W.D. Gann Market Analysis Techniques
Using Natural Law and Geometry to Predict Market Changes in Trend
Mar 8, 2009
William Delbert Gann (1878 – 1955) was born in the small town of Lufkin, Texas, son of a cotton farmer named Sam Houston Gann. William is credited for the discovery of some of the most unique and accurate methods of technical analysis of financial markets, those involving price, time and geometry.
Gann learnt at an early age that trading markets take hard work, discipline, and at times a resolute mind, but the rewards could be tremendous – complete independence with almost unlimited wealth potential. He was reported to have taken more than 50 million dollars in profits out of the markets during his life (about $600 million in today's money).
Gann’s Publishing
Gann worked very hard all his life to discover the techniques for his personal trading and which he wrote about in his 11 courses in stock market and commodities trading. Individual courses sold for between $1,500 and $5,000 in the 1930s when the dollar was worth some 12 times its current value. Gann thought that commodities trading was more profitable than trading stocks.
It was no secret that Gann was an astrologer and freemason. Gann offered books for sale to students interested in understanding his natural trading techniques.
Gann’s Trading Record
Figure 1 shows a newspaper headline with one of Gann's forecasts. While in his 30s, he traded in the presence of a William Gilley, a "respected inspector". In the most memorable series of recorded trades, Gann made 286 trades over a period of 25 market days, of which 264 were profitable, for a 92% profitability. During the month, he multiplied his margin by 1000% (as documented in ref 1).
Gann’s Technical Ideas
In his trading manual available online, Bryce Gilmore describes his own brand of geometrical concepts of markets in price and time. He also outlines a number of technical analyses founded by W.D. Gann.
- Time by Degrees. Gann often mentioned the square of 360 and the divisions and multiples of 360 in his work. He was referring to the degrees in the circle. Counting time by degrees (rather than days) keeps seasonal time periods uniform, and therefore a more fundamental time quantity to use than days.
- Gann Swing Charts. A swing chart is a simple indicator to keep the trader aware of the short term trend. Gann recommended using either a 2 day or 3 day swing chart.
- Squaring Price into Time & Time into Price. This is a technique of analysis for determining market tops and bottoms, which often occur at the same numerical units. For example, a market bottom occurring at 1148 degrees in time, after falling 1148 cents in price from the last top.
- Gann Angles & Gann Zero Angles. Marking special angles on a chart is another technique for squaring price to time.
- Gann Price Retracement Levels of a Prior Range. This allows the trader to geometrically relate price range to another price range. Gann taught that ratio retracements of prior price ranges were very important for determining trend change. The 50% level was most important, but other relationships applied, such as the golden ratio.
Gann is also credited for his Gann Wheel, what most people think of as the Square of Nine, sometimes called a "Square Root Calculator" or a device that "Squares the Circle."
Gann's Relevance Today
W.D. Gann's use of Natural Law and geometric proportions based on the circle, square, and triangle are as effective today in the stock and commodities markets as they were while he was alive.
The reader may be interested in a related article. Another market technician who investigated the rhythms of the market and understood that markets were affected by natural law was R.N. Elliott, as described by his Wave Principle.
References:
1. “W.D. Gann Stock Market Trading Courses”, Edited by Bradley F. Cowan. Published by Stock Market Geometry, San Diego, CA. 1998.
2. “W.D. Gann Analysis Techniques”, in Dynamic Time & Price Analysis of Market Trends, Chapter 10. Bryce Gilmore. Helensvale, Australia. 1999.
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