Gann square in technical analysis
What mathematicians and traders do not come up with to learn how to predict the price direction as accurately as possible. The market is a competition between buyers and sellers, whose psychology is largely unchanged. Everything is good – to buy, everything is bad – to sell. This is simplistic, but it is this general principle that underlies the cyclical nature of the market. Gann’s square is another interpretation of market behavior, which is based on a mathematical pattern tied to a calendar (annual interval).
What is Gann square
Gann’s square is a combination of two digital arrays, one of which is an analogue of a coordinate system with its own reference point (in the picture above – a “wheel” with a range from 0 ° to 360 °). Another array is a square with numbers arranged in a spiral in ascending order. In the lower left diagonal (orientation from the center of the square) there are odd numbers raised alternately to the 2nd power. In the upper right – even numbers, also squared. If an extremum (Max or Min) is formed on one of the cells with squares of numbers, then most likely after passing a full turn it will be repeated.
The second diagonal is the averaged values between moving from the squares of the even diagonal to the odd one and vice versa. For example, (81 + 100) / 2 = 90.5. In the Gann square, the averaged diagonal contains the number 91 (the upper left corner of the square, which is formed by the values 73, 82, 91, 100). This is one of the problems of applying this theory – rounding, which introduces some inaccuracy into the analysis.
In the above figure, you can see the division of the Gann square into several intermediate zones, which will also be needed for the analysis. This breakdown is called cyclical. There is also a second option for representing a square – diagonal, as in the figure below.
In fact, working with this tool comes down to analyzing an array of digital data, provided that there are no unpredictable fundamental factors on the market. The numbers in the cells are an array of price data, the circular coordinate system is an array of time, superimposed on the square of the figure – an attempt to tie price values to time. Which ones will be used (superimposed) for the analysis of the figure is an individual question. For example, there are options for overlapping corners, triangles and squares. Depending on the chosen method and the accuracy of calculating the angles using the Gann square, you can determine potential pivot points, highs and lows of the instrument.
Here you can see that the price has drawn several highs and lows on a specific time frame. We put a square on the price chart and mark the cells with extremes.
Methods for calculating the Gann square. Using:
- cell numbers;
- overlay shapes and cell numbers;
- progression and regression;
- combination of superimposed figures with mathematical regression and progression;
Manual construction of pivot points based on shapes and cell numbers is a laborious task, but there are few options for automating this process. The only free program in Russian is Gannzilla. In its parameters, you must specify the calculation method, specify information about the cells and the wheel, and select the overlay shape (circle, square, triangle).
Output… In the presented review, one can only draw a general conclusion about what the Gann square is. It is built on the relationship of price cyclicality at each circle, that is, a time interval. It is important to accurately superimpose the extremum points and determine the time interval by imposing various kinds of patterns. This is somewhat reminiscent of the selection of technical indicator parameters. The principle of application and analysis of the trend by the Gann square is described in sufficient detail in the 3-part review of the LiteForex blog, which is a partner of the FxCash rebate service. Need a link – write about it in the comments!