Day Trading with the Gann Square

Day Trading with the Gann Square
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As your day trading skills improve, you’ll want to familiarize yourself with and use more sophisticated trading tools. That’s where the Gann square comes in. You’ll need a high comfort level with charting before immersing yourself in the Gann system. Once you’ve educated yourself, you’ll find day trading with the Gann square to be an effective new tool in your trading arsenal.

History of the Gann Square

The Gann square has a long history, as it was developed by trader William Delbert Gann back in the 1930s. Gann, a Texas native, was a widely read, religious man who became a 33rd degree Freemason of the Scottish Rite Order, an interest that may have introduced him to ancient mathematic principles, including Sacred Geometry. He was also well-acquainted with the classical cultures of Egypt and Rome. When using the Gann system, you are delving back into the “technical indicators” of antiquity, now available via computer. Gann’s masterwork, The Basis of My Forecasting Method, was published in 1935. He describes his methods as “allegories,” and it’s safe to say the Gann system is not the most straightforward. It’s also safe to say that the trader will not encounter a stock market theorist quite as mystical as the legendary W.D. Gann.

How the Gann System Works

The Gann system measures important elements, including time, price and pattern. The Gann system has an esoteric quality, in that past, present, and future all exist simultaneously on a Gann angle. Analysis in any type of market requires the day trader to consider the market’s past performance, its current position as to its top and bottom, and forecasting future price movement by using that information.

The Gann system also focuses on geometric elements, especially square, triangles and circles, with the former considered the most compelling aspect. The circle is used to connect the square’s four corners, bringing the angles into sharper focus. In essence, it “squares the circle.”

Gann Angles

Gann angles form a straight line on a price chart, providing a fixed point between time and price. In his system, the primary angle is the line representing 1 price unit for 1 time unit. It’s known as the 1×1, or the 45- degree angle.

When following this primary angle, a stock’s value increases by 1 point per day. Other critical Gann angles are the 2×1, which move two points daily, and angles with similar criteria – 3×1, 4×1, 8×1, and 16×1. While the values increase, it’s important to note corresponding value decreasing angles. A Gann fan occurs when various angles are drawn in a group. This is generally drawn from the price’s top or bottom.

Gann Square Types

The essential Gann square is the square of 9, also known as the square root calculator. It involves a spiral, more often referred to as a wheel, of numbers. Gann didn’t invent the square of 9 for day trading purposes. In his wide travels, he found it inscribed on both the Great Pyramid of Egypt and an Indian temple. There’s an astrological foundation to the square of 9, as the ancient inscriptions, he found referred specifically to the summer solstice, on June 22. In Gann trading, this date represents a potential shift in direction or trend. Just as everyone has their own birthday – and the date and time supposedly foretell their future path – so does every stock and/or market has their own “vibration” reacting to the square of 9. In fact, if you’re familiar with astrological charting, you may have an easier time picking up Gann system methodology. Symbols such as the Cardinal Cross and the Ordinal Cross, which correspond to some astrological charting figures, also appear in the Gann system. It is on these crosses that support and resistance levels are determined. The Gann’s square of 9 even takes planetary movements into consideration, so think of it as astrological charting for a particular security. If your only knowledge of astrology is that of the basic sun signs, it’s easy to scoff at this methodology. If you’re more aware of the mathematical calculations involved in this ancient practice, you won’t dismiss it. Gann’s method is a type of forecasting, based on these trends. Not only does Gann forecast support and resistance levels, but also the timing of the breakout.

The Gann square revolves around the square root of numbers. Thus, the numbers to look at in the Gann square are those representing 0 to 360 degrees, or 2, 11, 28, 53 and so on. Also important are those numbers representing 45 degrees, or 3, 13, 31, 57, etc.; the numbers representing 90 degrees, or 4, 15, 31, 61, etc. and numbers representing 180 degrees, or 6,9, 40, 69, etc.

While trading with the Gann square has stood the test of time, it’s not foolproof. You can certainly lose money at times by using the square of 9, but even with that caveat, the system retains remarkable accuracy.

Using the Gann System

There’s no way to simplify the Gann system. It requires serious study on the part of the day trader. Once mastered, the Gann system is most useful for swing trading, a longer-term type of trading that usually requires several days to come to its intended fruition. When day trading with the Gann system, traders don’t have to concentrate on the system’s time alignment but use its support and resistance levels to make their trades. One strategy involves buying at a certain price and making your exit based on an important Gann value. Another advantage of the Gann system is that it’s useful for trading any type of security, from stocks to commodities.

The Sure Trader Advantage

SureTrader’s state-of-the-art platform offers top technical analysis tools, including the Gann system, for clients. While the Gann system is geared toward the more experienced day trader, we have top technical and charting tools for all trading levels. Along with 6:1 leverage, low fees and low minimum balance, these technical tools are just another part of the SureTrader advantage.

Reference:

How to Use the Gann System when Day Trading

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