The Month in Gann Lines

The Month in Gann Lines

It’s always important to know what levels markets are respecting because this in-turn determines what levels traders will be reacting to. Gann lines are the discovery of the late trader and analyst W.D. Gann whose many followers often attribute him with near mythical analytic powers. While I do not include myself in that group, I do believe any study of trading methods would not be complete without touching on Gann and his octaves frame for providing structure – support & resistance – in a market.  The Gann levels that always stuck out for me are1/8^th, purported to be one of the lowest risk levels to go long a market from; 7/8ths, the mirror opposite and Gann’s reported lowest risk level to go short a market from.  Fifty percent, or 4/8ths the most pivotal of the levels created by the frame, and 3/8ths and 5/8ths which create “the pipe” where Gann theorized that between these two levels price spend the majority of time.

When considering different trading methods, particularly those with a price tag attached, I’ve always been reminded of the old adage, “figures don’t lie, but liars sure can figure”. I can say however, after coming back to the Gann lines many times over the years, more as a hobby on the weekends than with a professional interest – I rely on Dow Theory professionally when analyzing and teaching in live markets – that the lines are noteworthy, and deserve a spot near the top of the list of reputable, and more important, reliable trading tools, in my humble opinion. (While I am always humble around markets, you must forgive me for not always being so humble when dealing with the many characters the brokerage profession attracts)   

Below are a series of charts of major financial markets over the past month showing their current Gann levels.

For this euro chart we use shorter-term Gann lines within the larger 80.00 to 160.00 frame.

In this AUDUSD chart we use longer-term Gann lines anchored to zero and 80, and 80 to 160. The 90.00, or 1/8^th level looks interesting.  

In this S&P 500 chart, a proxy for the global economy, we see the market roughly pinned into the lower half of Gann’s pipe, having just survived a temporary break below 3/8ths – for this example the octave frame is anchored to 800 below and 1600 above.

And the last chart, the European blue chip index the Stoxx 50, where I’ve taken the recent 3 year range and broken it down into 1/8ths.

Jay Norris hosts Live Market Exercise where he spends 12 hours per week pointing out trade set-ups and signals in live markets. He is the author of Mastering Trade Selection & Management, McGraw-Hill, 2011, and Mastering the Currency Market, McGraw-Hill, 2009.

Trading futures or Forex is a risky endeavor and not suitable for all investors!