Gann Indicators: Everything You Need to Know

Technical indicators are a quality alternative to manual chart analysis. They can make complex calculations and give ready-made signals for placing trades. One of the most effective and qualitative tools is indicators, based on the theory of Gann. They show important price levels, trend reversal points, and trend direction and give a lot of other useful information. With their help, you can find the most profitable points for setting Stop Loss and Take Profit.

What Are All the Gann Indicators Based On?

William Gann is one of the world's most famous traders. Without any special education, he was able to make a multi-million dollar fortune by trading in financial markets.

His theory is based on the fact that price movements are always cyclic and wave-like. Price surges are always followed by declines. The upward and downward trend, flat – all these states of the market periodically alternate, and in any sequence. This cyclic pattern has its regularity, so based on the data for the past time, you can calculate where the price will be in the future.

We recommend you use simple and profitable forex strategies. When working with them, Gann indicators can act as a filter for sifting out false signals and setting protective Stop Losses.

William Gann has developed several basic indicators that apply a linear-horizontal or fan pattern to a chart. This markup can be used to mark important price levels and market reversal points. Many other tools and calculators have been subsequently created based on the standard Gann indicators.

The Simplest Gann Indicator

The simplest tool based on this theory is the Gann Line. It is present in the standard set of both the fourth and fifth versions of the MetaTrader terminal.

Gann Line is a fundamental component of other indicators based on the theory. Its main function is to determine the direction of the long-term chart trend. There are two rules for determining the main trend:

• Price moves below the Gann Line. The market is in a descending (bearish) trend;
• The price is above the Gann Line. It is a sign of an uptrend (bullish).

Also, Gann Line often plays the role of a strong support or resistance level, from which the price turns in the opposite direction.

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This tool has some similarities with Simple Moving Average. The only difference is that a MA is a dynamic broken line, changing as the price moves, while Gunn's line is static and is always plotted at a 45-degree angle.

The static line divides the charted plane into two equal coordinate axes, the first of which denotes time and the second denotes price. When the equilibrium between these two axes is broken, there is a change in the trend. When the equilibrium is restored, the market situation also stabilizes.

To add the Gann Line to your chart, go to the "Insert" category in your trading terminal and select the "Gann" section. In the list that opens, find the desired indicator and drag it onto the chart by left-clicking on the name.

Gann Angles Indicator

The second most widely used Gann tool is Angles. It is also called "Gann's Fan". The tool consists of many Gann lines placed at different angles to each other.

The indicator has a complex structure. Experienced traders often combine it with classic support and resistance levels. It allows filtering signals and finding profitable points to enter the market.

Gann angles can be used to filter Stochastic when trading in the flat or trend.

The tool looks like a fan with the rays coming from one point. There are many variations of this pattern. For example, the fan's base point may be the minimum or the maximum of the current price trend.

The most important here is the central ray, which is located at an angle of 45 degrees. It divides the whole figure into two equal parts. Otherwise, it is also called the long-term trend line. It is on it you can determine the main direction of the price of the current chart. This is done as follows:

• If the price moves above the line of 45 degrees, then the long-term trend of the chart is upward;
• If the price passes under the ray of 45 degrees, then the main trend is downward.

When this line is crossed by price, it indicates a change in trend. The direction of crossing determines the future trend (the price broke the line from the bottom upwards – a bullish trend starts, and from the top downwards - a bearish trend).

Additional rays above and below the main trend line play the role of resistance/support levels and trend lines. If we look at the chart carefully, we can see that the price really "hangs" near these lines for a while, and then breaks out the level or moves away from it.

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The main difficulty when working with this tool is its primary drawing on the chart. Many beginners find it difficult.

To build the Gann Angles, it is first necessary to find 2 points on the chart - the minimum and maximum, which stand out clearly from the rest of the peaks. The trend line should be drawn by them. After that one should open the "Insert" menu and use it to add the Gann Fan tool to the chart.

The fan is drawn on the chart so that its base coincides with the minimum (for an uptrend) or maximum (for a downtrend) point of the chart. The trend line (angle of 45 degrees) must coincide with the trend line. During the drawing small errors are allowed. For example, candlestick shadows may be slightly out of levels.

There is one more variant of drawing Gann Angles. It is more accurate because the angle of the central ray is calculated automatically. The figure is built as follows:

• An indicator called "Angle Trend Line" is placed on the chart. You can find it in the "Insert" menu. When setting this line, specify an arbitrary angle of 45 degrees in the settings. The base of the ray should be at the Min or Max point, depending on the trend.
• Next, add the Gann Angles indicator to the chart so that their center ray (angle 45) coincides with the trend line on the angle built before. Thanks to this reference point, the fan will be plotted with perfect accuracy and without any errors.

Gann angles are used in trading according to different strategies. Most often they are used when trading along the trend, breakout trading from important price levels, and as a reference point for setting Stop Loss and Take Profit.

Gann Grid Indicator

The Gann Grid as well as a fan makes a layout on the price chart. This tool is a set of lines arranged at an angle of 45 degrees. It is also based on the classical Gann Line.

The Grid helps to determine the market trend direction and find the points of supposed price reversal. The upper and lower borders of the grid cells function as resistance and support levels. The side edges of cells can be used as trend lines. If you examine the chart carefully, you can see that the price periodically bounces or breaks out the horizontal cell borders and move at an incline according to the side grid borders.

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The direction of the crossover of the grid by the price line corresponds to the direction of the trend. For example, if the chart has crossed the upper edge of the cell, it is a sign of an uptrend. And vice versa, when the chart crosses the lower boundary, it can be considered a sign of a downward trend. If the graph has broken out the line plotted at an angle of 45 degrees, it is a sign of an approaching trend reversal or price correction.

The principle of constructing the grid is largely similar to that of other Gann indicators. You also need to determine the minimum and maximum points, and then correctly apply the grid to the working space. There are several ways to build a grid. Let us consider the simplest and most common one:

Go to the "Insert" menu of your trading terminal. Find the "Gann" category in the drop-down list, and then find the "Grid" item. Click on the name to add the indicator to the chart.

Hold down the left mouse button and drag the tool to the workspace so that its first point (main point) coincides with the price extremum. If the market has an uptrend, you should focus on the chart minimum. In the case of a downtrend, the maximum of the chart is the reference point for setting the first point.

Extend the grid to the opposite extremum.

The first point plays the most important role. Exactly it determines the size of the grid cells and, therefore, the trading signals that the indicator will give. The greater the distance between two opposite extrema of the chart - the larger the grid cells are.

The Gann Grid can be applied in different ways. The main way is to use the cell borders as support and resistance levels. The more often the price has departed from some border - the stronger this level is. The direction of the side cell borders will show the market trend.

The tool can be the basis for any forex strategy. For example, to trade pending orders. The grid borders will be the levels for placing Sell Limit and Buy Limit orders.

Observing the price behavior inside the grid diamond, you can assess the market condition, find entry and exit points, set the most profitable Stop Losses, and even predict the approximate profit. This tool can single-handedly replace many other indicators and become the basis of a high-quality strategy.

Many traders combine the Grid with Angles. The points of crossover of the lines of the two tools can indicate strong levels and important trend reversal points. Using these two indicators in combination makes trading signals as reliable as possible and significantly reduces the percentage of losing trades.

Gann Square Indicator

The Square is probably the most unusual indicator of the whole range of tools based on the Gann theory. It is based on the principles of numerology and at first glance can seem absolutely useless, but the long-term practice of traders says otherwise.

The tool looks like a square with numbers from 1 to infinity inside it. One is in the very center of the square and is considered a starting point. All other numeration rotates in a spiral from it. The size of the square is unlimited, so there can be as many numbers as you want.

William Gann has never revealed the secrets of his indicator formulas, which is why the exact method of calculating the Square is still unknown. There is an opinion that not only numerology but also astronomy, including the rules of planets' positions, were used for creating this indicator.

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A simplified scheme of applying the indicator is as follows:

• We determine the minima and maxima of the chart, as well as the main trend. It can be defined by the Gann Line.
• Further drawing of the Square depends on the trend direction. If the trend is upward, the Square with angles of 60 and 300 degrees is plotted on the chart. The cell step is 60 degrees. The closing price (hour, day, week, month - depending on the time frame) must be located in the center of the figure. The lines at angles of 300 and 60 degrees will come from this point. At these levels, the new values of Min will be placed.

In case of a downtrend, it is necessary to calculate the future maximums of the chart. In this case, the square is built on a similar principle, but with angles of 45 and 315 degrees. The step equals 45 degrees.

There is also an alternative approach, in which other figures are built based on the Square – triangle, pentagon, and rhombus. The important points, in this case, will be the vertices and extreme corners of the built figures.

Manual drawing of a Square according to Gann's theory is a time-consuming process. Therefore, you can install any Gann calculator, which will automatically calculate all the extreme points of the figure and draw the Gann square in minutes. Your task in this case is just to determine the extremums of the graph and move the ready figure on them.

Conclusion

Gann indicators are still little studied, so traders only know the principles of their work. Detailed formulas for calculating the data are not freely available. Despite this, the tools are very effective and allow you to predict the movement of prices in the market. As an experiment, we recommend you install any Gann indicator on the chart and watch how the price will move. You will notice that the chart does go according to the lines of the tool.

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