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

**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.