
• In reality, most of the times, the Gann square is a
rectangle. However, we will use the term of "Square".
• Evidently we must ask ourselves: what is the objective
of a "Gann square"?
• Why do we build a "Gann square"?
• How can it help us with our trading to build such a
square?
• The objective of a Gann square is to divide the time
and price and form 3D axis in space.
• Vertical lines, or the time resistance levels are those
that split time.
• Horizontal lines, or support and resistance levels are
ones that split price.
• Gann angles are those that split space.
• It is more than evident that these support and resistance
price and time levels and dynamic support or resistance
levels (angles) are nothing more than mathematical
instruments that are meant to help us understand what the
price in time and space evolution is and visualize a lot
easier how and when the price might react.
• Evidently we must answer these final two questions: when
and where is it the most likely for the price to react?
• The answer is relatively simple and it is offered by the "Gann
box":
• -the highest probability for the price to react is from:
• The intersection of the price with the time
• The intersection of the price with the angle
• The intersection of the time with the angle
• Ideally however, on triple intersection of the price
with the time and the angle
• The construction of a Gann box
• The construction of a Gann box is relatively simple,
especially if you have at least minimum geometry
knowledge.
• The first thing which we must do when we wish to build
a Gann square is to determine a beginning point of that
square.
• What should that initiation point of a Gann Square be?
• Most of the times, as we have shown in the previous
course materials, a starting point of a Gann square is
fixed on a maximum level or significant low, in a Gann
pivot as we said.
• Evidently, we can build a Gann square on a shorter
time period, in a trend that already exists. In this case,
what should be the initiation point of such a square?
• The answer is relatively simple: ideally we should build such a
Gann square, from a initiation point of a impulse movement or in
other words, it is best to avoid initiating a Gann square in a price
congestion area.
• When we build a "Gann box" we start from the evolution
elements that are offered by the price history. It is very important
to follow to have sufficient development space on the right of the
chart and check the way in which the price reacts on significant
levels of the Gann box.
• In the image above we have a theoretical example of
the construction of a Gann box. We notice that it is
practically a Gann box built on the previous range. In
the previous course material we have seen how we can
determine the support and resistance levels
mathematically, and the fixed time resistance levels.
Today, by learning the construction means of a "Gann
square" we learn how to calculate and trace the
resistance levels and the dynamic support: the angles.
• We were saying above that the current angles are the
ones that help us divide the space and that such a
construction helps us build 3D axis in space.
• Evidently in this course material we will use a concrete
example, in order to make it easier to understand, step
by step the methodology which you need to apply when
you wish to build a "Gann Box".
• After in step 1 we learned that we need to select the
initiation point of a "Gann box", in step 2 we will have to
learn how to identify the vibration points (or inflexion
points, turning points), starting from those minimum or
maximum levels. This aspect is extremely important
because the answer to this question will help us
determine the size of the square that we're going to
build.
• There are several dimensions to a Gann Square.
• The dimensions of a Gann square, the most well known
and used by the traders are:
• -52 period square
• -90 period square
• -144 period square
• -360 period square
• Evidently we discuss time periods, and these can be
days, weeks, months, years etc.
• We can talk a lot about these time periods, how they
were determined, why they are important, but we will
do this in much more detail when we will discuss the
time cycles. Now we will simply say that for example, a
year has 52 weeks. When we build a 52 week square ,
we are practically working with the cycle space of one
year and trying in this space to determine the dynamic
resistance areas that divide the space and that could
generate price reactions.
• Now let's try to answer this extremely important
question: How do we identify the vibrations or
inflexions of a price movement in time, so that we
know what the dimension, matrix of the Gann
square will be when we build it?
• The answer is much shorter, and easier then the
question itself: we will search, in the historic past of the
price to see if we have significant price reactions, of 30,
45 or 60 days, weeks etc.
• If after the analysis and our measurments we notice
that there are vibrations at 30,45 or 60 time
periods,then we will build a 90 degree time period
square.
• Evidently extending a 90 period square we will obtain a
180 period square, or if we extend even further we will
have a 360 time period square.
• In other words a Gann square could be extended to a
very long time period if the representative levels have
not been overlapped by the vibration of that specific
financial instrument and have not changed. We will take
a concrete example to see how we should determine if
the price reacted or not to the 30/45 or 60 time periods.
We will use them on the same daily chart, on EUR/USD
which we have used in the previous course materials.
• Upon first glance we notice relatively easily that the
price reacted to these levels of 30/45 and 60 days,
ending the consolidation areas and continuing the
ascending movement (on 30 days) or marking two
important tops (on 45 days and 60 days). It is more
than evident that it is very well to build a Gann square
on 90 days, 180 or 360 days.
• We will do this step by step in order to see if this
square is truly relevant to us or not.
• Let's also say however, with a simple observation, that
there are traders that are acting only after vibrations,
but it is not sufficient. We noticed many cases in which
on 90 days the price has a slight retracement, a minor
one and immediately continues in the direction of the
trend. Through this technique we will try to unite
several signals to identify the retracement points with
more accuracy and a higher probability.
• We must also state that we needn't give dimension to a
square by the 90 days - 90 pips or points principle. 90
days might be a good choice, but adjust the Gann box
dimension by the range dimension: "Square of
Range".
• Starting from a minimum, such as a theoretical
example presented in a previous course material we
might build "a Gann square".
• As you can see in the image above, we kept our chart
in the horizontal levels that we calculated in the
previous course material but furthered from the vertical
resistance levels.
• Why?
• Because as we have already said, we will build a
"Gann box" based on the time levels that we have set
out previously: 30/45/60/90 etc.
• The first practical step for building the Gann box: we
mark the start point in time, the Gann box as in the
image above. This is on the 24th of July 2012.
• If we wish to build a Gann box of 90 days we must
know that the representative time levels for its
construction are fixed at:
• 22/23 days resistance level 1x4
• 30 days- level 1x3
• 45 days-level 1x2
• 60 days
• 67/68 days
• 90 days
• We will now calculate 22/23 days from the initiation
point of the "Gann square" and we will place it in our
chart.
• As we can easily see in the chart above on the 23rd of August
2012, in the 23rd day of the initial point of our Gann square the
price made a top that was passed at 1.25886 after that for a
few days there was consolidation on the previous
resistance level of 90* price. If from the initiation point
of the Gann square we will trace a diagonal that unites
the initiation point from the Gann pivot with the
maximum Gann pivot (of the range) we have traced the
1x4 price angle, as we can see in the image below.
• In the next step we will calculate a 30 days movement of
trading, that have passed from the initiation moment of the
"Gann square".
• We notice in the image below on the date of the 4th of
September 2012, that there have passed 30 days from the
moment of our Gann box initiation.
• If from the initiation point of the box we reach a diagonal in the
intersection point to the time level, 30 days with a maximum of
the range, we have traced the 1x3 angle, as we can see in the
second slide below.
• In the next step we will calculate a movement on 45 days, that
have passed from the time initiation moment of our Gann
square.
• We will notice in the image below that this time resistance level
took place on the 25th of September 2012.
• If we will trace a diagonal from the initiation point of our Gann
square, to the intersection point of our time line of 45 days with
the maximum level of our range, it means that we traced the 1x2
angle.
• In the next step we will calculate a 60 days sequence
that have passed from the time initiation of the "Gann
square".
• As you can see very well in the image that I have
inserted below, this date was on the 16th of October
2012.
• We will insert in our chart this time resistance level.
• In the next step of the 90 days Gann square
construction we will calculate a 67/68 day sequence
from the initiation moment of our Gann square.
• As you can see in the chart below, this date was on the
26th of October 2012.
• We insert our chart and this time resistance level.
• In the next step of the Gann box to calculate 90 days
that have passed from the initiation moment of our
Gann box. As you can see in the image below this date
was on the 27th of November 2012.
• If from the initial point of the Gann box we will trace a
diagonal to the point at which the time resistance line of
90 days intersects the middle of the maximum range
we will place the 1x1 angle.
• We have traced the principal levels of support and
resistance prices of our 90 days square. We have
traced the principal time levels and the principal angles
of the Gann square.
• In order to finalize our built Gann square we will have
to trace the following angles, such as in the image
below. In order to see better we have made a chart
zoom.
• As you can easily see in the chart above we have
support and resistance levels for the prices at:
• ¼
• 1/3
• ½
• 2/3
• 3/4
• Similarly in the Gann square which we have drawn we fixed the
significant angles:
• 1x4
• 1x3
• 1x2
• 1x1
• 2x1
• 3x1
• 4x1
• We have said several times that the price, in its market
evolution, develops fractal structures. In this context we
must say that after we build such a Gann box, we
check to see how well he offered us support and
resistance levels that are so fixed and dynamic price
and time levels and if we reach the conclusion that
these mathematical levels represented inflexion levels,
after finalizing such a Gann square we can continue
with a new Gann square that is also 90 time periods.
• Evidently the Gann square that will result from the
construction of a 90 days sequence will be a 180 days
square. Simmilarly, when we will have a 180 days Gann
square, the angles will change their values. Thus the
2x1 angle in the 90 period square, in a 180 period
square will become the 1x1 angle.
• Evidently the new 90 period square will be built as we
have built the first sequence in our example.