Gann Angles
Candlefocus EditorGann angles are based on the 45-degree angle of the square of nine, which is Gann's most famous trading tool. This 45-degree angle is known as the 1:1 angle and is used to identify strong and weak trends. They are applied from price bottoms extending upwards or from price tops extending downwards. Other angles Gann used include angles of 2:1, 3:1, 4:1, 8:1, 1:2, 1:3, 1:4, 1:8.
Gann was convinced that the location of prices around the various angles was important and continuously observed patterns within the stock trading environment. He believed that as prices moved back and forth through the 45-degree angle, which was seen by him as the central pivot, it created levels of support and resistance for price movements.
Gann believed that as a result of the exchange of energy between the two markets, prices would gravitate toward the next Gann angle. He further suggested that if a security was trading below a Gann angle, then it would rise to the angle and if it was trading above a Gann angle it would fall to the angle, thus predicting first the direction and then the degree of the price movements. However, he also suggested that price movements were non-linear and that price movements could take the form of an arc rather than a straight line.
In conclusion, Gann angles allow traders to determine future periods of support and resistance, as well as providing signals for potential entry/exit points. Traders can use Gann angles to also assess momentum and identify trends. While Gann angles are useful they require experience and skill to read accurately and properly inform trading decisions. Additionally, traders should not rely solely on Gann angles, as they do not provide exhaustive information regarding potential market movements.