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William Gann, a legendary Forex trader, said that the line at 45º demonstrates a long-term market trend very well. This line is known as the Gann line or the balance angle and also as the Gann angle. The line can be both upward and downward. Let’s discover what it is in details and get to know how to use Gann grid in the currency analysis.
Gann Grid indicatorThe main idea of how Gann grid works is related with the balance line. The upward tendency rules if the price is getting higher the Gann line. And we face the downward tendency if the price is below the line. Under the bullish trend, the price tends to the parallel upward Gann lines, and under the bearish trend, it tends to the downward lines. When the price crosses the balance line, there is a high probability of the correction or reversal of the trend.
Building Gann Grid
To build Gann Grid you need to know the principles of building the Gann lines. If you use MetaTrader 4 trading platform, you should choose Insert – Gann – Gann Grid in the toolbar and mark two reference points on the chart which will determine the size of a cell (zone).
Img. 1
Gann pivot points are on extreme points of the price. Usually they are opposite: from the maximum point to the minimum one or vice-versa. Sometimes you can choose only two highest points or the lowest ones. It is also possible to set the points of the closing price and the opening price in the certain time periods. Let's consider the example of Gann Grid trading.
Img. 2
We choose two pivot points: the minimum pricу before and after the first correction. Upon the bounce of the price up, (point 1), we expect the price near the next ascending parallel Gann line (point 2). The price reaches this level easily. Then we expect that the price moves to the first line – point 3. Here we also face break of the balance line down and expect the price to be even lower, but the market doesn’t always do what we expect, so the price returns to the point above Gann line (point 4) and renews the bullish trend. At this point we can look for the entrance for buying with targets near the line, which was the resistance line earlier. In actual fact we trade in the descending range here, and this range is constituted by Gann lines. Upon breaking up the balance line (point 6), we expect to get rollback and forecast the nearest targets in the next zones (point 7). Now we have got the descending parallel Gann lines and they will work until a new break up takes place (point 8), afterward the price reverses again.
As you can see it is quite easy to apply Gann Grid. All you need is to pay attention to the price along the lines and at intersections of rhombuses and to look for patterns.
Gann grid is a powerful tool and can be combined with time zones method, Gann Fan, horizontal support and resistance lines, pivot lines and other tools of technical analysis.
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