Gann analysis

Gann analysis is a method of analysis in the field of technical analysis that is named after William Delbert Gann. William Delbert Gann applied the analysis method for his trading during the early 1900s and was considered to be a successful stock investors.

Gann analysis assumes that there is a relationship between time and price. In Gann analysis you draw lines in a graph of the stock price from a price peak or a price floor. The lines corresponds to a relationship between price and time. The most important line in Gann analysis is the 45 degree line that has a ratio of price and time of 1x1, this relationship implies that the stock price changes by one unit per day or other time unit. A unit of the stock price may correspond to 1 or 100, it is up to the analyst to decide how much each unit shall be based on the time-scale that is applied.

Other lines in the Gann analysis is 2x1 where the stock price change with two units per day or time unit and 1x2 where the stock price changes by half a unit per day or other time unit. If the share price is at the 1x1 line, the share price is said to be in equilibrium. If the stock price is above the 2x1 line, the stock price is said to be strong and when the share price is below 1x2 line it is considered to be weak. If the stock price breaks through one line, the stock price will move towards the next line according to Gann analysis.