Angles drawn on price charts are similar to trendlines except that they are not drawn with the benefit of hindsight. Two approaches to such angles, geometric angles and Gann angles, are similar but they are not the same. Here is how to apply each.
Analysts sometimes attempt to equate the line slopes known as Gann angles, with line slopes commonly known as geometric angles. If the intent is to illustrate Gann angles and approximate them to geometric angles, then there is agreement.
But if the inference is to suggest that a Gann angle is the same as a geometric angle (a 1×1 Gann angle for instance, equaling a 45-degree geometric angle) then there is some difference in opinion.
This article will clarify the difference between Gann angles and geometric angles - a subject that has been argued for longer than the question of whether the chicken or the egg did indeed come first.
GEOMETRICANGLES
In high school geometry, it is learned that a line connecting two points in space forms a geometric angle to the horizontal line.
We can easily adapt this to technical analysis of market prices. Connecting two or more lows, or two price points, forms a line of a specific geometric degree to the horizontal. Price is the only factor that is considered for determining the geometric angle at which the line rises or falls.
Horizontal and vertical lines form angles of O degrees and 90 degrees, respectively. How "high above" or "low below" the second price point is in relation to the first point determines the "angularity" - or slope - of the line.
GANN ANGLES
Gaiin angles are based on the analysis techniques of W.D. Gann. Gann was a well-known trader of the 20th century. His original works, and those articles, books, training courses and videos that followed him, are legion in number. As with most legends that have taken on a life of their own, separating fact from fiction about his abilities and techniques is becoming difficult.
One aspect of Gann's research went one step further than to use only geometric angles to define price slopes. Gann considered the time needed for prices to complete a rising or falling trend to be even more important than the price change in the market.
Resulting are Gann angles that define price-trend slopes not only as a function of price but also of time. Drawing lines from a major high or a major low and using a proportional ratio factor, unique for each market, determines the line's slope of ascent or descent. "Another angle" (right) shows how Gann angles can differ from a 45-degree line and across different markets.
The ratio factor is the determining factor for differentiating between a Gann angle and a geometric angle. When a chart's scale for price or time changes, the slope of a Gann angle will not change; the slope of a geometric angle will change.
For instance, using the Gann-angle concept, the line's slope of following the prices' rise in 30 minutes would be steeper than the line's slope at which prices rose the same number of points, but in 60 minutes.
Rather than identifying the priceline slope of his angles in terms of geometric degrees (33 degrees, 45 degrees, etc.), Gann identified his angles by the unique expression reflecting the ratio of price to time (A × B) in which:
* A is the number of price units by which prices rise or fall
* B is the number of time units required for prices to complete a trend by moving the number of price units.
Examples of Gann-angle expressions are 1×1, 2×1, 1×2, etc. A 1×1 Gann angle, for instance, means that price is moving at the rate of one unit of price (whatever a "unit" of price - or ratio of price to time - may be) in one unit of time (minute, hour, day, etc). The next faster Gann angle would be a 2×1, meaning that prices are rising (or falling) at the rate of two units of price in one unit of time.
Conversely, the next slower Gann angle before a 1×1 is a 1×2 - prices are rising (or falling) at the rate of one unit of price in two units of time.
Gann Angles, which could be bearish or bullish, assist in three goals of the technical trader:
1. Monitoring trend slopes
2. Projecting price turning points
3. Identifying levels of support and resistance.
MONITORINGTRENDSLOPES
Gann said that price trends follow certain pre-determined slopes. The angle of these slopes reflect the stages of a price trend.
For example, when a trend begins, the trend's slope is of a slighter degree - a "shallower" slope, such at a 1x4 Gann angle. At the end of a trend, a trend's slope may be "steeper," such as at a 4×1 or 8×1 Gann angle.
The best known expression related to Gann angles is questioning if prices are "at a 45," "above a 45" or "below a 45." These comments refer to prices being at (normal), above (demonstrating a bull market) or below (demonstrating a bear market) a 45-degree angle. Should prices break a 45, it may be an indication that the trend direction has, or is about to, change from bear to bull or bull to bear.
PROJECTING TURNING POINTS
Certain intersections of bear and bull Gann angles may indicate future turning points for prices.
READ MORE - Gann vs. geometric angles .... I
Analysts sometimes attempt to equate the line slopes known as Gann angles, with line slopes commonly known as geometric angles. If the intent is to illustrate Gann angles and approximate them to geometric angles, then there is agreement.
But if the inference is to suggest that a Gann angle is the same as a geometric angle (a 1×1 Gann angle for instance, equaling a 45-degree geometric angle) then there is some difference in opinion.
This article will clarify the difference between Gann angles and geometric angles - a subject that has been argued for longer than the question of whether the chicken or the egg did indeed come first.
GEOMETRICANGLES
In high school geometry, it is learned that a line connecting two points in space forms a geometric angle to the horizontal line.
We can easily adapt this to technical analysis of market prices. Connecting two or more lows, or two price points, forms a line of a specific geometric degree to the horizontal. Price is the only factor that is considered for determining the geometric angle at which the line rises or falls.
Horizontal and vertical lines form angles of O degrees and 90 degrees, respectively. How "high above" or "low below" the second price point is in relation to the first point determines the "angularity" - or slope - of the line.
GANN ANGLES
Gaiin angles are based on the analysis techniques of W.D. Gann. Gann was a well-known trader of the 20th century. His original works, and those articles, books, training courses and videos that followed him, are legion in number. As with most legends that have taken on a life of their own, separating fact from fiction about his abilities and techniques is becoming difficult.
One aspect of Gann's research went one step further than to use only geometric angles to define price slopes. Gann considered the time needed for prices to complete a rising or falling trend to be even more important than the price change in the market.
Resulting are Gann angles that define price-trend slopes not only as a function of price but also of time. Drawing lines from a major high or a major low and using a proportional ratio factor, unique for each market, determines the line's slope of ascent or descent. "Another angle" (right) shows how Gann angles can differ from a 45-degree line and across different markets.
The ratio factor is the determining factor for differentiating between a Gann angle and a geometric angle. When a chart's scale for price or time changes, the slope of a Gann angle will not change; the slope of a geometric angle will change.
For instance, using the Gann-angle concept, the line's slope of following the prices' rise in 30 minutes would be steeper than the line's slope at which prices rose the same number of points, but in 60 minutes.
Rather than identifying the priceline slope of his angles in terms of geometric degrees (33 degrees, 45 degrees, etc.), Gann identified his angles by the unique expression reflecting the ratio of price to time (A × B) in which:
* A is the number of price units by which prices rise or fall
* B is the number of time units required for prices to complete a trend by moving the number of price units.
Examples of Gann-angle expressions are 1×1, 2×1, 1×2, etc. A 1×1 Gann angle, for instance, means that price is moving at the rate of one unit of price (whatever a "unit" of price - or ratio of price to time - may be) in one unit of time (minute, hour, day, etc). The next faster Gann angle would be a 2×1, meaning that prices are rising (or falling) at the rate of two units of price in one unit of time.
Conversely, the next slower Gann angle before a 1×1 is a 1×2 - prices are rising (or falling) at the rate of one unit of price in two units of time.
Gann Angles, which could be bearish or bullish, assist in three goals of the technical trader:
1. Monitoring trend slopes
2. Projecting price turning points
3. Identifying levels of support and resistance.
MONITORINGTRENDSLOPES
Gann said that price trends follow certain pre-determined slopes. The angle of these slopes reflect the stages of a price trend.
For example, when a trend begins, the trend's slope is of a slighter degree - a "shallower" slope, such at a 1x4 Gann angle. At the end of a trend, a trend's slope may be "steeper," such as at a 4×1 or 8×1 Gann angle.
The best known expression related to Gann angles is questioning if prices are "at a 45," "above a 45" or "below a 45." These comments refer to prices being at (normal), above (demonstrating a bull market) or below (demonstrating a bear market) a 45-degree angle. Should prices break a 45, it may be an indication that the trend direction has, or is about to, change from bear to bull or bull to bear.
PROJECTING TURNING POINTS
Certain intersections of bear and bull Gann angles may indicate future turning points for prices.
