Recent work of mine on Fibonacci, inspired in part by the mathematical garden at the Chelsea Flower Show (designed by silver gilt winner and head gardener at the Chelsea Physic Garden Nick Bailey), started me thinking about magical numbers. These have been important to peoples all over the world for millennia.
As technical analysts we are used to working with Fibonacci retracements and projections, moving averages, and Elliott Wave counts. Many of us struggle with the latter (do watch the excellent video on the subject by Thomas Anthonj on www.technicalanalysts.com ) and wrestle even harder with WD Gann. Both men believed that there were ‘natural laws’ which have great influence on markets.
Texas born and self-taught William Delbert Gann moved to New York in 1902, worked at a stock broker’s and wrote for ‘The Ticker and Investment Digest’, precursor to the Wall Street Journal. His trading success was phenomenal and much of it has been independently verified.
The Spring Equinox is the start of the year for many gardeners and the financial year according to Gann, just as the Winter Solstice marked the end of the Mayan calendar. Like Ichimoku cloud charts, the concept that time and price are inextricably linked is key, Gann believing time the more important variable. His law of vibration states that stocks are centres of energy and therefore controlled mathematically; his second principle is that analysis must factor in space, volume, and time.
A Gann fan draws lines from a significant high or low at an initial rate of one unit of time to one of price (45 degrees). Others are added around this at the rates of 1X2, 1X3, 1X4 and 1X8 (7.5 degrees) around which markets rotate. ‘Essential’ numbers include 66.66%, 50%, 33.33%, 16.66% and 8.33%.
Many years ago Fred Stafford gave an illuminating (and entertaining) lecture on Gann at an STA monthly meeting, having a dig at ‘funny mentalists’ who he believed useless. His son Gary has now taken over as main cheer leader for team Gann and has several free videos on the subject on You Tube. Or perhaps it might be better to go straight to the horse’s mouth, two volumes of ‘Collected Writings’ and ‘45 Years on Wall Street’ being perennial favourites.
FAQs
Gann trading strategy can still be used and, if applied correctly, can predict the movement of an asset up to 90% accuracy. W. D. Gann believed that the market follows a natural time cycle.
How much money did Gann make? ›
Gann's students have stated that he left a fortune of $50 million (equivalent to $569 million in 2023) that he built by following his methods, but evidence of such a fortune is lacking. Alexander Elder, in his book Trading for a Living, said "I interviewed W.D. Gann's son, an analyst for a Boston bank.
What is the Gann formula? ›
Gann's equation goes as follows: 1 x 8 = 82.5 degrees, 1 x 4 = 75 degrees, 1 x 3 = 71.25 degrees, 1 x 2 = 63.75 degrees, 1 x 1 = 45 degrees, 2 x 1 = 26.25 degrees, 3 x 1 = 18.75 degrees, 4 x 1 = 15 degrees, 8 x 1 = 7.5 degrees.
Does technical analysis really work in trading? ›
Technical analysis can be applied to any security with historical trading data. This includes stocks, futures, commodities, fixed-income, currencies, and other securities. In fact, technical analysis is far more prevalent in commodities and forex markets where traders focus on short-term price movements.
What is the most accurate trading theory? ›
The Wyckoff Theory or Wyckoff method is one of the best blueprints when it comes to picking winning stocks, the best times to buy them, and the most effective risk management approach. Observing price action, Wyckoff ultimately formulated his theory which identifies key elements in the development of trends.
What is the golden ratio of Gann? ›
The Golden Ratio is a mathematical concept that is found throughout nature and has been applied to trading. The ratio is approximately 1.618 and is often used in conjunction with Fibonacci retracements and Gann angles to identify potential areas of support and resistance.
What is the most important Gann angle? ›
A Gann angle is derived by joining a top and a bottom on the price chart. An angle drawn on the price chart will have a slope, which is measured in degrees. The most important angel angle in the Gann theory is 1:1. A 1:1 angle is considered to have a slope of 45 degrees.
What is the best Gann indicator in Tradingview? ›
The Gann Spiral, more commonly known as the Square of 9 is one of the most well known tools that Gann used. Today, it is most commonly used to find possible support and resistance levels, and possible reversals in time.
Was Gann a good trader? ›
Texas born and self-taught William Delbert Gann moved to New York in 1902, worked at a stock broker's and wrote for 'The Ticker and Investment Digest', precursor to the Wall Street Journal. His trading success was phenomenal and much of it has been independently verified.
What does Warren Buffett say about technical analysis? ›
- Warren Buffett by contrast believes trying to time the market is a waste of time and hazardous to investment success. As far as technical analysis is concerned, he once said "I realized that technical analysis didn't work when I turned the chart upside down and didn't get a different answer."
The MACD (Moving-Average Convergence/Divergence) line is the most used technical indicator. Along with trends, it also indicates a stock's momentum. To forecast a stock's future direction, the MACD line analyses its short-term and long-term momentum.
Does anyone make money with technical analysis? ›
You can make money in the markets using technical analysis, just as you can by picking stocks at random, throwing darts at a dartboard, or tossing a coin to decide which to buy or sell – i.e. by dumb luck. But you can't reliably make money this way.
Do Gann angles work? ›
Gann angles can be a very effective tool. Learning to use them takes time and practice. Keep in mind that no strategy is absolute.
