An Introduction to W.D. Gannís Rule of 1/8ís
Rule of 1/8s Guidelines
- Markets will stay within Gann's Trading Range 40% of the time. Price movements within the trading range will characteristically be sluggish with a high degree of 'range-bound' action, where any 3/8's move will have a high-probability of a 1/8 retracement. Consider scalping 1/8 moves within the Gann Trading Range depending on the particular market you're watching & Market Internals.
- Any 5/8's move (or better) that stalls out at a Key Gann Level has a high probability for pullback. Therefore, if I'm Long or Short after any 5/8's move, I'm frequently taking some profit and/or moving my Stop tighter. IF the move is against the overall trend, I'll be looking for a reversal opportunity.
- The Strongest Support & Resistance Levels on any time frame in a Gann Frame are the 0/8 & 8/8 levels with travel beyond those levels averaging no more than 1/8 on the first move attempt.
My experience has shown the Even Levels within a Gann Box have a much higher degree of technical validity than the Odd Levels. Understand, illiquid markets won't show technical reliability/validity with any technical tool. Liquid markets will illustrate technical reliability/ validity. Therefore, the more liquid a market the more validity/reliability the tool will have.
This is how I plot and use the following configuration of a Gann Box illustrating only the Even Levels:
Gann assumes ALL markets are the same, in that they are traded by what he calls mobs and therefore are driven by the same emotional mob behavior that moves every market.
Mark Likos can be contacted at Trading Views