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Intraday trade using gann angle

In my book on "Gann Method" though I have explained various principles of W.D.Gann's method and  its application on the stock market but the one which inspired me a lot is  "Gann angle" principle. The Gann angle is defined as the set of trend lines drawn from an individual price point or from different price points (i.e. high, low, and midpoint) in order to identify the supports and resistances of a future price move.  At this stage, do not worry much about this definition. It will become simpler as you proceed to the next part of this article.  The next big thing about the gann angle trend lines are that they are drawn at a particular angle with respect to the X-axis or to the time line. This concludes the basic formation of gann angle trend lines.

Now let me explain this concept with the help of an example. Say I wish to draw a trend line at 1X1 (read it "one by one") gann angle. This means my trend line is a straight line drawn in the price time chart which makes an angle 45 degree with the X-axis.  You must ask me that how I have derived the 45 degree. Quite simple! This is a trend line drawn assuming 1 unit of price change happens with 1 unit of time change. If I will plot 1 unit of price change with respect to 1 unit of time change in a semi log scale and measure the angle with the help of a protractor I will get the angular measurement as 45 degrees.

 For making an intraday trade decision we need a point to make buy or sell entry. We need a stop loss point and couple of target points. Though this job can be done with any guess work but we need perfection. The perfection will be achieved only through the mathematical calculation which is accepted by the market.

W.D.Gann has given us 11 different trend lines which will guide us in making a trade decision.  These trend lines are drawn based on the geometrical angle proportion in X and Y axis. For example the 2X1 (2 by 1) trend line is drawn assuming the 2 unit of price raise or fall happens in 1 unit of time.  This trend line makes geometrical angle of 63.75 degrees with X-axis when drawn from a lower price point and projected towards the higher price points. Similarly this trend line will make 26.25 degrees with respect to x axis when it will be drawn from a higher price point and project towards the lower price point. This is the mathematical logic available in origin shifting, parallel line algorithm.

 Now the 11 sets of trend lines from a lower price point towards the higher price point are as follows  1X1, 1X2, 2X1, 1X3, 3X1, 1X4, 4X1, 1X8, 8X1, 1X16 and 16X1.

 The geometrical angle made by these trend lines with the X axis in an up move corresponding to 2X1= 63.75 degrees, 1X2= 26.25 degrees, 1X1= 45 degrees, 1X3= 18.75 degrees, 3X1= 71.25 degrees, 4X1= 75 degrees, 1X4= 15 degrees, 8X1= 82.5 degrees, 1X8= 7.5 degrees, 1X16= 3.75 degrees, 16X1= 86.25 degrees.

 The geometrical angle made by these trend lines with the X axis in a down move corresponding to 1X2= 63.75 degrees, 2X1= 26.25 degrees, 1X1= 45 degrees,3X1= 18.75 degrees,1X3= 71.25 degrees,1X4= 75 degrees,4X1= 15 degrees, 1X8= 82.5 degrees,8X1= 7.5 degrees, 16X1= 3.75 degrees,1X16= 86.25 degrees.

 Gann Formula for calculating the support and resistance:  In gann study the 180 degree is considered as factor 1. This is because between the sun rise to sun set the solar motion happens approximately 180 degrees and it is considered as 1 day time.

 The 2nd universal concept accepted by the financial analysts is that the supports are always calculated in a falling trend and it used to be calculated from the high.

 The 3rd universal concept accepted by the financial analysts is that the resistances are always calculated in a falling trend and it used to be calculated from the low.

 Gann formula for calculating the support and resistance is as follows:

 Support = (square root of (high)- Degree factor)^2

 Resistance = (square root of (low) + Degree factor)^2

 Trading Rules as per gann and as modified by me (Soumya Ranjan Panda Author of this article) 

1. The 3rd support or resistance of any price move is important (as per W.D.Gann).
2. In intraday trade 45 degree support break (1X1 support) will favor sellers and 45 degree resistance (1X1 resistance) break will support the buyers. Provided the annual volatility of the trading instrument  must be higher than 50% (as per my own research )
3. In low volatile or medium volatile market (i.e. the annual volatility of the trading instrument is less than 50 %) the (1X4= 15 degree) resistance and (4X1=15 degree) support must be utilized for long and short entry provided no congestion or entry error should be present in the calculated price. (as per my own research ) 
4. If sell entry price at 15 degree or at 45 degree  greater than buy entry price at 15 degree or 45 degree price point then it is considered as error and rectified by changing calculation procedure from the high and low to mid point of high and low. This says that instead of calculating the supports down from high and up from low you can calculate the same from the mid point of high and low (as per my own research ) 
5. If the price unit of the trading instrument is a 4 digit number then between the buy entry and sell entry price at least 5 unit difference is required to take unbiased decision as per this principle or else it is considered as congestion and it is rectified by changing the high and low to mid point. (as per my own research )  
6. If the price unit of the trading instrument is a 3 digit number then between the buy entry and sell entry price at least 3.5 unit difference is required to take unbiased decision as per this principle or else it is considered as congestion and it is rectified by changing the high and low to mid point. (as per my own research ) 
7. If the price unit of the trading instrument is a 2 digit or single digit number then it must be converted to 4 digit number by the way of multiplying it with 10 or 100 or even with 1000 and the resistances and supports will be derived from the 4 digit number. And the results need to be dividing by the multiplier to reconvert it back to its original form. (as per my own research )
8. The smallest time interval in which you can identify the high and low is 5 minuets after the opening bell or the highest time interval you can consider is the 1st 15 minute after the opening bell.  Any auction period must be ignored. Like now in Indian market 9 a.m. to 9 :15 is considered as call auction period. Hence the data from 9 a.m. to 9:15 a.m. must be ignored (as per my own research )
9. If any trade of yours triggers the stop loss or trailing stop loss then do not reenter the  trade in the same direction again. 
10. As a day trader speculation is my profession and I will follow these calculations like religious testimony.

    Example:  on 11th November 2010 SBI between 9:15 to 9:30 a.m. made high 3238.35 at 9:16 p.m.  low 3214.10 at 9:27 p.m.

     Below given are the calculation of resistances and supports for reference.

     Low3214.1 High 3238

    Angle Degree Degree-Factor Resistance Angle Degree Degree-Factor support

    16X1 86.25 0.479166667 3268.6604 1X16 86.25 0.479166667 3184.0442

    8X1 82.5 0.458333333 3266.2787 1X8 82.5 0.458333333 3186.3958

    4X1 75 0.416666667 3261.5178 1X4 75 0.416666667 3191.1015

    3X1 71.25 0.395833333 3259.1387 1X3 71.25 0.395833333 3193.4557

    2X1 63.75 0.354166667 3254.383 1X2 63.75 0.354166667 3198.1667

    1X1 45 0.25 3242.509 1X1 45 0.25 3209.9592

    1X2 26.25 0.145833333 3230.6567 2X1 26.25 0.145833333 3221.7735

    1X3 18.75 0.104166667 3225.9219 3X1 18.75 0.104166667 3226.5053

    1X4 15 0.083333333 3223.5558 4X1 15 0.083333333 3228.8725

    1X8 7.5 0.041666667 3218.8262 8X1 7.5 0.041666667 3233.6095

    1X16 3.75 0.020833333 3216.4626 16X1 3.75 0.020833333 3235.9793

    (You can download a ready made free to use gann angle calculator from our web site from the following link http://www.smartfinancein.com/free-software.php . The paid calculator which is given along with the master course validates more number of logical conditions and infuses more number of gann principles in the decision making so as to give you greater success in intraday trade.)

    As per the above discussion and calculation procedure we have made the calculation of resistances and supports. As per the current volatility condition we are being advised to buy the stock at 3223.5558 or sell at 3228.8725. This is violating the point D trade principle and considered as an entry error henceforth we will change the high and low to its mid point and do the calculation from the mid point the mid point of 3238.35 and 3214.10 is 3226.225 . The modified calculation table is as follows.

    As per the modified calculation we are advised to buy at 3235.6986 for final target 3280.8878 and sell at 3216.7653 for final target of 3172.0214

    Low 3226.225 High 3226.225

    Angle Degree Degree-Factor Resistance Angle Degree Degree-Factor support

    16X1 86.25 0.479166667 3280.8878 1X16 86.25 0.479166667 3172.0214

    8X1 82.5 0.458333333 3278.5016 1X8 82.5 0.458333333 3174.3685

    4X1 75 0.416666667 3273.7318 1X4 75 0.416666667 3179.0654

    3X1 71.25 0.395833333 3271.3482 1X3 71.25 0.395833333 3181.4151

    2X1 63.75 0.354166667 3266.5837 1X2 63.75 0.354166667 3186.1172

    1X1 45 0.25 3254.6874 1X1 45 0.25 3197.8876

    1X2 26.25 0.145833333 3242.8129 2X1 26.25 0.145833333 3209.6796

    1X3 18.75 0.104166667 3238.0692 3X1 18.75 0.104166667 3214.4025

    1X4 15 0.083333333 3235.6986 4X1 15 0.083333333 3216.7653

    1X8 7.5 0.041666667 3230.9601 8X1 7.5 0.041666667 3221.4934

    1X16 3.75 0.020833333 3228.5921 16X1 3.75 0.020833333 3223.8588

     Trade outcome:

    1. At 9:34 a.m. We got a chance to sell at 3217 and kept out stop loss at 3235.70 this as per our calculation. Upon achieving the 1st target 3214.4we trail to stop loss to 3216.80, then upon crossing the 2nd target we trail the stop loss to 3214.40. Unfortunately after touching the low 3211 at 9:39 a.m. the trailing stop loss triggered at 3214.40 and we just bagged less then +3 points.
    2.  Considering our short trade adventure is wrong and as per the last protocol set in the trade rule we waited for the 3235.70 to come which we have got a chance at 10:07 a.m. and achieved till 3254 till 11:27 a.m. which is close near to our 45 degree target point.

    In this case if my shell stop loss triggered at 3235.7 I will accept close near to 18.9 point loss and be a buyer at this point keeping the stop at 3235.7 and aim for the last target  3281 with some logical trailing stop loss.

     This concept works in commodity, currency as well as in stocks.

     However the limitation of this article is that it does not discuss all the trading rules and conditions which are being researched by me. In the gann master course the supplied software uses all the extended set of logics.