Gann number was formed by the analyst W. D. Gann in early 1900’s. He is known as biggest forex trader in history who traded even during the great depression period and made a huge profit of 92.9% accuracy with 265 winning and only 22 losing trades out of 287 trades in total. The most specific feature about the Gann number is that it can predict the relative price movement of future price. Many traders around the world uses this chart for depicting future contract movement.
How to Use Gann in Forex Trading
Most analyst believe that the Gann theories are not real. In true sense, it is just a series of good luck and discoveries. Gann believes to keep the variables as stagnant and introduced the support and resistance level dividing the raw or multiple numbers by 3 and 4. Gann numbers are based on algorithmic trading by considering the growth rate of 0.05% on every trade. Gann divides a 90 degree angle in series of 8 different parts. Gann numbers are basically divided into two parts i.e. Support and retracement level.
Support level (angles)
Gann numbers are basically a square of 9 have an angle of 45 degrees, these verify the angle of 45*2= 90 , 45*4 = 180, 45*6 =270, 45*8=360 which can either represent as sum or square of angles, 120 or 240. The above angles serve as supporters or prediction tool and finds its relative time frame to determine the accurate price line of specific currency, commodity or any capital market securities
As per the Gann analysis, the most significant setback level are 12.5%, 25%, 37.5%, 50%, 62.5%, 75%, 87.5% and 100% which are bifurcated into 8 parts. I.e. 1/8. 2/8, 3/8, 4/8, 5/8, 6/8, 7/8 and 8/8. Whereby mostly 37.5%, 50%, 62.5% are given the prime importance. The retracement level help the possible aim to predict the market.
Advantages And Limitations of Gann Numbers
- Historically speaking, Gann numbers have given the highest satisfaction ratio among the trader who trade in future market or spot market.
- Technically, the Gann numbers are supported (FIB) Fibonacci levels. Hence if the trader has limited knowledge about the prediction. Then Gann numbers are of limited scope.
- The Gann numbers are one of the most difficult strategy used by the high mathematician which are used as algorithmic trading.
- Gann numbers are not applicable on the high trading days as the volume traded are deposited and withdrawn within the fraction of second. It doesn’t co-relate with economic situation which plays a major role in defining the currency value of respective country.