William Delbert Gann (1878-1955) was a legendary trader.
Started trading at the age of 24, who have designed several techniques for
analyzing prize charts, by nature he was very religious man as well as having scientific
approaches in his trading explorations. Gann considered that the perfect
balance between time and price exists when prices rise or fall at a 45 degree
angle relative to the time axis. And I think many of you traders are aware of the
24 rules defined by W.D.Gann. Coincidently you are all perfectly following seven
of the rules in trading contest system offered by Dukascopy bank. Rules like
having a compulsory stop loss for a trade execution, writing reasons for trade
entry and exits, moving stop loss close to breakeven level etc. If you follow remaining
rules properly, probably you will come into one of the top ten places. Similarly
there are so many complicated and incomprehensible explorations have been done by
legendary trader W.D.Gann.



Gann Grid


Chart-1

Gann grid is the one of the technical analysis tool designed
by applying W.D. Gann concepts. The tool is available in MT4 trading platform
which you can access from Fair Trading Technology Company who is external
service provider for Dukascopy bank. Gann grid is one of the leading
Indicators. Gann grid is used for squaring up time and price and is based on
the most famous Gann line, the 45 degree or 1:1 Gann line which shows a strong
long-term trend. By definition “A Gann Grid represents an intersecting series
of Gann Lines over laid on a price chart; Gann's teachings stress the
importance of the 45 degree line representing a 1:1 relationship between time
and price (1 unit of price to 1 unit of time). When price trades above the
45-degree line it is an indication of an up-trending market; when price trades
below the 45-degree line it is an indication of a down-trending market”
(babypips.com). Gann grid is one of popular tool used by traders to analyze
strength of trends and to predict trend changes. It is an easy to follow
indicator helpful for investors, long-term traders and swing traders.



According
to chart-1, If the price stays above one of the upstream lines the instrument
is on a strong bullish. And if the price stays below one of the downstream
lines the instrument is on a bearish. When crossing of one line occurs it is
treated that the primary trend is broken, and when the price intersects more
than one line it is treated as the beginning of a new trend. Some traders also
call as Buy and Sell zones for the area above upstream and area below
downstream respectively.


Application of Gann Grid

Chart-2

Use
the scaling points for changing the grid size. You can move the grid using the
grid move point. In chart-2, you can see price is forming higher high and high
lows. You have to choose the extreme points for fixing the gann grid using
scaling points. Gann grid is best suitable higher time frames. It provides convincing
trading ideas in above 15m charts.



Chart-3

In
chart-3 you can see the gann grid has been set for EURUSD currency pair on 1
hour chart. As you can observe in the chart, the dimensions of grid sides are
equal to the distance between the scaling points. It is also very interesting that
similar to point levels, these grid lines forming resistance in sell zone area
in case of bullish condition.



Chart-4

In
the chart-4 of Eurusd currency pair gann grid has been attached. Interesting
observation in this chart is, I have chosen scaling points somewhere in October
and still price follows the same grid lines as resistance and support levels
for the November price chart



Chart-5


In chart-5 of Eurusd chart, you are not having higher high
and higher low scenario,  in that case no
need to be confused because gann grid allow traders to manually adjust the grid
once the grid is automatically plotted. You will get the same results as normal
method.

Possible trading strategies

Chart-6



In the chart-6 of Eurusd currency pair on 1 hour chart, in
this chart also gann grid has been set somewhere back in the month of January
and still the price follows the same grid lines for following month February.



I think there are possibilities for using gann grid as a
trading strategy for entry. traders can enter short if the price tops rejected
in  one or more number of times by
downstream lines, in this case the lines serves as strong  resistance for the trend. Similarly for long
trades price lows rejected back from upstream lines. In this case price serves
as strong support for the trend. The reliability of the trade strategy increases
with the number of times the price touches it and bounce back.



You can create trading strategies by using
trendines in conjunction with gann grid and use the price break out as entry. There
are occasions gridline itself forms breakout line. I think it is possible to create
consistent strategies along with other indicators like Stochastic, MACD, pivot points
indicators etc. Further I think it is required to conduct some more in depth trading
trails and analysis concerning to developing a consistent trading strategies.



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