In 1908, one of the pioneers of technical analysis is William Delbert Gann. He was a finance trader who developed a tool for Gann analysis called Gann angles. He wrote a number of books, with the wall street journal hailing his book “Truth” as one of his best works. Over time, he began to release information on the techniques he used to make his forecasts on the stock market. He discovered what he termed market time factor. To test his theory out, he opened an account and started trading stocks using his new theory on his stock picks. The result was very successful, and within three months he had made huge profits.
Using Gann Analysis for predictions and forecast on price movement were based on three things; price, time, and range. Using these factors for prediction, he looked at price study using a support and resistance line with pivot point and angles. The study involved looking at historical reoccurring dates that occurred as a result of natural or social means. This included the study of stock charts and performing chart analysis, which involves looking at market swings by using trend lines and reversal patterns.
The most important Gann angles is what he called the 1×1 or 45 degree angle. This represents one unit of price for one unit of time. There are also other important angles like 2×1, 3×1, 4×1, 8×1, and 16×1. Gann would watch for the most notable tops and bottoms to form on a daily, weekly and monthly chart. He would then draw his angles based on these trend changes. If there was an uptrend and the price stayed in the space above a rising angle without dipping below it, this would be indicative of a strong market. However, if the trend is down and the price remains below a declining angle without going above it, this indicates that the market is weak.
The results that are obtained from using Gann analysis will vary from person to person. Like with all other forms of technical analysis, nothing is fool proof. Investors who use Gann analysis in the stock market today should in theory get better than average returns. When doing technical analysis, it is better to use two or three other methods to fine tune the results you get. To learn more about technical analysis and how it works, you need to research and watch a stock market video showing how to use the tools properly.