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Price and time decision points the WD Gann way

Price and time decision points the WD Gann way

WD Gann was an incredible chartist and trader in the early 20th century. One of the most powerful technical analysis methods that he shared in the works he left behind was the application of ‘percentage moves’.

Gann believed (and has shown) that important price levels could be determined by dividing the ranges between 8 and 3. He then pointed out that these divisional price points had different levels of importance.

For example, dividing a range by 8, you would end up with percentage levels of 12.5, 25, 37.5, 50, 62.5, 75, and 87.5. And of course there is 100%, although the focus is on the divisions of the 100% full range.

The first level of importance is generally considered the 50% level. Then they would be 33.3 and 66.66 (thirds).

These levels could be determined in a correcting market (retracing within the price range from which the splits are derived) to try to determine price levels that could stop the correction, or they could be added to the end of the price range. to determine extension levels (beyond range).

For the first example, let’s say the price moves up from a low of 100 and stops at 200, then starts moving back down. The range equals 100 points, so the support levels would be 200 (the top of the range) minus 12.5 (187.50), 25 (175), 37.5 (162.5) and so on.

For the second example using the same range as the previous example, the extended price levels would be 200 (again the top of the range) plus 12.5 (212.5), 25 (225)… 50 (250) and so on. And of course you would do the same with levels calculated from thirds.

These levels act as price decision points, where the technical analyst and trader would have to further determine whether the price is likely to bottom or top at that level. While price often makes lows and highs at one of these levels, knowing which one requires more than just noticing a pause in price action at that level.

Therefore, WD Gann also expressed how these percentage calculations can be applied to TIME. For example, if the range from 100 to 200 took 28 days to complete, that also gives a range in TIME.

With your range over time, best divided into fourths (25, 50, 75, 100) and thirds (33.33, 66.66) and the result added to the last day of that range, you get points over time where you would look to see if the price it is also at one of the support or resistance levels that you calculated from the price.

This is just one of the many valuable methods taught by WD Gann that every technical trader should know about and put into practice.

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