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Gann Angles

     If you've spent much time in investment circles you've heard about Gann Theory and Gann Angles. What are they? W.D. Gann (1878-1955) was a young stock and commodity broker in the early 1900's. Gann was very successful at trading the markets and early on was fairly secretive about his methods. He was able to generally get into a move in the bottom eighth of a trading swing and out in the top eighth. Later in his life Gann expounded more on what principles he applied to his trading. He stated every stock and commodity "had its own center of gravity, mathematical points of force governed by the Laws of Vibration". Gann used strange looking charts that looked like a spoke bicycle wheel looked at from the side with the hub in the middle. Central to Gann's techniques were geometric angles in conjunction with time and price. Gann believed that specific geometric patterns and angles had unique characteristics that could be used to predict future price movements.

    All of Gann's logic required that equal time and price intervals be used on charts, so that a rise/run of 1 x 1 will always equal a 45-degree angle. Gann believed that the ideal balance between time and price exists when prices rise or fall at a 45-degree angle relative to the time axis. This is also called a 1 x 1 angle. Gann Angles are drawn between a significant bottom and top (or vice versa) at various angles. Deemed the most important by Gann, the 1 x 1 trendline signifies a bull market if prices are above the trendline or a bear market if below. Gann felt that a 1 x 1 trendline provides major support during an up-trend and when the trendline is broken, it signifies a major reversal in the trend. Gann identified nine significant angles, with the 1 x 1 being the most important. A sample of the nine angles are represented by the 1 x 8 (82.5 degrees), 1 x 4 (75 degrees), 1 x 3 (71.25 degrees), and 6 lower angles. Gann believed trading occurred between a pair of angles with the upper angle being the resistance level and the lower angle providing support. Gann developed several techniques for studying market action. These include Gann Angles, Gann Fans, Gann Grids, and Cardinal Squares.

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