By Isfaqur Rahman

## Gann Theory: A Pattern, Price and Time Combined Analysis

• The study of pattern, price, and time and how their relationships affect the market.

### Gann based predictions of price movements on three premises:

• Price, time, and range are the only three factors to consider.
• The markets are cyclical in nature.
• The markets are geometric in design and in function.

### Based on these three premises, Gann’s strategies revolved around three general areas of prediction:

• Price study: This uses support and resistance lines, pivot points, and angles.
• Time study: This looks at historically reoccurring dates, derived by natural and social means.
• Pattern study: This looks at market swings using trendlines and reversal patterns.

## Gann Angles

• Gann Angles are drawn from major price peaks and bottoms and are used to show trend lines of support and resistance.
• This allows the analyst to forecast where the price is going to be on a particular date in the future.

## Constructing Gann Angles

### Determine the time units:

• In most cases, the intermediate-term (such as one- to three-month) charts produce the optimal amount of patterns.

### Determine the high or low from which to draw the Gann lines:

• The most common way to accomplish it is to use other forms of technical analysis—such as Fibonacci levels or pivot points.

### Determine which pattern to use:

• The two most common patterns are the 1×1 (left figure), the 1×2 (right figure), and the 2×1.
• The 1X2 means the angle is moving one unit of price for every two units of time.
• The 1X1 is moving one unit of price with one unit of time.
• The 2X1 moves two units of price with one unit of time.

### Draw the patterns:

• The direction would be either downward and to the right from a high point, or upward and to the right from a low point.

### Look for repeat patterns further down the chart:

• This technique is based on the premise that markets are cyclical.

## Gann Angles Provide Support and Resistance

• Uptrending angles provide support.
• Downtrending angles provide the resistance.
• Because the analyst knows where the angle is on the chart, he or she is able to determine whether to buy on support or sell at the resistance.

## Gann Angles Determine Strength and Weakness

• Trading on or slightly above an uptrending/downtrending 1X1 angle means that the market is balanced.
• Trading on or slightly above an uptrending/downtrending 2X1 angle means that the market is in a strong uptrend/downtrend.
• Trading at or near the 1X2 means the trend is not as strong.
• Anything under the 1X1 is in a weak position.

## Gann Angles Can be Used for Timing

• The basic concept is to expect a change in direction when the market has reached an equal unit of time and price up or down (1X1 angle).
• This timing indicator works better on longer-term charts, such as monthly or weekly charts; this is because the daily charts often have too many tops, bottoms, and ranges to analyze.