Key points

● Gann has a unique insight into market forecasting and accurately predicted the date of the stock market crash in 1929.

Based on mathematics, geometry, religion and astronomy, ● Gann's theory reveals that the stock market operates according to a certain mathematical proportional relationship and time cycle.

No matter whether the price of ● goes up or down, the most important price is in the 50% position, and the price correction often occurs.

William Gann is one of the most famous investors in the American financial market and a magical technical analyst.

Gann began to invest in the capital market at the beginning of the 20th century and experienced World War I, the stock market crash of 1929, the Great Depression of the 1930s and the second World War. It is said that he earned a total of more than $50 million in his investment career, which is equivalent to about $1 billion today.

Gann has a unique view on market forecasting. He has claimed that each of his forecasts is based on mathematical principles. Surprisingly, Gann accurately predicted the date of the stock market crash in 1929. In the Annual Outlook, published on November 3, 1928, Gann made it clear that September 1929 was a dangerous month, with stock prices falling at 05:00 on the Black week. In fact, US stocks peaked in early September 1929, followed by the most influential and damaging crash in history in October.

Gann's original Gann theory, which combines time and price perfectly, is still respected by investors.

Gann's theory

The technical analysis methods contained in Gann's theory are extremely mysterious, based on mathematics, geometry, religion and astronomy, combined with his achievements and experience in the stock and futures markets. Gann calendar, Gann geometric angle, Gann line, Gann callback ratio and other analysis methods are introduced.

Gann believes that there are also natural rules in the universe in the stock and futures markets, and the price movement is not disorganized, but predictable.

The main contribution of Gann's theory is to make an in-depth study of the time cycle, revealing that the stock market operates according to a certain mathematical proportional relationship and time cycle, and clarifying the relationship between price and time. The market measurement system is treated differently from the operating system. In Gann's theoryThe time period is the first, the second is the proportion, and the last is the form.

Gangen line

Gann line, which generally includes Gann angle line, Gann time line and Gann price line, is an important part of Gann theory.The Gann line has a very intuitive analysis effect, and the angle line represents space and time, and is the expression of support and resistance.

The rising Gann line is a straight line extending from the bottom of the market to the upper right, while the falling Gann line is a straight line extending from the top of the market to the lower right. The correct use of Gann angle line requires attention to find the correct volatility and the correct starting position.

Each straight line of the Gann line has the function of support and pressure, the most important are the 45-degree line, 63.75-degree line and 26.25-degree line, corresponding to 50%, 62.5% and 37.5% of the percentage line.

Draw Gann angle lines as succinctly as possible. The correct starting point contains two meanings: the first is to start with the high and low points of the market, and the second is the important time of the market as the starting point.

After determining the starting point, find the angle line, if the starting point is high, draw the descending Gann line; if the starting point is low, draw the rising Gann line. As soon as you find that the newly selected starting point is immediately replaced by a new high or low, change the starting point immediately.

Source of chart: investopedia

Source of the chart: Futu Niuniu

Callback rule

A pullback refers to a temporary reversal of prices in the main movement. Callback theory is an important part of Gann's price theory. According to the concept of price level, 50%, 63% and 100% as callback positions constitute strong support or resistance to the trend of price movement.

Gann 50% callback method is based on Gann's 50% callback or 63% callback concept. Gann believes that no matter whether the price goes up or down, the most important price is in the 50% position, where a price correction often occurs.

Among the Gann prices, 50%, 63% and 100% are the most important, corresponding to geometric angles of 45 degrees, 63 degrees and 90 degrees, respectively. These prices are usually used to determine the establishment of 50% callback bands.

The general method of calculating 50% callback is to divide the difference between the highest price and the lowest price by 2, and then add the lowest price or subtract from the highest price.

After observing a large amount of data, the Gann callback rule is reflected in:

The price obviously reverses at the 50% pullback level; if the price passes through the 50% callback price, the next callback will appear at 63%; if the price crosses 63% callback price, the next callback will appear at 75%; if the price crosses 75% callback price, the next callback will appear at 100% price.

Support and resistance levels may also occur at repeated price levels of 50%, 63%, 75%, and 100% callbacks. In extreme cases, prices will rise or fall by more than 100%.

Cycle theory

Gann's cycle theory is a summary of the whole Gann thought and its investment experience for many years, and it is summarized and perfected on the basis of the concept of controlling time factors.

The so-called controlling time factor means that time is the most important factor that determines the market trend, because time can exceed the price balance, when time arrives, the trading volume will push the price up and down, and time as a factor to predict the market trend, its important role is to predict the turning point of market movement.

Gann believes that the more important cycles are:

Short-term cycle: 1 hour, 2 hours, 4 hours, 18 hours, 24 hours, 3 weeks, 7 weeks, 13 weeks, 15 weeks, 3 months, 7 months

Medium cycle: 1 year, 2 years, 3 years, 5 years, 7 years, 10 years, 13 years, 15 years

Long-term cycle: 20 years, 30 years, 45 years, 49 years, 60 years, 82 or 84 years, 90 years, 180 years.

The 10-year cycle is also an important basis for Gann's analysis. Gann believes that the ten-year cycle can recreate the cycle of the market. For example, a new historical low will appear ten years after a historical high, whereas a new historical high will appear after an all-time low. At the same time, Gann pointed out that any long-term uptrend or decline cannot last for more than three years without adjustment, and there must be an adjustment of three to six months. Therefore, the upward trend of the ten-year cycle actually occurs in the first six years, with a top every three years and the last top in the last four years.

Gann's 21 rules of dealing

Gann believes that trading must be conducted in accordance with a set of established trading rules, rather than buying and selling at will and blindly guessing the development of the market.

With the change of time, the conditions of the market will also change. Investors must learn to change with the changes of the market, rather than accept the dead reason.

First, every time we enter the market to buy or sell, the loss should not exceed 1/10 of the total funds.

Second, stop-loss positions should always be set up to reduce the losses that may be caused by trading mistakes.

Third, never oversell.

Fourth, never turn your position into a profit or loss.

Fifth, never go against the market. When the market trend is not obvious, I would rather wait and see on the sidelines.

Sixth, there is doubt, that is, close the position and leave the field. Be firm when entering the market, and do not enter the market when you are hesitant.

Seventh, buy and sell only in active markets. It is not suitable to operate when the sale is light.

Eighth, never set a target price in and out of the market, avoid price limits in and out of the market, and only obey market trends.

Ninth, if the position is not closed without proper reason, the profit can be protected by the stop-earning position.

Tenth, after the success of Lien Chan in the market, part of the profits can be withdrawn in case of emergency.

Eleventh, do not buy stocks only hope to pay dividends.

Twelfth, when there is a loss in trading, do not increase the price in the form of gamblers, so as to seek to reduce costs.

Thirteenth, do not enter the market because of impatience, and do not close positions because of impatience.

Fourteenth, whether you are willing to lose or not to win, cut the precepts. Don't do a business that loses more and gains less.

Fifteenth, the stop-loss position left when entering the market should not be arbitrarily cancelled.

Sixteenth, there are many mistakes in doing too much. you should wait for an opportunity to enter the market and should not buy and sell too closely.

Seventeenth, be free to be long and short, not just one-sided.

Eighteenth, don't absorb because the price is too low, and don't sell short because the price is too high.

Nineteenth, never hedge.

Twentieth, try to avoid adding pyramids when it is inappropriate.

Twenty-one, if there is no good reason, avoid arbitrarily changing the trading strategy of your shares.