Gann Square Of 9 Indicator
Luz Ignasiak
Gann indicators are normally considered to be a lot more about mathematics and less about charts and technicals. However, Gann indicators have been used quite extensively in identifying opportunities in the stock markets, both at the index level and the stock level. Let us first understand the concept of Gann and the logic behind the Gann indicators.
The above square is called the Gann square or the Gann Master Chart and is the basis of Gann based trading. This is not a random chart but is the number system that is created through concentric squares. See where the number 1 starts right at the centre and then gradually that pattern is followed all the way up to 81 where the 9X9 square ends. While this has been depicted for just 81 squares, you can expand it to 144 squares and so on. Essentially, if you look at the pattern of the consecutive numbers, it forms a spiral all the way from 1 to 81 with each spiral forming concentric squares/circles. The logical movement from 1 to 81 is in a clock-wise fashion.
The Gann Square of 9 is simply a tool that calculates time and price besides calculating the square root of numbers, including the mid points. The Gann Square basically looks for price and time alignments and is often used to forecast prices. Typically, the time alignment is used for swing trading, while the price alignment is used for forecasting prices and also for identifying supports and resistances of a stock.
In the entire Gann Square, it is the numbers on the cross and the diagonals that are really important from a forecasting point of view. For example, since the Gann Square is a perfect square it can also be represented as a circle that perfectly circumscribes the four corners of a square. Once that is done, the entire Gann Square is broken up into 8 equal parts of 45 degrees each. Since the circle has an angle of 360 degrees, each sector of 45 degrees will constitute one angle for the Gann Analysis. From a price and time forecasting point of view, the two most important lines are the Cardinal Cross and the Ordinal Cross. Let us focus on this Cardinal Cross and the Ordinal Cross more closely.
In the above chart, the blue lines represent the Cardinal Cross and the yellow lines represent the Ordinal Cross. They are next in importance and represent the important supports and resistance levels for stocks. Effectively, the numbers along the blue line (cardinal cross) represent the strong supports and resistances, while the numbers along the yellow line (ordinal cross) represent the strong supports, which are liable to be breached.
Gann trading has never been proven to be scientifically workable but the patterns and the harmony in numbers that Gann has spoken about do have a lot of resonance not only in mathematics but also in most sciences ranging from trading, architecture, design, etc.
If the high price or the low price of a stock or index is made on Friday (last trading of the week), the next week is likely to see higher highs and lower lows, respectively, through a stock trading app.
Four weeks (1 month approximately) is a good indicator of reliable breach. If a four week high is breached or if a four week low is breached then indications are of more highs or more lows, respectively.
There are certain basic ratios that are held. For example, if the price trend is up for 9 days at a stretch then it is likely to correct for 5 days at a stretch (Ratio of 9:5). Double bottoms and triple bottoms on a monthly chart after a minimum gap of 6 months is an indication of a fresh uptrend.
In terms of application, Gann theory can be used to trace and interpret 3 kinds of distinct patterns. These include Time Study, Price Study and Pattern Study. While the applicability of the Gann approach by itself is doubtful, it is a very important step in understanding patterns in trading.
indiainfoline is part of the IIFL Group, a leading financial services player and a diversified NBFC. The site provides comprehensive and real time information on Indian corporates, sectors, financial markets and economy. On the site we feature industry and political leaders, entrepreneurs, and trend setters. The research, personal finance and market tutorial sections are widely followed by students, academia, corporates and investors among others.
Technical indicators are a quality alternative to manual chart analysis. They can make complex calculations and give ready-made signals for placing trades. One of the most effective and qualitative tools is indicators, based on the theory of Gann. They show important price levels, trend reversal points, and trend direction and give a lot of other useful information. With their help, you can find the most profitable points for setting Stop Loss and Take Profit.
William Gann has developed several basic indicators that apply a linear-horizontal or fan pattern to a chart. This markup can be used to mark important price levels and market reversal points. Many other tools and calculators have been subsequently created based on the standard Gann indicators.
Gann Line is a fundamental component of other indicators based on the theory. Its main function is to determine the direction of the long-term chart trend. There are two rules for determining the main trend:
This tool has some similarities with Simple Moving Average. The only difference is that a MA is a dynamic broken line, changing as the price moves, while Gunn's line is static and is always plotted at a 45-degree angle.
The static line divides the charted plane into two equal coordinate axes, the first of which denotes time and the second denotes price. When the equilibrium between these two axes is broken, there is a change in the trend. When the equilibrium is restored, the market situation also stabilizes.
To add the Gann Line to your chart, go to the "Insert" category in your trading terminal and select the "Gann" section. In the list that opens, find the desired indicator and drag it onto the chart by left-clicking on the name.
The tool looks like a fan with the rays coming from one point. There are many variations of this pattern. For example, the fan's base point may be the minimum or the maximum of the current price trend.
The most important here is the central ray, which is located at an angle of 45 degrees. It divides the whole figure into two equal parts. Otherwise, it is also called the long-term trend line. It is on it you can determine the main direction of the price of the current chart. This is done as follows:
Additional rays above and below the main trend line play the role of resistance/support levels and trend lines. If we look at the chart carefully, we can see that the price really "hangs" near these lines for a while, and then breaks out the level or moves away from it.
To build the Gann Angles, it is first necessary to find 2 points on the chart - the minimum and maximum, which stand out clearly from the rest of the peaks. The trend line should be drawn by them. After that one should open the "Insert" menu and use it to add the Gann Fan tool to the chart.
The fan is drawn on the chart so that its base coincides with the minimum (for an uptrend) or maximum (for a downtrend) point of the chart. The trend line (angle of 45 degrees) must coincide with the trend line. During the drawing small errors are allowed. For example, candlestick shadows may be slightly out of levels.
Gann angles are used in trading according to different strategies. Most often they are used when trading along the trend, breakout trading from important price levels, and as a reference point for setting Stop Loss and Take Profit.
The Grid helps to determine the market trend direction and find the points of supposed price reversal. The upper and lower borders of the grid cells function as resistance and support levels. The side edges of cells can be used as trend lines. If you examine the chart carefully, you can see that the price periodically bounces or breaks out the horizontal cell borders and move at an incline according to the side grid borders.
The direction of the crossover of the grid by the price line corresponds to the direction of the trend. For example, if the chart has crossed the upper edge of the cell, it is a sign of an uptrend. And vice versa, when the chart crosses the lower boundary, it can be considered a sign of a downward trend. If the graph has broken out the line plotted at an angle of 45 degrees, it is a sign of an approaching trend reversal or price correction.
The principle of constructing the grid is largely similar to that of other Gann indicators. You also need to determine the minimum and maximum points, and then correctly apply the grid to the working space. There are several ways to build a grid. Let us consider the simplest and most common one:
Hold down the left mouse button and drag the tool to the workspace so that its first point (main point) coincides with the price extremum. If the market has an uptrend, you should focus on the chart minimum. In the case of a downtrend, the maximum of the chart is the reference point for setting the first point.
The first point plays the most important role. Exactly it determines the size of the grid cells and, therefore, the trading signals that the indicator will give. The greater the distance between two opposite extrema of the chart - the larger the grid cells are.
The Gann Grid can be applied in different ways. The main way is to use the cell borders as support and resistance levels. The more often the price has departed from some border - the stronger this level is. The direction of the side cell borders will show the market trend.
Observing the price behavior inside the grid diamond, you can assess the market condition, find entry and exit points, set the most profitable Stop Losses, and even predict the approximate profit. This tool can single-handedly replace many other indicators and become the basis of a high-quality strategy.
Many traders combine the Grid with Angles. The points of crossover of the lines of the two tools can indicate strong levels and important trend reversal points. Using these two indicators in combination makes trading signals as reliable as possible and significantly reduces the percentage of losing trades.
c80f0f1006