Probably there are no such traders, who never heard about a legendary trader named William Delbert Gann. In his forecasting methods, Gann applied math methods and laws which secrets so far fascinate minds. In foundation of his works the interrelation between price and time is laid, whereas Gann angles serve as one of the methods of determining price – time balance. Specifics of those angles allow projecting in the future and if drawing is correct, the price will account it to a high precision.
Gann Line is the trend line laid at the angle of 45°. This line is also called balance angle or “one-to-one”, which means that one price interval corresponds to one time interval. Gann stated that 45° angle finely demonstrates long-term line of the trend. Any cross of balance angle made by the price shows that trend stops (in other words, about correction) or about reversal of major tendency. When prices are above balance angle, it says about dominating of ascending tendency on the market, when prices are at the angle 1×1, the tendency is descending. Location of the price at the angle of 45° tells that price and time are coherent. Gann line is the basis for drawing fan and grid of Gann.
Building Gann line
The most popular method of building Gann line in Meta Trader 4 trading terminal is to choose “Insert – Lines – Trendline by Angle” in the toolbar and lay up the line for the angle 45° from significant value of minimum (upward) or maximum (downward).
For bullish trend this angle serves as the support level for the price whereas for bearish market – as the resistance line. In terms of graphic representation it looks as follows:
Pic. 2 – (Ascending tendency)
This is not the only option for building Gann line. One more method is the method of the “first vibration”. To lay this angle, it is necessary to choose “Insert –Gann-Gann line” in the toolbar of the terminal.
The chosen line consists of three supportive points. For bullish trend, initial point is located on the lowest historical point, the final point is on ascending lowest point, which is formed by the first correction (vibration). For bearish market it is quite the opposite: initial point is located on the higest historical point, the final point is on descending maximum formed by the first bounce. The example of downward tendency is below:
Pic. 4 – (Descending tendency)
Among other methods of drawing Gann line we can highlight the method of selecting of correct scale with the help of natual numbers applied by Gann. Also you can draw balance angle by building box on the chart.
The difference in methods is explained by variety of experiments made by Gann and his adherents. But it does not change the sense. The priority is given to finding the balance between price and time , which supplies a trader with a great advantage in trading.
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