Gann numbers

Gann numbers - There is no simplistic explanation for Gann numbers, but it basically charts a relationship between price movements and time. Although it is increasingly used in stock trading, there is every chance you could find a reference to it in forex trading too. As you can see from the chart below, Gann numbers are calculated by using angles in charts. This helps in determining the support and resistance areas and could be used to predict the timing of future trend changes.

Gann Fan

Lines of Gann Fan are built at different angles from an important base or peak at the price chart. The trend line of 1х1 was considered by Gann the most important. If the price curve is located above this line, it is the indication of the bull market, if it is below this line it is that of the bear market. Gann thought that the ray of 1x1 is a powerful support line when the trend is ascending, and he considered the breaking this line as an important turn signal. Gann emphasized the following nine basic angles, the angle of 1x1 being the most important of all:

• 1х8 — 82.5 degree
• 1х4 — 75 degree
• 1х3 — 71.25 degree
• 1х2 — 63.75 degree
• 1х1 — 45 degree
• 2х1 — 26.25 degree
• 3х1 — 18.75 degree
• 4х1 — 15 degree
• 8х1 — 7.5 degree

The considered ratios of price and time increments to have corresponding angles of slope in degrees, X and Y axes must have the same scales. It means that a unit interval on X axis (i.e., hour, day, week, month) must correspond with the unit interval on Y axis. The simplest method of chart calibration consists in checking the angle of slope of the ray of 1х1: it must make 45 degrees.

Gann noted that each of the above-listed rays can serve as support or resistance depending on the price trend direction. For example, ray of 1x1 is usually the most important support line when the trend is ascending. If prices fall below 1х1 line, it means the trend turns. According to Gann, prices should then sink down to the next trend line (in this case, it is the ray of 2х1). In other words, if one of rays is broken, the price consolidation should be expected to occur near the next ray.

FOREX SUPPORT AND RESISTANCE

Understanding support and resistance will give you an image to understanding how the market works. This will help you enter and manage your trades to a highly accurate degree with minimal stops and reasonable, reachable targets.

How to draw support and resistance? First you have to learn to identify these levels once you open a chart, draw lines where you can see major support and resistance, especially on the higher time frames, and everything else you learn during your Forex training will fall into place.

Once price break through the resistance, it now becomes a level of support. If it is a key level of resistance that is broken, once price has moved on through it can become major support. It is often possible to enter a trade at an optimal point by simply waiting for price to come back to test that strategic level that was broken.

By using this,rather than chasing price and hastily putting a trade in once the market has started to move in a certain direction, wait for price to pull back to that key level that was broken. Put an entry order in at the level and wait for price to pull you in to the trade.