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Introduction to Gann Theory
William D. Gann was a legendary trader, publisher, and seminar
speaker with a voluminous output. He was first mentioned for
his phenomenal trading skills by Richard Wycoff, himself a master
trader and student of volume, in 1909.
Although Gann had many trading systems from simple mechanical
trend-following methods to astrological techniques, he is best
known for his concept of range division and range multiplication,
both for price and time.
An example of price range would be a move in Tbonds of ten
points (from swing low to swing high) would be divided into 1/8ths
(1 8/32nds). Each "rung" of 1 and 8/32nds was thought
to represent natural support or resistance. The 3/8, 1/2, and
5/8 "rungs" are often considered most important as
they are close to the Fibonacci numbers of 38.2%, 50%, and 61.8%.
Likewise time ranges, being the time between two important
price points were divided into 1/8ths.
In a similar fashion Gann would take historic price levels,
highs or lows, and look for multiples of these numbers both in
price and time to be significant support or resistance. An example,
as discussed in the Special Cotton Report available at the home
page, is the all-time modern low of December cotton in 1932,
540. Gann used multiples of 540 in price and in calendar days
to find future support and resistance levels and times.
Gann's technique of drawing angles on charts was another and
more visual way of representing the division and multiplication
of ranges.
My favorite Gann book is "How to Make Profits in Commodities"
originally published in 1942, revised in 1951. This book and
much else by and about Gann is available from Nikki Jones, whose
grandfather Billy Jones purchased Gann's publishing company from
his estate, at Lambert-Gann
Publishing.
Another excellent source for this and many other investment
books is Traders
Press.
Sacred Science Institute is now re-publishing a large number of classic investment books, including many of Gann's most difficult to get courses. These are quality photo reproductions on double-sided pages with plasticized covers in ring binders. I have bought books from them and have been quite happy with them.
Links to many Gann Internet sites may be found at Bonny's
Links.
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