Explain Gann’s approach to trend analysis and trendlines. Gann’s approach to time-series analysis is fundamentally different from EWT’s. EWT and Gann use RSI check this a primary indicator of momentum over a why not check here of time, where the relative strength of an asset is determined by price movement relative to the previous period and direction of the previous period. Gann identifies three primary statistical tools, including the standard deviation, the RSI and MACD — the later being a modification of RSI. Out of the three, the RSI is used most often. Not every trader is proficient or comfortable with RSI. An easier alternative is Gann Waves, which uses the harmonic technique described above. Explanation The wave pattern has been defined by an oscillating trend. The difference between the slope and the median or average of the preceding period. This will drive the market up or down. Typically, it is not used in trading because it has a slightly biased tendency to go the opposite side of the pendulum. Pre-defined ratios can be difficult to trade on, especially during periods of extreme volatility where the ratio varies too much. The greatest occurrence of a wave-2 in the wave-1 and the wave-3 in a wave-2 pattern.

Cardinal Squares

The point where the swing high and swing low occurred, based on percentage changes. The swing level is located between those points. In a falling wedge, if an asset trades below the swing low, then it is trading at a near-term support level. If an asset trades above the swing high, it is trading at a near-term resistance level. A standard setup for Gann Waves, trading below the wave-1 More hints and above the wave-3 highs. Significance More of the stock or ETF price moves toward a trendline. We define a trendline as a line or series of connected points that defines support and resistance for the stock or ETF price. The trendline is a dynamic line for the price; it changes based on the changing market condition and trend shifts. Only the trend itself moves, leaving the support and resistance points untouched. A standard setup for Gann Waves, trading above the wave-1 lows and below the wave-3 lows. Significance Similar to the above scenario, but with movement below the wave-1 highs and above the wave-3 lows. This setup is considered the strongest wave pattern. A standard setup for Gann Waves, trading below the wave-2 highs and above the wave-2 lows.

Planetary Synchronization

Significance This is an ideal setup for traders. It means that the current market is in the early stages of the trend and headed higher, allowing for potential upside by extending the wave-1. It also allows for potential downside because if the trend turns more bullish, so will the wave-1 and it can retrace before a trend reversal. If the market movesExplain Gann’s approach to trend analysis and trendlines. What causes the reversal and eventual exhaustion of a trend? A. (a) One can plot an exponentially moving average (EMA) on a chart to illustrate and then follow trends. (b) A trend is characterized by lines that pass through each period’s EMA. Because they represent means, trends can potentially move up or down 50 percent of the EMA at a time. In that way, a chart of the EMA looks like a slope, descending or ascending. (c) One can plot one’s EMA and find that the longer a trade extends, the higher the profit or loss becomes. When the break of a long-term trend occurs, the trend is replaced by a sideways, or zigzag, series. The trendline of a long-term momentum or mean reversion trade ends when a trendline is broken with a loss equal to the potential gain from the trade plus a determined amount. This means that the break point is equal to the potential losses multiplied by an added amount, which may always be equal to the expected profit for an entry point with a setup.

Astral Harmonics

It also reflects the amount or type of “price deterioration” that is sufficient to continue the trade to a profit, but not much more beyond that. (d) The slope of an EMA on a chart can be considered a continuation mean. The moment a slope turns, a mean revert is indicated. The curve shown in Figure 6.33 uses the slope of EMA 19. (e) If EMA 19 has broken down only to remain below it, the series has moved sideways. Market segments that exhibit trends have common characteristics of price behavior. Hence, when one observes a chart looking down, the bull trend is usually the broader, smoother upper price move higher. When one obtains a short covering bounce, as shown in Figure 6.34, the bearish shift, often expressed in the form of a “back-and-forthExplain Gann’s approach to trend analysis and trendlines. The theory of Gann and trend lines involves the understanding that trends are always biased. Understanding this means that when you create a trendline, the direction of the bias depends upon which line you use above, below, or on the line itself. This book does not contain several lines with different directions of bias that we illustrate in the tutorials.

Price Patterns

That is, several lines with different directions of bias are not discussed here. When Gann suggests using a trend line for various reasons, he uses lines which are oriented according to a few predetermined criteria. The first two lines are called “upside” trends, and their directional bias is +1. For example, if the price is above trendline1 on the chart and below trend line 2, +1 means that the price will most likely cross below the trendline2 first. According to this theory, prices tend to rise when they are above an upside trend line, and prices tend to fall when they are below an upside trend line. The last two lines are called “downline” trends and their directional bias is −1. For example, if the price is below trend line1 on the chart and above trend line 2, −1 means that prices generally rise, and the price will most likely rise after crossing below trendline2. Of course, it is up to the author how he labels them. Hannes Meyer explains that in such a situation trend line construction is the same as spotting the trend, and the main thing is whether the trend is upward (positive upward) or downward (negative downward): To begin with, a signal line must be created which denotes that the price is rising or falling (trend), and this must be augmented by a confirmation- or shadow-price (direction of trend) (Climbing Leads To Falling, p. 2). It doesn’t matter how you come to recognize the trend, you must be realistic. If you’re wrong, you must simply recognize it. There are many different ways of looking at a chart.

Financial Geometry

Many different charts capture very different things. It is conceivable that you could create an entirely different trend on a different chart by different methods due to all sorts of factors. (Mayer on Stock #N#, p. 11f; see also Mayer on The Role of Time, pp. 30f) Bohannon explains that Gann prefers trends in which the bias is very strong when prices are above price line 1 and then the bias disappears and becomes very strong when prices are below price line 2 (Strong Directional Bias, p. 7). Strip the bias from lines 1 and 2 and you merely have arrows pointing up and down. The advantage of the Gann approach is that we have real information about the bias a trend is taking. Gann himself does not need to worry whether the bias is very strong when prices are above price line 1