Squaring The Price Range With Time

SQUARING THE PRICE RANGE WITH TIME
The squaring of price and time was one of the most important and valuable discoveries that Gann ever made. In his trading course he stated “if you stick strictly to the rule, and always watch when price is squared by time, or when time and price come together, you will be able to forecast the important changes in trend with greater accuracy.”

The squaring of price with time means an equal number of points up or down, balancing an equal number of time periods- either days, weeks, or months. Gann suggested traders square the range, low prices, and high prices.

Squaring the Range
When Gann angles are drawn inside a range, the angles provide the trader with a graphical representation of the squaring of the range. For example, if a market has a range of 100 and the scale is 1 point, a Gann angle moving up from the bottom of the range at 1 point per time period will reach the top of the range in 100 time periods. A top, bottom, or change in trend is expected during the time period when this occurs. This cycle repeats as long as the market remains inside the range.

Squaring a Low
Squaring a low means an equal amount of time has passed since the low was formed. This occurs when a Gann angle moving up from a bottom reaches the time period equal to the low.
For example, if the low price is 100 and the scale is 1, then at the end of 100 time periods an uptrending Gann angle will reach the square of itself. Watch for a top, bottom, or change in trend at this point. The market will continue to square the low as long as the low holds.

A graphical representation of squaring a low price can be seen on a chart Gann called a zero-angle chart. This chart starts an uptrending angle from price 0 at the time the low occurred and brings it up at one unit per time period. When this angle reaches the original low price, a top, bottom, or change in trend is expected.

Squaring a High
Squaring a high means an equal amount of time has passed since the high was formed. This occurs when a Gann angle moving down from a top reaches the time period equal to the high. For example, if the high price is 500 and the scale is 5, then at the end of 100 time periods a downtrending Gann angle will reach the square of itself. Watch for a top, bottom, or change in trend at this point. The market will continue to square the high as long as the high holds.

A graphical representation of squaring a high price can be seen on a zero-angle chart. This chart starts an uptrending angle from price 0 at the time the high occurred and brings it up at one unit per time period. When this angle reaches the original high price, a top, bottom, or change in trend is expected.

Time analysis in Gann Theory requires the trader to study market swings, anniversary dates, cycles, and the squaring of price and time to help determine future top, bottom, and change in trend points.
While the previous time studies require the trader to derive the data from actual charts, the basis of much of this analysis is drawn from Gann’s fundamental studies of financial astrology and his proprietary master charts. In the next section a brief discussion of the complexity of these two techniques is presented.

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[1] All quotations in this chapter about the Master Egg Course are from the W.D. Gann Commodities Course, and are reprinted with permission per Nikki Jones of Lambert-Gann Publishing Co., Box O, Pomeroy, Washington 99347
[2] As reprinted in the W. D. Gann Technical Review, vol. 1, no. 11, p.1, November 12, 1982
[3] From a missive on Gann letterhead with the title, “Soy Beans: Price Resistance Levels,” which originally came with the W. D. Gann Commodities Course, but which was left out of later reprints of the course

READ MORE - Squaring The Price Range With Time

Advanced Price and Time Techniques

Natural Cycles and Financial Astrology
While this book covers the most conventional methods of time analysis, another important tool Gann used to analyze time was the study of natural cycles. A natural cycle is a cycle that cannot be altered by man. For example, although a twenty-eight day cycle in a market can be discovered through analysis of historical price action, a naturally occurring fourteen-day cycle is the moon cycle. While one cycle may be changed or altered as more data becomes available, the moon cycle cannot change. Since the moon cycle follows a natural law, its position can be predicted well into the future. To Gann the division of time by the natural cycles of the moon, the sun, and the planets was very important. For example, his thirty-day cycle was based on the sun cycle, and the twelve-year and eighty-four-year cycles were based on Jupiter and Uranus cycles, respectively.


The study of natural cycles, their origins, and their influences on the markets led Gann to develop a trading system based on financial astrology. Financial astrology is the study of how planets and their phenomena affect commodity and stock markets. The financial astrologer believes planetary influences are the cause of bull and bear markets.

Gann was often quoted as saying that there was nothing mysterious about his methods of prediction. He also claimed, in effect, that if he had the appropriate data, he could use geometry and algebra along with the theory of cycles to predict when a certain event would happen. This is ultimately the language of the astrologer. Also note that in much of his work Gann used the term cycle as did the Greeks (to the Greeks the word “cycle” meant circle, again an astrological term). Astrologers use math, geometry, and algebra to find the locations of the planets and the moon, study past effects when the planets were in certain positions relative to each other, the sun, and the earth, and then use their calculations to make their forecasts.

For years Gann made charts predicting the future of prices a year in advance (his annual forecast), and financial astrology was apparently the method he used in making these forecasts. Included in them was the exact price, the time of the day, as well as the day and month.

The fundamental principle behind financial astrology is that the planets’ orbits, rulerships, groups of planets, and the sun and moon have an effect on the minds and actions of people and events, and in particular, these planetary effects affect the cycles and prices of stocks and commodities. That in sum is the meaning of financial astrology. While you may wish to reserve judgment on this matter, the fact remains that Gann was expert at financial astrology, that he was totally committed to it, and that he used it as a means of improving his trades.

He was careful not to publish anything whatsoever on this use of financial astrology because he knew such a revelation would receive bad press, and the effect this would have on his status and his brokerage and advisory business.

Gann certainly broke new ground in financial astrology. Most astrologers are capable of using the longitude readings or time periods only. However, he was able to convert longitude to price, and was thereby able to generate a methodology for support and resistance levels. This was a new advance in financial astrology, and helps to explain how he could allegedly make call within one-eighth of a point on stocks for highs and lows. You can begin to see how he was able to make long-range predictions, as well as minute-to-minute forecasts.

Finally, the study of, but not necessarily the belief in, astrology played a major role in the development of Gann’s forecasting technique. Rather than try to explain how he used astrology, the following is an excerpt from a rare item that explains in great detail how he converted astrological analysis into price and time analysis and a trading system. Rather than write in his normal veiled language, in which astrological references were replaced with market terms, Gann used terms unique to astrology.

In the first paragraph Gann explains how to convert degrees to the planets to price to find support and resistance.
…67 (cents), add 90 gives 157 or 7 degrees Virgo. Add 135 gives 202 or 22 degrees Libra. Add 120 gives 127 or 7 degrees Leo. Add 180 gives 247 or 7 degrees Sagittarius. Add 225 gives 292 or 22 degrees Capricorn. Add 240 gives 307 or 7 degrees Aquarius. Add 270 gives 337 or 7 degrees Gemini. Add 271 ½ gives 438 ¼. High on May Beans was 436 ¾. After that high the next extreme low was 201 ½. Note that 67 plus 125 gives 202, and that one-half of 405 is 202 ½, and 180 plus 22 ½ is 202 ½, which are the mathematical reasons why May Soybeans made bottom at 201 ½.

All of the above price levels can be measured in Time Periods of days, weeks and months, and when the time periods come out at these prices, it is important for a change in trend, especially if confirmed by the geometrical angles from highs and lows.

Here, Gann created support and resistance levels using the longitude of the position of the sun. In the next excerpt, Gann used the longitude of the major planets to create support and resistance levels.

Active Angles and Degrees
By live or active angles is meant Prices and Time Periods where the Longitude of the major planets are or where the squares, triangles, oppositions are to these planets.

The averages of the six major planets Heliocentric and Geocentric are the most powerful points for Time and Price Resistance. Also the Geocentric and Heliocentric average of the five major planets with Mars left out, is of great importance and should be watched.

You should also calculate the averages of eight planets which move around the Sun as this is the first most important odd square. The square of “1” is one, and “1” is the Sun. 8 added to “1” gives 9, the square of 3 and completes the first important odd square, which is important for Time and Price.
Examples of live, active angles: At the present writing, January 18, 1954, Saturn Geocentric is 8 to 9 degrees Scorpio. Add the square or 90 degrees gives 8 to 9 degrees Aquarius and equals the price 308-309, for May Beans.

The planet Jupiter is at 21 degrees Gemini, which is 81 degrees in longitude from “0” the square of 9. Subtract 135 degrees from Jupiter gives 306 or 6 degrees Aquarius. This is why Soy Beans have met resistance so many times between 306 and 311 ¼. The Price Resistance levels come out strong around these degrees and prices and the Geometrical angles come out on daily, weekly, and monthly, but the Power of Saturn and Jupiter aspects, working out Time to these Resistance Levels, is what halts the advance in Soy Beans.

Example: December 2, 1953, May Soybeans high 311 ¼. This equaled 18 degrees 45’ in Pisces, close square or 90 degrees of Jupiter, 135 degrees to Saturn and 180 degrees of the averages, and 120 degrees of Uranus.

300 price equals 30 degrees Virgo. 302 equals 30 degrees Libra. 304 equals 30 degrees Scorpio. On January 18, 1954, the planet Saturn Geocentric is 8 degrees Scorpio, and 15 degrees Scorpio gives a price of 303, therefore when May Beans decline 302, they will be below the body or longitude of Saturn and will indicate lower. At the same time, using the Earth’s revolution of 365 ¼ days to move around the Sun, a price of 308 ½ is 90 degrees or square to Saturn. As long as the price is below 308 ½ it is within the square and in position to go lower. But by the 24th revolution, when the price breaks below 304, it is in the bear sign of Scorpio, a fixed sign and will indicate lower prices.

Study and analyze all options of all commodities in the same way as we have analyzed May Beans. Remember, when these Resistance Points are met you must give the market time to show that it is making tops or bottoms and getting ready to make a change in trend. Do not guess, wait until you get a definite indication to buy or sell against these resistance levels and place a stop loss order. Having before you all the information outlined above, you would certainly have gone short of May Soy Beans on December 17 at 296 because the price was down to the 45 degree angle from 44 on the Monthly high and low chart.

To a trained astrologer and experienced trader, these excerpts reveal an important link between pattern, price, and time. In addition, they also show that although using financial astrology can be a useful trading tool, a trader should not abandon conventional charting techniques, as both aspects have to be used together. For example, knowledge of astrology is necessary to interpret and convert the degrees of the planets, but knowledge of technical analysis techniques is still needed to build charts, interpret tops and bottoms, find support and resistance, and place stop orders. All of this information may seem complicated to follow, but remember the overwhelming theme in each paragraph is pattern, price, and time.

The Master Charts
Researching and trading required a tremendous amount of time, especially since Gann had to chart everything by hand. At the same time, he sensed the need to simplify his analysis by developing a pattern, price, and time chart that was universal and permanent. This became the motivating force behind the design and invention of the master charts.

Over the years Gann developed a number of master charts, including the Square of Nine, the Square of Four, and the Master 360 Degree Chart. These charts incorporated the best features of his price and time techniques, and provided him with a quick and easy way to forecast the market. The master charts can best be described as permanent charts in the form of circles, squares, and spirals, which represent natural angles and permanent resistance points for either price, time, or volume. Although it is claimed that he used these charts exclusively to trade late in his career, the Master Egg Course example demonstrates how he used this master charts in conjunction with his conventional bar charts.

It should be noted that these charts probably represent Gann’s life work, and should therefore not be used until the more conventional Gann analysis tools are mastered. Since deep study and research are necessary to learn how to use the master charts, a proper background in Gann analysis is necessary. This is why I consider the master charts beyond the scope of this book. In addition, the master charts are only available in his trading course.

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[1] All quotations in this chapter about the Master Egg Course are from the W.D. Gann Commodities Course, and are reprinted with permission per Nikki Jones of Lambert-Gann Publishing Co., Box O, Pomeroy, Washington 99347
[2] As reprinted in the W. D. Gann Technical Review, vol. 1, no. 11, p.1, November 12, 1982
[3] From a missive on Gann letterhead with the title, “Soy Beans: Price Resistance Levels,” which originally came with the W. D. Gann Commodities Course, but which was left out of later reprints of the course.

READ MORE - Advanced Price and Time Techniques

Applying a Few Gann Techniques to the Forex Markets

Gann Theory can be described as the study of pattern, price, and time relationships and how these relationships affect the market. Gann Theory looks at pattern, price, and time as the key important elements in forecasting the future movement of the market. While each element has its own characteristics, each also has a unique, overlapping quality.

The focus of Gann Theory is to find the interlocking relationship between these three primary indicators of changes in trend and market direction. In other words, in certain instances a pattern has a large influence on the market, while at other times, price and time exert their dominance. It is the balance of these three elements, especially price and time that creates the best trading opportunities that can lead to more success in the market.

Gann Theory helps the trader to determine the best combinations of pattern, price and time to initiate successful trades. While trades can be triggered by each element individually, a trader who weights his signal too much toward one of these elements may experience a large number of losses, whereas a trader who is patient enough to wait for a proper balancing of pattern, price and time may experience more success.

Pattern study consists of the proper construction of minor, intermediate, and main trend-indicator swing charts and closing-price reversal patterns. Price study consists of Gann angle analysis and percentage retracements. Time study looks at swing timing, cycle timing, and historical dates. The combination of these three time factors helps the trader decide when and where to buy or sell. In this article, I describe techniques that help the trader determine how to discover these elements through proper chart construction and how they are related in trading activity.

PATTERN

In Gann Theory, pattern is defined as the study of market swings. Swing charts determine trend changes. For example, a trend changes to up when the market crosses swing tops and it changes to down when the market crosses swing bottoms. The trader can also gain information from swing charts about the size and duration of market movements. This how price, which is size, and time, which is duration, are linked to a pattern. In addition, the trader can learn about specific characteristics of a market by analyzing the patterns formed by the swing charts. For example, the charts delineate a market's tendency to form double tops and bottoms, signal tops and bottoms, and the tendency to balance previous moves.

Chart 1: Main Swing Indicator












PRICE

In Gann Theory, price analysis consists of swing-chart price targets, angles, and percentage retracement points.

Swing-chart Price Targets

After constructing a swing chart, the trader creates important price information that can be used to forecast future tops and bottoms. These prices can be referred to as price balance points. For example, if the swing chart shows the market has had a recent tendency to rally 100 - 150 pips before forming a top, then from the next bottom, the forecast will be for a subsequent 100 - 150 pip rally. Conversely, if the market has shown a tendency to break 100 - 150 pips from a top, then following the next top, the trader can forecast a break of 100 - 150 pips. If the swings equal previous swings, then the market is balanced.

Chart 2: Main Swing Indicator with Movement













Angles

Geometric angles are another important part of the Gann trading method. The markets are geometric in design and function, so it follows that they will follow geometric laws when charted. Gann insisted on the use of the proper scale for each market when charting to maintain a harmonic relationship. He therefore chose a price scale that was in agreement with a geometric design or formula. He mainly relied on a 45-degree angle to divide a chart into important price and time zones. This angle is usually referred to as the "1X1" angle, because it represents one unit of price with one unit of time. He also used other proportional geometric angles to divide price and time. These angles are known as 1X2 and 2X1 angles because they represent one unit of price with two units of time and two units of price with one unit of time, respectively. All of the angles are important because they indicate support and resistance. They also have predictive value for future direction and price activity. All of which is necessary to know in order to forecast where the market can be in the future and when it is likely to be there.

Chart 3: Gann Angles












Just as Gann angles offer the trader price levels that move with time, percentage retracement points provide support and resistance that remain fixed as long as a market remains in a price range. Gann is commonly acknowledged to have formulated the percentage retracement rule, which states that most price moves will correct to 50%. Other percentage divisions are 25% and 75%, with the 50% level occurring the most frequently.

Gann believed traders would become successful if they used price indicators such as swing-chart balance points, angles, and percentage retracement points to find support and resistance. In essence, however, the combination of the two price indicators provides the trader with the best support and resistance with which to work. For example, while the uptrending 1X1 angle from a major bottom and a 50% price level provide strong support individually, the point where these two cross provides the trader with the strongest support on the chart.

Chart 4: Percentage Retracements












TIME

According to Gann, time had the strongest influence on the market because when time is up, the trend changes. Gann used swing charts, anniversary dates, cycles, and the square of price to measure time.

Swing-Chart Timing

A properly constructed swing chart is expected to yield valuable information about the duration of price swings. This information is used to project both the duration of future up moves from a current bottom and the duration of future down moves from current tops. The basic premise behind swing-chart timing is that market patterns repeat: this is why it is necessary to keep records of past rallies and breaks. As a swing bottom or top is being formed, the trader must utilize the information from previous swings to project the minimum and maximum duration of the currently developing swing. The basic premise is that price swings balance time with previous price swings. However, in strong up moves the duration of a rally is greater than the duration of a break, and subsequent upswings are equal to or greater than previous up moves. Conversely, in strong down moves the duration of a break is greater than the duration of a rally, and subsequent downswings are equal to or greater than previous down moves.

Anniversary Dates

Among the timing tools Gann used is a concept he referred to as "anniversary dates." This term refers to the historical dates the market made major tops and bottoms. The information collected in effect reflects the seasonality of the market because often an anniversary date repeats in the future. A cluster of anniversary dates indicates the strong tendency of a market to post a major top and bottom each year at the same time. For example, in order to predict future tops and bottoms in wheat, Gann claimed to have studied prices back to the twelfth century, noting not only the prices, but the anniversary dates - top to top, top to bottom, bottom to bottom, and bottom to top - were fundamental factors in this thinking. This information he learned from the research was very important to his analysis, and these dates gave obvious clues to another of his approaches to the market: time cycles.

Cycles

As mentioned earlier, Gann tried to build analysis tools that were geometric in design. When looking at anniversary dates he saw a series of one-year cycles. In geometric terms, the one-year cycle represented a circle or 360 degrees. Building on the geometric relationship of the market, Gann also considered the quarterly divisions of the year to be important timing periods. These quarterly divisions are the 90-day cycle, the 180-day cycle, and the 270-day cycle. In using the one-year cycle and the divisions of this cycle, you will find a date where a number of these cycles line up (preferably three or more) on a single point in time in the future. A date where a number of cycles line up is called a time cluster. This time cluster is used to predict major tops and bottoms. Time cycles are a major part of Gann analysis, and should be combined with price indicators to develop a valid market forecast.

SQUARING THE PRICE RANGE WITH TIME

The squaring of price and time was one of the most important and valuable discoveries that Gann ever made. In his trading course he stated "if you stick strictly to the rule, and always watch when price is squared by time, or when time and price come together, you will be able to forecast the important changes in trend with greater accuracy."

The squaring of price with time means an equal number of points up or down, balancing an equal number of time periods - either days, weeks, or months. Gann suggested traders square the range, low prices, and high prices.

Squaring the Range

When Gann angles are drawn inside a range, the angles provide the trader with a graphical representation of the squaring of the range. For example, if a market has a range of 100 and the scale is 1 point, a Gann angle moving up from the bottom of the range at 1 point per time period will reach the top of the range in 100 time periods. A top, bottom, or change in trend is expected during the time period when this occurs. This cycle repeats as long as the market remains inside the range.

Squaring a Low

Squaring a low means an equal amount of time has passed since the low was formed. This occurs when a Gann angle moving up from a bottom reaches the time period equal to the low. For example, if the low price is 100 and the scale is 1, then at the end of 100 time periods an up trending Gann angle will reach the square of itself. Watch for a top, bottom, or change in trend at this point. The market will continue to square the low as long as the low holds. A graphical representation of squaring a low price can be seen on a chart Gann called a zero-angle chart. This chart starts an up trending angle from price 0 at the time the low occurred and brings it up at one unit per time period. When this angle reaches the original low price, a top, bottom, or change in trend is expected.

Squaring a High

Squaring a high means an equal amount of time has passed since the high was formed. This occurs when a Gann angle moving down from a top reaches the time period equal to the high. For example, if the high price is 500 and the scale is 5, then at the end of 100 time periods a Downtrending Gann angle will reach the square of itself. Watch for a top, bottom, or change in trend at this point. The market will continue to square the high as long as the high holds. A graphical representation of squaring a high price can be seen on a zero-angle chart. This chart starts an up trending angle from price 0 at the time the high occurred and brings it up at one unit per time period. When this angle reaches the original high price, a top, bottom, or change in trend is expected. Time analysis in Gann Theory requires the trader to study market swings, anniversary dates, cycles, and the squaring of price and time to help determine future top, bottom, and change in trend points.

GANN THEORY AND ITS APPLICATION TO TRADING

Gann Theory is based on the principles that price and time must balance. Markets are constantly in a position of change and subject to movement, sometimes with great volatility. Gann Theory states that there is order to this movement. By using the proper tools to analyze this movement, an accurate forecast for future direction can be made.

Finding the balancing points is necessary to predict future prices and movement. Gann developed a number of methods to help determine these balance points. The first method uses patterns created by swing charts to find the balance points. The second method uses angles and the squaring of price and time to find the balance points. The third method uses time.

While the perfect market remains balanced all the time, it also proves to be uninteresting, because major moves occur when price is ahead of time or time is ahead of price. The proper use of the various Gann analysis tools will help you to determine when these major moves are most likely to occur.

Now that the theory has been explained, how can it be applied to trading?

The first step is to create the charts that properly demonstrate the concepts of pattern, price and time analysis. The second step is to create the swing charts or trend indicator charts that provide the trader with a way to analyze the size and duration from the swing chart to forecast future price and time targets. In addition to forecasting, this chart is also used to determine the trend of the market.

After the pattern has been analyzed in the form of the swing chart, the trader moves to the fourth step, which is the creation of Gann angle charts. Using the tops and bottoms discovered with the swing chart, the trader draws, properly scaled geometric angles up from bottoms and down from tops. Since these angles move at uniform rates of speed, the trader uses the angles as support and resistance, and attempts to forecast the future direction and price potential of the market.

Chart 5: All Gann Techniques.












Percentage retracement levels are also created using the information derived from the swing charts. Each paired top and bottom on the swing chart forms a range. Inside of each range are the percentage retracement levels, the strongest being the 50% price level. The fifth step is to draw the percentage retracement level inside of each range. At this point the trader can judge the strength and weakness of the market by relating the current market price with the percentage levels. For example, a strong market will be trading above the 50% price and a weak market will be trading below the 50% price.

Time studies are then applied to the market in the sixth step. Traders should use historical charts to search for anniversary dates and cycles that could indicate the dates of future tops and bottoms. The swing chart is used to forecast the future dates of tops and bottoms based on the duration of previous rallies and breaks. Gann angle charts are used to predict when the market will be squaring price and time. Now the percentage retracement chart indicates the major time divisions of the current range, with 50% in time being the most important.

In the seventh step, the information obtained from the pattern, price and time charts is combined to create a trading strategy. This is the most important step because it demonstrates where the three charts are linked. For example, the swing chart tells the trader when the trend changes. If the trend changes to up, the trader uses the previous rallies to forecast how far and how long the rally can be expected to last. The Gann angles drawn from the swing chart bottom show the trader uptrending support that is moving at a uniform rate of speed. In addition, the Gann angle chart shows the trader the time that will be required to reach the swing chart objective based on the speed of the Gann angle. The 50% price level acts as support when the market is above it and as resistance when it is below it. The strongest point on the chart will occur at the intersection of the uptrending Gann angle and the 50% price. Finally, time indicators are used to prove to the trader that the upside target is possible because anniversary dates and cycles can verify the existence of similar market movement in the past.

Combining pattern, price, and time, the trader creates a trading strategy. This trading strategy is based on the principle of price and time balancing at certain points on the chart. The three methods of analysis draw this information out of the chart. Without the proper application of the three analysis tools, valuable information would be lost to the trader. This is the essence of Gann Theory, which states that there is order to the market if the proper tools are used to read the charts.

James A. Hyerczyk is a registered Commodity Trading Advisor with the National Futures Association. Mr. Hyerczyk has been actively involved in the futures markets since 1982 and has worked in various capacities from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis.

His published works include articles for Futures Magazine, Trader's World, SFO Magazine, Forex Journal, and Commodity Perspectives (Commodity Research Bureau), and, his book Pattern, Price & Time published by John Wiley & Sons, Inc. in 1998.

READ MORE - Applying a Few Gann Techniques to the Forex Markets

Gann vs. geometric angles .... II

A complete set of Gann angles for daily data, usually consists of five to seven bull Gann angles and five to seven bear Gann angles. These angles are drawn from previous major highs and major lows, sometimes as far hack as the beginning of a contract. (The subject of how far to go back to draw these lines is another subject for discussion).

If a bull Gann angle intersects a bear Gann angle on a certain day, the trader could anticipate a possible change in trend direction.
The "strength" of the turning point is determined by the specific combination or number of Gann angles intersecting at a specific point in time. One bear and one bull Gann angle intersection may indicate a weaker turning point than if multiple Gann angels or Gann angles of stronger degrees cross each other at a certain point in time.

The greatest accuracy in price projection can only result if the location at which a line's slope intersects price, is consistent - if it docs not change regardless of overall chart scale.
Price scaling, as well, can affect line slopes for a number of reasons. Chart scaling of time is usually constant (one hour, one day, one week or one month). Not only are the number of price units important, but the space between the price units is critical.

In working with geometric angles, scaling for price and time is important in determining the slope of a line. The slope of a geometric angle would be affected by chart scaling. The slope of the Gann angle, however, is not affected by changing a chart's price or time scaling, as long as long as the issue's price-to-time ratio, remains constant.

SUPPORT/RESISTANCE LEVELS
Mention was made that Gann's research determined that prices will follow pre-determined Gann angles at different times of a trend. These slopes vary from a shallow 1×4 Gann angle occurring at the beginning of a trend to a super-steep 8×1 angle occurring at the end of a trend.

When a trend starts, for instance, prices may follow a 1×4 Gann angle (almost a horizontal price channel). As the price trend gains momentum, prices will move faster and jump to the next higher Gann angle (a 1×2 in this example) for support or resistance.

When momentum carries prices higher still, prices will jump to and follow along the next higher Gann Angle (a 1×1 then a 2×1, etc.) until the trend reverses.

Finally, when prices arc seen screaming up or down, prices are probably following a 4×1 or 8×1. An 8×1 is about as close a price trend will get to a vertical line. When prices arc at an 8x1, a trend turning point is near. This also echoes the general Gann rule that trends move slowest when beginning, before gaining momentum, and fastest when ending, when everybody recognizes what's happening and tries to hold out for one more dollar of profit.

TRADER. BEWARE
Often geometric angles arc equated with Gann angles, such as a 26-degree geometric angle equaling a 1×4 Gann angle, a 45-degree geometric angle equaling a 1×1 Gann angle or an 89-degree geometric angle equaling an 8×1 Gann angle. However, this should be done for illustrative purposes only.

if done for technical analysis, errors become inherent and results in incorrect price projections and support/ resistance errors result. To equate geometric angles with Gann angles may not be totally correct.

The one commodity, if not the only commodity, for which a 1×1 Gann angle may be equal to a 45-degree geometric angle is for gold. One unit of gold ($1) is the same for a unit of time (one hour, one week, etc.). Not all commodities are golden, however, and analysts should take care in applying Gann angles and geometric angles interchangeably.

Gerald Marisch is a trader for the privately held company, Dover Capital Investments LLC. E-mail him at gm@spfutures.com.

READ MORE - Gann vs. geometric angles .... II