Gann believes that there are natural laws of the universe in the stock and futures markets, and the running trend of market prices is not chaotic, but can be predicted by mathematical methods. The essence of Gann's theory is to establish a strict trading order in a seemingly disorderly market.
Using Gann theory, it can be used to find out when the stock price will be adjusted back and what price it will be adjusted back to.
First, the basic structure of Gann angle line
Gann angle line is defined by time unit and price unit. It starts and ends with the important high and low points of the stock price, and then draws eight angle lines according to different angles. When the stock price moves to the angle line position, it will encounter obvious support or resistance.
The basic ratio of Gann Line is 1: 1, that is, the price runs one unit per unit time. There are also 2: 1, 3: 1, 4: 1, 8: 1: 2, 1: 3, 1: 4, 1. Among the eight angle lines, the most important ones are 2: 1 and 3: 1.
The rising Gann angle line is a straight line extending from the bottom of the market to the upper right, and the falling Gann angle line is a straight line extending from the top of the market to the lower right. Draw Gann Angle Line as simply as possible. The correct starting point should be chosen from the price, and the time when the relative high and low points appear is also very important.
Through the Gann angle line, it is easy to find the possible support level and resistance level, and better grasp the trading opportunities. When the stock price falls to a certain angle to get support and there are obvious signs of stopping falling and rebounding, investors can buy moderately. After that, if the stock price effectively falls below the support line, it should stop loss and sell decisively. When the stock price rises to a certain angle and meets resistance, there are obvious signs of stagflation and decline, investors should sell decisively. After that, if the stock price effectively breaks through the resistance line, it can re-enter the market to buy.
Second, the operating principle of Gann angle line
The operating principle of Gann angle line mainly includes two items: one is the principle of market movement; The second is the principle of time and price movement.
1. Market movement principle
Market trends are graded, big and small. In each stage of movement, it will rise or fall at a certain rate or a multiple of that rate. At the same time, the speed of large-scale movement determines the speed of the next stage of movement.
That is to say, if the large-scale movement of a stock rises at a rate of 50%, then the next level of movement in this level will also rise or fall at this rate or a multiple of this rate. In the same way, the same is true for the next level of sports. Because of this, we often see that some stocks tend to shrink or diverge.
Because of this rule in stock price operation, it is possible to predict stock price changes.