Stocks & Commodities V17:12 (515-520): Applying Gann Angles To Computer Charts by Brent AstonBASIC TECHNIQUES Applying Gann Angles To Computer Charts Tried and true and far from being discarded, Gann angles are daily tools for some traders. Here’s how to use two of W.D. Gann’s central ideas in today’s computerized environment. T of a chart are totally different things and should not be confused. Squaring a chart is scaling data into uniform proportions, while Gann squares are squares containing a numerical sequence that W.D. Gann used to forecast future swing points. Applying Gann angles is a logical, mathematical method that requires only a few drawing tools to reproduce, or they may be applied to data via a personal computer. Here are two specific methods of preparing and implementing Gann techniques, updating the hand method with the use of software. rader William D. Gann became famous in the early 20th century for his ability to forecast exact price targets in the stock and commodity markets. To arrive at his forecasts, W.D. Gann used a combination of GANN BY HAND methods, ranging from simple counts and angles to Before we examine Gann techniques with the use of correlating natural events. Of course, many securities software, let’s look at the theories behind them. that exist now did not exist then, and volatility is very different from what it was in his time. However, the geometrical relationships that he applied to data appear to work equally well on modern data. Of the work that he passed along, two of perhaps the best known but often misunderstood techniques are Gann angles and the squaring of data on charts. Gann squares and the squaring FIGURE 1: SOYBEANS. This hand-drawn chart of 1948 soybeans depicts W.D. Gann’s basic techniques of drawing trendlines. (Reproduction courtesy of John Wiley & Sons.) by Brent Aston Copyright (c) Technical Analysis Inc. That square ratio is simply expressed as 4x4 (that is. 16 squares = 4x4). one square over for the day. If the close were one point from the high. and one day (or one bar) to the square on the horizontal axis. A perfect square is equal in both width and height. squaring charts by hand can be as simple as drawing a line and putting data on a 1-by-1 grid. it is essential to set up your own chart the way that Gann did so that it is squared. Gann hand-plotted his data onto graph paper that consisted of small squares combined into larger squares containing 16 of the smaller squares. The same ratio of width to height can be expressed as 1x1 or 1-to-1. but not all. indicating one point to the square on the vertical axis. with four equal sides and four right angles. it would be plotted in relationship to the first bar.Stocks & Commodities V17:12 (515-520): Applying Gann Angles To Computer Charts by Brent Aston PATRICK FITZGERALD Squaring: That Gann was fascinated by squares is evident in his work. and that is what I use. and from one square below the close of yesterday to three squares above it. The horizontal space from the day before (if any) should be one square wide (Figure 2). Beginning with one day of data for wheat contracts and a daily range of five points. draw a line on the vertical axis five squares long. . it would be one square lower than the top of the line just drawn. and he used a repeating count of four. Take a look at Figure 1. To draw Gann angles. Gann’s method of squaring tends to confound many would-be practitioners. a close that is one point lower than the previous close Copyright (c) Technical Analysis Inc. If the next bar has a four-point range that closed two points higher than the previous high and had a low one point lower than the close. The third bar plotted on the next day has a range of 3. he squared price and time. When Gann plotted price on his charts. A 1-by1 grid works well on the grains. Some securities require the use of fractions or decimals for the points. This ratio — one point to one day — works well with some securities. However. the data was in a 1-to-1 ratio. resulting in a 2x1 line. Gann angle lines radiate from price data dialog by right-clicking on the screen to bring up a the bottom left corner to the same points. Select the scaling tab. 110. wheat chart from 260 to 270 lines radiating outward from using the intersections of the internal boxes and the external box. degree angle-drawing tool to check the intellectually and instinctively. For ease 1x8 1x4 1x3 1x2 opposite corners of a square of drawing. W. put a 45-degree angle line on the was drawn to the point where the second square from the bottom intersects the large square. Gann angles were work for wheat. 1 x squares (8x8) (Figure 3). that the eye accuracy of the line angles. Then a line was drawn to rectangle (Figure 5). hand-drawn bars and a 45-degree Gann angle. rectangle that is 10 points Gann arrived at the other high by 10 days wide. The Gann process of targeted corners. Finally. Here are three some way. Gann angle FIGURE 3: SQUARE. its to ratios like halves. Open the format Following that series of lines. only a straightstart by selecting the recedge is needed to line up the tangle drawing tool. The screen. the 1x1 line was drawn to the opposite corner.Stocks & Commodities V17:12 (515-520): Applying Gann Angles To Computer Charts by Brent Aston and a high that is one point lower than the previous high. The process is surprisingly similar to squaring Gann angles: Why Gann angles have a charts by hand. Adjust the scale using the first small square in the upper left-hand corner and proceeding user-defined maximum and minimum boxes. You perhaps because the human mind likes to may find it useful to get a protractor or a 45have a sense of order. 1x4. 3x1 and 1x3 are derived in the vertical axis and from the bottom left-hand corner differently. drawn from either the top or If the dimensions are The 1st line 8x1 bottom corner of the large accurate. The 1x1 line 45-degree protractor or a variable-angle Put the tool on the selected angle drafting tool can be used to level and begin drawing a measure other angles. fourths. Use 2x1 ne i l angles by dividing a large full points. and analyzing data. and 1x2. Copyright (c) Technical Analysis Inc. A numbers like 20. begin with round and draw a 1-to-1 angle. Using the wheat contract as an example. Clicking on of the small square in the lower right-hand corner intersects the the rectangle between corners makes it possible to drag it larger square. the data and concludes the squaring process. or your display hardware. Now begins the sometimes frustrating sequence that squares the point that was four squares from the bottom. Full points won’t work for 3 ine 3rd l Excepting the 3x1 and the everything. resulting in an 8x1 line. depending on your monitor. moving. FIGURE 2: TRIAD OF BARS. it is not important large square square to various points where the rectangle is drawn. 1x3. been drawn on a September Specifically. resolution. Now. using a trendline tool. August 2 to August 16 on were drawn in a counterthe horizontal axis (count clockwise direction from that corner to the point where the top only the spaces between bars to reduce confusion). smaller and smaller numbers are squaring charts is simply a matter of getting the data aligned required for accuracy. When adding. plotting. Gann derived nearly all his angles by drawing them on an 8x8 square.D. beginning with the dialog box. Artists certainly know. 4th square up into 64 smaller again for ease of drawing. of course. Here’s how to do it using SuperCharts or TradeStation. . the boxes until the 45-degree line goes exactly from one corner of the rectangle to the opposite corner. Be aware that when using some correlation to the market may be explained software programs. will follow a line and that we perceive the always check the angle by clicking on it to world in a series of relationships that the make sure that it has not been distorted in mind finds familiar. however. and even thirds. not quarter points. As the line gets closer to the collecting. Likewise. Adjust it for a across the top of the square. Line it up with the rectangle’s corner by clicking on the 3x1 line intersected a point a third of the distance from the line and dragging it until it lines up with one corner of the bottom to the top of the large square. where the smaller squares In Figure 4. the rectangle has intersect the larger square. These Gann angle lines resulted in larger or smaller scale by increasing or decreasing the values in the converse angles of 1x8. Adding Gann angles by hand: On a handdrawn chart. resulting in a 4x1 line. This involves some trial and error but may be simplified by increasing or decreasing the SQUARING GANN CHARTS WITH A COMPUTER These days. proportionally. the next line accurately into place. or configuring angled trendlines. computers are by far the preferred method for values with round numbers. or 330. the angles are not always by the fact that humans instinctively respond accurate. but they usually 1 ne 4x 2nd li 1x3 lines. the chart is squared. adjust the vertical scale until the 45-degree line goes perfectly from one corner of the box to the opposite corner.) If done correctly. The line may have to be moved back to the corner(s) after each change in scale. throwing off the lines and angles. It may be advisable to use the magnifying feature in Windows or magnifying software such as Loupe for greater accuracy. the chart should now be squared as in Figures 6 and 7 and ready for Gann angles. Now go back to the chart that you have just squared. At this point. . (When you’re finished. the scale will change. Here is a rectangle that has been set up in preparation to be squared. FIGURE 5: DRAWING A LINE. Once charts are squared. leave the 45-degree angle line on the screen to be used later. note that the rectangle has changed and continues to change shape until the rectangle finally becomes square (Figure 6). When it does. Gann tool 1x1 line overlays hand-placed 1x1 line 45˚ line (1x1) DRAWING GANN ANGLES WITH A COMPUTER Many software programs come with various Gann angle drawing tools. If SuperCharts’ magnifying feature is used.Stocks & Commodities V17:12 (515-520): Applying Gann Angles To Computer Charts by Brent Aston FIGURE 4: SQUARING CHARTS ON A COMPUTER. Copyright (c) Technical Analysis Inc. Have your computer draw a perfect 45-degree line and place it on the corner of your Gann square. 45-degree angles or any other angles can be accurately represented in only one way. It usually won’t go to the opposite corner correctly because your chart has yet to be squared. select the Gann FIGURE 6: ADJUSTING THE SCALE. The Gann fan tool in SuperCharts can be used to turn on all of the various angled Gann angle lines at once or each individually. Using your software’s scale adjustment (format price data in Omega products). Lines parallel and perpendicular to Gann angles may also be added to a squared chart. Once you’ve gotten the right number of points per bar. the pointsper-bar number rarely works on other contracts of the same or different securities.Stocks & Commodities V17:12 (515-520): Applying Gann Angles To Computer Charts by Brent Aston Gann Fan -45 degree angle 1 x 1 Gann 10 x 10 square FIGURE 7: GANN FAN PARALLEL TO THE 45-DEGREE ANGLE. put it on the chart using the text tool. the scale and spacing can be changed without affecting the relative position of the fans. After clicking on any Gann fan. Gann fans can be duplicated by using the tool that allows you to add a parallel drawing object. as shown in Figure 9. it reacted by vibrating around the Gann angles. However. Now. the points per bar number can be adjusted until the lines are parallel (Figure 7). you may drag it to any location on the screen. Increase or decrease this number until the 1x1 Gann fan tool plot is at a 45-degree angle. select only the 1x1 line to start by clearing the checks from all the other Gann angles. the price stayed within the upper 1x4 and 1x3 angles. PRACTICAL APPLICATIONS Having squared a chart and applied Gann angle lines to it. which is a chart of the September Standard & Poor’s 500 index contract. the other Gann angle lines listed in the dialog box FIGURE 8: SEPTEMBER WHEAT AND GANN FAN. the trend has changed. If the price goes up from your chosen pivot. and find a major pivot point. The angle of the Gann line should change when the number is changed. the Gann angle lines should line up at the same points that they did when the chart was still squared. The Gann fan must be set to the appropriate direction — up or down — for your chart. select down/right. Unfortunately. Gann was of the opinion that the 45-degree angle line was the most important line on the chart. He went on to say that when the 45-degree angle line was broken. Once a chart is squared on your computer. Having the number on hand for reference purposes allows you to add more Gann fans and use it for future reference. find the input box next to the points per bar. changing the scale has made it look longer than it is high. you can put on a Gann fan and turn on or off the angles you want displayed. such as pivot points and Gann angle intersections. up/left. a Gann fan angled upward off a previous high helps to define the support and resistance (point A) of a subsequent movement into new highs. In the time/ price Gann lines part of the dialog box. Each time the price got near a Gann angle line. can be turned on as needed. the price continues to follow these lines until market conditions cause the price to break through. the fan must be set to the up/right direction. Copyright (c) Technical Analysis Inc. The color and style of various fans can be altered for clarity. After last year’s pullback in the autumn. Once the scale is adjusted and the 45-degree line is in place. If the 45-degree angle trendline is still on the chart. how is it used? W. In Figure 9. Gann angle lines can begin and extend outward to important swing points where trends change direction. Beginning in the same dialog box. PLACEMENT Gann fans can be started at various points.D. and down/left. Study Figure 10. inside this box is a default number. One or more lines should be seen radiating out from that point. Despite being stretched. fan tool. down/right. Apply the Gann fan to the chart (Figure 8). if the price goes down. having the number can speed up the process of zeroing in on the right angles when putting Gann angles on other charts of the same security. . Although the red rectangle was a square when the chart was originally squared. Often. Next. Once the squaring and setting of the points per bar are complete. Almost everything in this chart is keyed off the angles coming from the peak at the upper left. Some experience using Gann angles may reveal new and interesting relationships in the data. Click on the fan to open the dialog box and click on the line that reads “format selected Gann fan. Strong trends like this can be a high percentage move in price and time. the Gann fan can be aligned confidently. although they will look different because they are effectively being stretched to a different scale. adjust the program’s Gann angle.” then click on the properties tab. Fans can be added in any of the four possible directions — up/right. September wheat declines into the summer but rallies to the Gann fan line as autumn approaches. That is often a sustained move. fibonaccitrader. Gann Treasure Discovered. 3d edition. Not all charts will have a price movement that stops in the exact center like the wheat chart shown in Figure 10. “Gann Swings And Intraday Trading. Does this suggested support forecast an upcoming bottom? Using this example (Figure 10). Further. either by hand or by 17: October. S&C Brent Aston is a private trader. While applying Gann theory by computer may be Kaufman. Thom [1999]. taking only one or two days. no matter if by computer or by hand. For example. Subsequently. The W. The price generally gravitates toward the nearest of intersection points. 7119. Prices move down along a 1x1 angle to point A. Copyright (c) Technical Analysis Inc. CONCLUSION A 1x4 1x3 1x1 FIGURE 9: S&P FUTURES. P.com Marisch. fax 512 443it. it is best to focus on the basic lines such Geometric Traders Institute. Once done. [1998]. Gann angles are not upward. John Wiley & Sons. FL 32086. Suite as the 1x1 angle and look for price action to track and react to 352.J. Does the price vibrate around these Gann angle lines? Was the 45-degree angle important? Did the 45-degree angle define the trend? It appears so. the price will often seem to bounce and move rapidly away from that support or resistance. Hartle. 1835 US 1 South 119. As the Standard & Poor’s futures contract rebounds off historical highs. after three years of downtrend.Stocks & Commodities V17:12 (515-520): Applying Gann Angles To Computer Charts by Brent Aston Once a Gann angle line is crossed. Further. Gann Method Of Trading. Such verification may improve a trader’s odds of success. computer. . the price usually moves in the direction of the next closest line. wheat had room to run.” Finally. Augustine. they can be something of a roadmap. when a Gann angle line is rapidly approached by the price but not crossed. however. Using overbought and oversold indicators. angles drawn equidistantly after the low is in place identify that reaction as the subject to changes in scale. center of the downtrend’s progress.D. Gerald [1990]. some Gann theories can be assessed by examining the results of squaring the wheat chart and placing Gann angles on it. to use computerized Gann angles to their greatest advantage. Krausz. 512 443-5751. Robert [1997]. March. Internet http://www. The New Commodity Trading Systems quicker and simpler in some ways. When applied correctly. or trend indicators and any number of other indicators with Gann angles has intriguing possibilities. the process of squaring charts and adding geometric Technical Analysis of STOCKS & COMMODITIES. but clearly this one did (point A). This is a zone of congestion and slow trending. but in the wide-open spaces during February. the price was going through several closely spaced Gann angle lines from above and below. A W. when the price has been moving down and comes near an intersection. In May and June 1999. Volume Gann angles can be time-consuming. and April. this can happen quickly. However. where they bounce Once charts are squared. Windsor Books. it still takes careful scrutiny And Methods. we might find that the relative strength indicator (RSI) or stochastic indicator is oversold and may suggest a divergence. they are certainly not random. St. A FIGURE 10: SEPTEMBER WHEAT. where the Gann angle lines cross. the wheat price did not cross into the lower right-hand portion of the Gann square. and they show significant areas of support and resistance. showing where and how REFERENCES AND RELATED READING price action will behave in both price and time. Gann lines from previous pivot points provide support and resistance at a variety of locations. If the volatility is great.D.