Speedline Draw

Gann Analysis â € "An unusual technical approach to stock markets

Author: Mike Estreyas

It is fair to say that certain forms of technical analysis of stock markets go beyond the purely mathematical and one of them is the analysis Gann, who has many followers in the world despite its most esoteric.

The body of work that has been built around WD Gann started with his own set of forecasts in the first part of the 20th century have been strangely accurate, and soon built a huge following as one the first real technical analysts. His studies of combined analysis of prices and time to do what he described as the time factor markets, and believes that all market movements could be defined by a set of mathematical laws and the functioning of the natural world.

The Foundations of Gann Analysis

There were three exit rules:

1 Price, time and variety are the only factors to consider.

2, the markets are cyclical.

3 The markets are geometric in design and function.

Gann had three areas of preparation: His studies include support lines prices and resistance, pivot points and angles, many of which are standard techniques of analysis in modern times, technical analysis. Their study historically recurrent time dates searched, and these were obtained through natural and social, which is more subjective. He also studied the models look at the potential market fluctuations using trendlines and investment patterns.

Price, time and construction of Gann angles

What Gann tried to do is define a series geometric angles that could be used as support and resistance levels increase based on laws natural, and is now known to analysts as high-speed lines.

Much of his work was empirical, meaning that developed the analysis of the experimentation and observation, but was attached to the Central 1 * 1 price against the timeline measured as a 45-degree line on a map.

The second point is where the line of departure, and Gann discovered that large peaks or holes made excellent points. Then also, the horizontal support and resistance levels using what he called "vibrations" or "price swings €, and again his testimony has been empirical in nature using mathematical theories such as Fibonacci retracements (which we have discussed elsewhere).

Once the price and time points were recorded on a graph, then called in Gann (modern software systems do this automatically), several important lines, the two most common patterns were line 1x1, 1x2 online (which is softer rate of ascent, and the line of 2X1 (steeper rate of increase).

The idea is that if the price action crossed 1X1 ascending line, the probability that a line down to the 1X2, and vice versa.

Besides this, he developed a series of subdivisions that could be represented on a graph 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

The models could be learned from the bottom of major depression or descending ridges, and in both cases that could be used as support and resistance points at any time.

Because every market is cyclical in nature considered, along the line could be drawn between the points on the road, the largest of its global impact would be (some commentators still consider a high-speed Gann in 1982 under the major U.S. stock markets still in place, for example).

Advantages of using Gann angles

The main advantage for investors is important that the action of high speed lines to act as Support and resistance levels that are different trend lines of other means of communication a series of minimum or maximum. It is a very simple method to observe rates of exchange where the lines are inserted in different terms at a price per share.

Some investors use setbacks at a speed of lift as an opportunity to add to positions already profitable.

If a high speed interacts with a horizontal emphasis, combining time and money becomes more important and Gann has shown that these points often forecast the major turning points in the future.

Disadvantages

Like any technique empirical analysis Gann works differently for each investor and each population, as it depends on what you observe. Drawing speedline is markedly different in each market due to the inherent variable pricing stocks.

There is some skepticism that the ideas based on natural laws are more than mathematical astrological and many analysts have dismissed the theory as Mumbo Jumbo, with the theory of Fibonacci and Elliott wave for example.

As with all technical analysis although not fixed right or wrong answers. You can not predict the future, but it helps if you can add an element of probability theory to pattern-based analysis of human behavior and makes Gann analysis.

One final point is that at the time, WD Gann had the advantage until his theories were widely known and has been shown stellar returns on their trades. Chaos theory and speed of today's computer systems suggest a new edge is much harder to find and maintain in terms of buying or selling absolute points. CFD traders and other investors still better to adopt a disciplined approach throughout the placement process has success.

About the author:

Estreyas Mike is Head of Research for Blue Index, specialists in the CFD trading online, the contracts for difference and Online Forex Trading.

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