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GANN Theory Explained

WILLIAM DELBERT GANN (1878 – 1955)

Gann’s life story is very colorful and compelling. Born in Texas in farmers family, he started trading when he was 24 (1902).

It is a known fact (mainly through his books) that he was a religious man but also interested in science. His rich knowledge of ancient mathematics as well as Greek and Egyptian cultures was most likely acquired due to the fact he was a Freemason of the Scottish Rite Order.

Gann developed many tools such as Gann angles, Square of 9, Hexagon, Circle of 360. His analysis are based on ancient mathematics, astrology, astronomy and geometry. Very wide range of methods which in my opinion explains why the gap between the critics who admire his work, and the ones that are strongly against it, is wide.

EARLY PREDICTIONS

He is famous for many but probably one of the most distinguishing ones is during the World War I, when Gann predicted the abdication of the Kaiser on November 9th, 1918 which was the end of the war.

According to many he also forecasted the Japanese attack on Pearl Harbor which started the air war between the two countries, in his book from 1927 “Tunnel Through The Air”. Right or wrong I will leave it to you to judge.

When it comes to financial forecasts he predicted the continuation of the rally in 1929 due to speculations and that the market will reach new high – until early April.

Gann published his daily forecast “The Supply and Demand Letter” where he would analyze commodities and stocks. In a while when his newsletter picked up more and more readers, he issued several books. “Truth” which was featured in the Wall Street Journal turns out to be one of his best works. This is when he released to the public his trading methods, knows as the Gann Studies.

GANN STUDIES A.K.A. GANN THEORY

The GANN theory is basically the correlation between patterns, price and time and how all three relate to the market. According to GANN those are the 3 most valuable aspects of trading that could best describe and predict the future movements of the markets.

Any of these 3 elements could provide a signal on its own but according to the GANN theory if you are patient enough, to wait for all three to “tell” you the same thing, your odds will tremendously increase. This is exactly what happened in the early years of Gann’s trading career when he found “the market time factor”. The year was 1908, Gann opened two accounts ($300 and $150) to test out his new findings and strategy. In only one month he managed to turn the $150 into $12,000 and the $300 brought him a profit of $25,000 in a quarter. These achievements gained him the respect of Wall Street, making him one of the pioneers of technical analysis as well as one of the best analysts!

Fascinating, isn’t it?

MATHEMATICS IN GANN THEORY

As it was already mentioned above, Gann had a huge passion for numbers and mathematics. He applied his knowledge towards finding patterns in the market, and judging by his results, he found the correlation. The square of numbers for example, plays a significant role in his trading and analysis. The numbers, that he believed are really important are : 16, 25, 36, 49, 64, 121 and 144. As per his understanding, the market would move in patterns that was strongly correlated to this numbers and their squares. For example a specific rally might find strong resistance 64 cents or 64 days from the bottom.

KEY NUMBERS IN GANN THEORY

Some of the numbers that Gann would use in his analysis: 12 (it has biblical and astrological meaning – 12 disciples, 12 houses of the zodiac), 3.5, 144 and 365.

BREAKING DOWN GANN THEORY

Looking back at his way of thinking, I can only admire the way his brain worked. He managed to figure out 100 years ago, that the market is a complex creature and we can’t and shouldn’t try to predict it, looking at it from only one angle. He generalized the market as a whole, defined the main factors that are making it move, and tried to look at each factor independently. Once all three factors agreed, he would make his move. Brilliant!

Price study– This uses support and resistance lines, pivot points and angles.
Time study – This looks at historically reoccurring dates, derived by natural and social means.
Pattern study – This looks at market swings using trendlines and reversal patterns.

It is like driving a car. Weather is factor 1, proper tiers for the season is factor 2, driving after you have been drinking is factor 3. So if it winter, and temperature is -15, road is all covered in ice, you better wait until you get your winter tires and until you sober up. If you are not patient enough, you might and will probably end up on the side of the road after a few turns. To make this journey successful you should have all three factors lined up to achieve best results.

Best is to wait a bit until sun comes up, ice melts, you have your winter tires setup, you are sober and well relaxed after a good sleep as opposed to driving drunk, with summer tires in the middle of the night. Same goes in trading, if you have the patience, you might turn pretty much the same situation, from total disaster into huge profits.

GANN ANGLES (VS TREND LINES)

Of all of W.D. Gann’s trading techniques available, drawing angles to trade and forecast is probably the most popular analysis tool used by traders. Many traders still draw them on charts manually and even more use computerized technical analysis packages to place them on screens. Because of the relative ease traders today have at placing Gann angles on charts, many traders do not feel the need to actually explore when, how and why to use them. These angles are often compared to trendlines, but many people are unaware that they are not the same thing. (To learn about trendlines, see Track Stock Prices With Trendlines.)

A Gann angle is a diagonal line that moves at a uniform rate of speed. A trendline is created by connecting bottoms to bottoms in the case of an uptrend and tops to tops in the case of a downtrend. The benefit of drawing a Gann angle compared to a trendline is that it moves at a uniform rate of speed. This allows the analyst to forecast where the price is going to be on a particular date in the future. This is not to say that a Gann angle always predicts where the market will be, but the analyst will know where the Gann angle will be, which will help gauge the strength and direction of the trend. A trendline, on the other hand, does have some predictive value, but because of the constant adjustments that usually take place, it’s unreliable for making long-term forecasts.

Constructing Gann Angles
Before we begin, it is important to realize that this form of analysis – like most forms of technical analysis – is not set in stone but constructed out of empirical methods. Without further ado, here is the process used to construct a Gann angle:

Determine the time units – This is one of the empirical processes. One common way to determine a time unit is to study the stock’s chart and take note of distances in which price movements occur. Then, simply put the angles to the test and determine their accuracy. Most people use intermediate-term (such as one to three-month) charts for this as opposed to long-term (multi-year) or short-term (one to seven-day) charts. This is because, in most cases, the intermediate-term charts produce the optimal amount of patterns.
Determine the high or low from which to draw the Gann lines – This is the second empirical process, and the most common way to accomplish it is to use other forms of technical analysis–such as Fibonacci levels or pivot points. Gann himself, however, used what he called “vibrations” or “price swings.” He determined these by analyzing charts using mathematical theories like Fibonacci.
Determine which pattern to use – The two most common patterns are the 1×1 (left figure above), the 1×2 (right figure above), and the 2×1. These are simply variations in the slope of the line. For example, the 1×2 is half the slope of the 1×1. The numbers simply refer to the number of units.
Draw the patterns – The direction would be either downward and to the right from a high point, or upward and to the right from a low point.
Look for repeat patterns further down the chart – Remember this technique is based on the premise that markets are cyclical.
Again, this requires some fine-tuning with experience in order to perfect. Because of this, the results will vary from person to person. Some people, like Gann, will experience extraordinary success, while others – who don’t use such refined techniques – will experience sub-par returns. However, if the system is followed and sufficient research is put into finding the optimal requirements, above-average returns should be attainable. But remember, technical analysis is an odds game -add more technical indicators to increase your chances of a successful trade.

Using Gann Angles
Gann angles are most commonly used as support and resistance lines. But many studies have support and resistance lines. What makes this one so important? Well, Gann angles let you add a new dimension to these important levels – they can be diagonal.

Here you can see how Gann angles can be used to form support and resistance levels. Diagonal trend lines are commonly used to determine times to add to existing long positions, to determine new lows and highs (by finding significant breaks of the trend line), and to help discern the overall trend.

Sources and references: Wikipedia, Investopedia, StockCharts

Link:https://vladimirribakov.com/gann-theory-underappreciated-genius-behind/

Forex Bank Trading Secrets

Forex bank trading secrets revealed!

The secret currency technique that banks use to make billions

The currency markets are the backbone of global economy and the banks are riding it like a bucking bronco. The banks dont make their money from speculating or trading the currency markets they make their money from being the currency market. What I mean by the banks is being the market is that they will make money whether you win or lose on a trade. This happens because the banks make money from the pip spreads on the front end and are always in a hedged position when a currency transaction occurs. So it does not matter what the market ultimately the banks wins regardless. Well if the banks hedge there position to protect them selves, why dont we as traders do the same.

Everyone has heard the term for every action there is a reaction, and every negative has a positive, and what goes up must come down; you get the picture. Well the same applies for the currency markets we refer to it as hedging using negative correlations, or simply one pair goes up when the other pair goes down and vice versa. It is very important for any one involved in the forex market to understand this basic concept of risk management. This technique is used all the time by banks, and especially major international corporations that do business in other currency besides the dollar. This is simply a logical choice when you are trading multiple currency pairs to ensure that your trading account does not get depleted very rapidly.

Negative as well as positive correlations exist between all currency pairs and are susceptible to change based on the a variety of factors, and of course monetary policy in that country being one of if not the biggest influence. A trader should check the currency pair correlation often to ensure that there has not been any major changes in the way currency pairs are affecting each other. This can be done in any number of ways; most forex trading software packages include the ability to view historical and daily currency prices which will allow you to determine a correlation between currency pairs. In closing I highly recommend if you trade currency you become familiar with Correlation Coefficient between currencies pairs so hedge your positions and limit your market exposure for maximum profit.

Bearish Engulfing Pattern Candlesticks 

How to find a really strong bearish engulfing pattern
In our previous articles, we discussed reversal candlestick patterns. You might remember a bearish engulfing pattern, in which the second candle engulfs the whole body of the first candlestick. This patterns form on the bullish market and signal the upcoming price reversal to the downside.

In this article, we will learn how to recognize strong bearish engulfing patterns (which indicate real short trade setups) and single them out from the weaker ones. There are some features of the strong engulfing patterns:

• The second candlestick is the most important part of the pattern. It should be long enough to engulf the first candle completely. If the first candlestick is not very big, you should pay attention to the range of the previous candlesticks (at least 2 previous ones); their bodies and wicks should be engulfed completely by the candlestick you are focusing on (the second one). If this requirement is satisfied, the bearish engulfing pattern is rather strong. But to make sure that you chose a real engulfing pattern, you should meet two other requirements.

• The first and second candlesticks should go beyond the upper boundary of the Bollinger band indicator.

• The bearish engulfing pattern shouldn’t be formed at the very peak of the long-term uptrend because the formation of strong engulfing pattern could signify the bulls’ exhaustion, not a trend reversal.

Once your pattern satisfies all these requirements, you may be sure that you found a really strong reversal pattern that can be used as a short trade setup.

Forex Traps You Must Avoid

A bull trap is a real pain in the neck as it causes substantial financial losses leaving the market participants penniless. The bull traps occur when prices start heading upwards, but then, out of nowhere, reverse and decline. This counter price move produces a trap and often leads to substantial sell-offs. You may face with such traps in a major resistance zone.
So, let us straighten out, how to predict the occurrence such traps; how to recognize them at the earliest stage of their formation. Here is how. Imagine, there is an uptrend; then, you notice the price running into resistance level and breaking it; it doesn’t stop there and continues to move higher. Then, a few candlesticks later, the rally phases out, and prices start falling. Those market participants who had open long positions (the bulls) as they notice a breakout of the resistance now feeling nervous as their stop losses are getting hit. So, they got trapped.
Common bull trap chart pattern

A bull candlestick breaks and closes above the resistance level, but the next 2 bars are bearish. The second candlestick in the pattern resembles a bearish pin bar type of candlestick.


Another version of bull trap chart pattern

A bull trap candlestick breaks the resistance and goes higher, but then closes below the resistance level forming a bearish candlestick.


Finding bull trap chart patterns as well as key resistance zones can be really difficult, especially for novice traders. Sometimes you can be deceived by the market. When you think that you found a bull trap, it will eventually turn out to be a true breakout to the upside. So, to find a strong resistance level you should switch to the weekly or the daily timeframes (any higher timeframes) and look at the charts. Is there a peak that actually stands out from the trading channel? If there is a peak, this is your resistance level (don’t be too lazy to do this to confirm your resistance levels).
Trading strategy

Now when you learned how to find the bull traps, we would like to suggest you several trading strategies

“Key ingredients”

Currency pairs – any

Timeframes – hourly charts are preferable, but you may use daily, H4 as well.

Background – learn to recognize bearish reversal candlesticks, trading experience of trading on multiple timeframes

Technical tools – not required


“Rules of the game”

1. When you see the price advancing to the resistance level, you should wait and see what happens when it reaches it;

2. After the price reached the resistance zone, and the formation of the bull trap chart pattern has started you may place a sell stop pending order at least 2 pips below the low of the candle that broke the resistance zone;

3. Then, place a stop loss at least 2 pips above the high of this candlestick;

4. Take profit should be placed at the previous swing low price level.

Source Fxbazooka

Forex Three Candle Strategy Trading

Powder and shot from FX Bazooka:

“The third candle” strategy

As you know, three is a magic number, so there is a forex strategy named “The third candle” that proved to be rather efficient. We suggest you learn it and add to your ammunition to earn more money while trading. The strategy can be applied to any currency pair on any timeframe. In order to use it you should plot stochastic indicator (5, 3, 3) on your technical  chart.

How to use it

1. Select the first candle. Its maximum and minimum should be located higher than that of the previous candle. The color of the previous candlestick does not matter.

2. Wait until the second candle closes in the red zone, the closing price of the previous two candles should be lower. If the second candle opens above the closing price of the first candlestick, the bearish signal is particularly strong.

3. Open a short position at the opening of the third candle. The signal must be confirmed by Stochastic indicator.

4. If the bodies of the first and second candles are very small – you shouldn’t enter the market, because quotes failed to get momentum and bears are losing their strength.

5. Stop loss should be placed a few pips above the high of the first candle.

6. Take-profit is usually plotted at the close of the third candle.

7. If you set a take-profit target at a certain mark, but the price is moving sideways, it is advisable to close the position at the fifth candle once the order is open.
And one more thing to bear in mind: don’t use this strategy in a highly volatile period of trading.

Best Forex Top 6 Japanese Candlesticks Reversal Strategies

Eastern wisdom gained iconic status in Western countries. Some people addressed to Eastern thinkers in order to purge themselves from sins and deepen their spirituality, while others learnt how to make money. That’s the case of Japanese candle chart analysis now used internationally by traders. One of the main advantages of using candle charts is that they provide you with early indications of market reversals. To be able to recognize these trading signals, you should memorize the main candlestick patterns.
Harami and Engulfing candlestick
Let’s refer to my favorite reversal pattern – Harami. From old Japanese “harami” means pregnant. The bigger candlestick is the mother, and the smaller one is the baby. The body of the baby must lie within the body of its mother.

Their position tells us that the market has come to a muted reversal. You may ask: “Ok, and how do we trade it?” In a bull trend, we should use the bullish Harami to define the end of the ascending trend. In a bear trend, you have to use the bearish Harami to designate the end of the bullish retracement.
The next popular trend is called engulfing candlestick. It is the opposite of Harami pattern flipped horizontally. The body of the second candle entirely engulfs the body of the first. The engulfing candlestick is a reversal of a downward trend; it demonstrates how the sellers were overpowered by the buyers.
Trading signals. In case of a bull trend, you should buy above the bullish engulfing pattern for bullish continuation. If there is bear trend, sell below the bearish engulfing pattern for bearish continuation.
Hammer and Hanging Man candlesticks
Well, let me put it bluntly, these two patterns look exactly the same. Their body is located near the top of the candlestick, and their shadow is much longer than their body. The difference between the hammer and the hanging man is following: the hammer pattern can be identified at the very end of the downward trend line (it is a strong bullish signal), while the hanging man appears at the end of a bull run (roughly speaking, the suffocation of the hanging man signifies the beginning of the bearish trend).


Trading signals. If there is a downward trend, we should buy above the hammer pattern for a reversal play. In case of a bullish trend, we should sell below the Hanging Man pattern for a reversal play as soon as the bears consolidate their positions.
Piercing Line and Dark Cloud Cover
The first candle of the Piercing line pattern is bearish, while the second one is bullish. It opens below the wick of the first candlestick and closes above the 50% of the first candle’s body. Both bodies are long enough.

The Dark cloud cover is a bearish version of the Piercing line. The first candlestick is bullish. The second one opens above the higher ending of the wick of the first candlestick and closes below the mid-point of the first candlestick.
2. Inverted Hammer and Shooting star.
The Inverted hammer has the same shape as the Shooting star. But they designate the beginning of two different trends. When an Inverted Hammer is found at the end of a downtrend, a Shooting star is placed at the end of the uptrend.

Trading signals. In a downtrend, you should buy above the Inverted Hammer pattern for a reversal play once “bullies” win back their lost position and consolidate them. And in a bull trend, it’s better to sell below the Shooting star pattern for a reversal play.
Morning and Evening Stars

These ones have three bars. A Morning star consists of a long bearish candlestick, a candle below it (no matter which one, it could bearish or bullish one) and a bullish candlestick that closes within the body of the first candlestick of the same pattern.


An evening star consists of a long bullish candlestick, a star above it (either bullish or bearish) and a bearish candlestick closing within the body of the first candlestick.
Trading signals are following: buy above the last candlestick of Morning star three-bar pattern and sell below the las bar of the Evening start formation.
Three White Soldiers and Three Black Crowns

It’s a sort of an ascending ladder, each candlestick embodies a staircase. All three part of this pattern have almost the same size with a little deviation. After we pass three staircases, we may be sure that the bullish trend is growing in strength.


The Three Black Crows pattern reminds a descending ladder. Each of the three candlesticks in this pattern should open within the previous candle body and close near its ending. If three crows flew in the “window” (appear on the graph), the bearish trend is on the lookout.
Trading signals: you should buy above the Three White Soldiers pattern and sell below the Three Black Crowns.

Source : https://fxbazooka.com/analytics/10489

Forex Pivot Point Indicator Tips

How is pivot point calculated?
Pivot Point is a technical indicator calculated as the average of the high, low and closing prices from the previous trading period. This central pivot point is used to calculate further support and resistance levels. You can see the formulas below:
Pivot Point = (Previous High + Previous Low + Previous Close) / 3
Resistance Level 1 = (2 * Pivot Point) – Previous Low

Support Level 1 = (2 * Pivot Point) – Previous High

Resistance Level 2 = (Pivot Point – Support Level 1) + Resistance Level 1

Support Level 2 = Pivot Point – (Resistance Level 1 – Support Level 1)

Resistance Level 3 = (Pivot Point – Support Level 2) + Resistance Level 2

Support Level 3 = Pivot Point – (Resistance Level 2 – Support Level 2)
In MT4 the calculation of these levels is automatic, you just need to download special indicator.
How to trade using pivot point levels?
If the prices trade above the pivot point, the sentiment is bullish, while if the pair is below the pivot point, the sentiment is bearish.
Pivot Point is also used to determine entry and exit levels. If the price is below the pivot point, downward movement is expected to continue, so take profit order levels should be placed at pivot support levels. If the price is above the pivot point, upward movement is expected to continue, so take profit order levels should be placed at pivot resistance levels.
If the market shows strong directional movement, pivot point is used as an entry level. If the market is ranging, trade on the recoil from the first support/resistance level.
Where to download Pivot Point indicator?
You can download Pivot Points Multi-timeframe indicator here. The indicator provides a choice of several timeframes to calculate pivot points. Daily and weekly pivots are most popular on Forex.
How to install:
– Download the indicator file.
– Open MT4.
– Go to File – Open Data Folder – MQL4 – Indicators.
– Copy the file that you downloaded and paste in the folder mentioned above.
– Restart MT4 and apply this indicator on any timeframe (Insert – Indicators – Custom – Pivot Points Multi-timeframe).
When customizing the indicator choose the timeframe you want to use for pivot point calculation.

Top Five Mouth Watering Forex Resources

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I have searched heavily through this gigantic internet planet and can list for you the best five forex websites and you will never go again searching for more information about the forex world.

Really these forex websites have enormous exceptionally valuable information run by REAL traders with successful track records.

One piece of advice-once you get to know these websites you will be able to make very good decisions in your forex trading business and will increase your confidence level by ten fold.

So here they are in no particular order as different sites may suit to different characters,mentality for traders.Here we go! The Top Five Forex Information You will Ever Need!!

learntotradethemarket.com

dailypriceaction.com

thepatterntrader.com

markettraders.com

vladimirribakov.com

Here are few more more which may get your attention according to what is applicable for you.But the above five are the best of the best knowledgeable forex trading guides.

tradeitsimple.com

forextradingstrategies4u.com

Ok Thats it and I truly believe these list will greatly help and improve your forex business and career.Not to mention but it will make you grow as a person too!!

Forex Trading Techniques – Foreign Currency Trading

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