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.
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