Basics of Gann Analysis
his calculations and geometrical annotations. Modern Gann practitioners tend to use
significant peaks and troughs in lieu of historical peaks and troughs in the commodity
markets, as much trading today is carried out on lower timeframes and over shorter
time horizons. Nevertheless, firm proponents of Gann methods will insist that only
historically significant prices should be employed usually based on the weekly charts.squaring of price and range and the
Cycle Connection
The phrase squaring of price is unique to Gann analysis. It refers to the forecast-
ing of potential peaks and troughs in the market based on a carefully selected
price‐time scale, or trend rate. Gann was seeking to graphically represent the bal-
ance between price and time on the charts and therefore had to select a chart scale
where equal units of price excursion tend to occur over equal units or intervals of
time. If drawn correctly, this would ideally represent that 45‐degree or 1×1 line
on the charts, an indication that price is moving at a linear rate with respect to
time. If price were to move at a greater rate than time, price would be seen to rise
above the 45‐degree line in an uptrend, and conversely will be below the negative
45‐degree line (315 degree line) in a downtrend. Therefore in order to correctly
draw Gann charts, the scale or trend rate must first be determined. See Figure 19.1.
Once the scale is determined, an uptrending 45‐degree line may be drawn
from a significant trough and a downtrending 45‐degree line may be drawn from
a significant peak.
Assume that we have already determined the scale or average trend rate that best
describes the balance between price and time along the 1×1 line. Gann believed that
once price traces out the complete range, referred to as the squaring of the range that
is represented by equal price excursion and equal time intervals, the trader shouldfiGure 19.1 The 1×1 (45‐Degree) Line of Balance between Price and Time.