Gann Swing Trading

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WD Gann was a trader in the late nineteenth and early twentieth century. In 1909 his trading was invigilated for the month of October when he made 286 trades of which 264 were successful and his capital increased by 1000%

Of all methods, it is his swing trading techniques which have maintained to this day and which, often in modified form, are popular and used successfully.

The two basics of Gann's approach are , quite simply, to identify the trend change or the trend continuation.

The trend changes from up to down when a previous swing low formed during the uptrend is breached whereupon a sell signal is generated.

Thereafter, each time the instrument makes a new and lower swing high and then declines to fresh lows the downtrend is re-affirmed and a fresh sell signal generated. Most modifications - eg MarcRivalland's approach - seek an earlier sell signal than awaiting a fresh low.

Crucial to this approach is the identification of swing highs and swing lows. Here Gann is looking for subtantive corrections and seeks to ignore irrelevant market noise. He therefore defines a correction in an uptrend, leading to a swing low, as needing at least 3 consecutive days of lower lows (and vice versa for downtrends ie: 3 consecutive days of higher highs). Most modifications here either reduce the number of days or do not require the 3 days of lower lows to be consecutive.

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