Gann Theory

Gann: the biography of a Mathematician
W.D. Gann was born on the 6th June 1878 in East Luftin Texas and he spent his early years working as a clerk in a cotton warehouse. This was a far cry from Wall Street where he later became a legend as market dealer.

Gann began trading the stock and commodity trading markets when he was 24 years old. He then moved to New York City in 1908 and there he opened his own brokerage firm called W.D. Gann, on the corner of Broadway and 18th street.

In 1909 during a 25 day period and while being observed by a journalist from the magazine Ticker Tape, Gann transacted 286 trades in the stock market, both buys and sells. He made a profit on all of the trades except for 22 of them and by the end of the 25 day period his capital had grown by 1000%.

As his career progressed so did his following on Wall Street. He started to forecast stocks and commodities, and had his forecasts published. They were known as Supply and Demand forecasts and he confirmed a knack of forecasting the start and end of market trends. In his 1929 annual forecast he predicted the peak of the 1929 bull market a clear nine months before it happened. His knack of correctly predicting the start and the end of a trend earned him the title of ‘Guru of Wall Street’.

Gann devoted his life to observing the financial markets and their relationship with human nature. He spent years trying to understand why the markets moved and what was behind their movement. While doing this he developed a number of theories that were based on mathematics.

As the English markets had a much longer historical record Gann spent many years studying price history in England. He worked very hard and started to perceive the repeating patterns in stock and commodity prices. He concluded that market movements were based on a natural law and he devoted most of his time study this law and its applicability to speculation.

Gann discovered ‘Master Time Factor’ and ‘Time Period’ and he believed that the markets moved in cycles due the law of action and reaction. He determined from studying the past when the major cycles occur and applied it to the future to forecast what would occur in the future. He developed the technical analysis tool called Gann angles which is based mathematics, astrology and geometry. He also wrote several books on his theories.
Gann died in 1955 in his 77th year.
The History of Gann Theory
Soon after Gann started working in a broker’s office he noticed that stocks and commodities fell and rose in a pattern that occurred periodically. He concluded that the markets moved due to a natural law. Gann commenced a period of hard research on all the known sciences and in the end discovered the Law of Vibration. This law enabled Gann to determine the precise points to which commodities and stocks fall and rise within a certain time frame. This particular law establishes the reason and forecasts the outcome on the market long before Wall Street is aware of anything.

Gann studied the markets and particularly their history and the mass of statistics that accompanied them it became obvious that particular laws rule the changes and deviations in the value of stocks and behind all this is a cyclical law which periodically repeats itself. There are observations that show that there are periods of extreme action followed by periods of idleness. Gann was able to not only apply his law to huge market swings such as occurred during cycles of economic upturn or cycles of economic downturn but he also could apply it to hourly and daily swings. He discovered the precise vibration of individual stocks and at which exact point the stock or commodity (like silver, gold and oil trading)would meet the greatest resistance or biggest support. Gann discovered that completely different rules apply to a rise in a stock as opposed to a decline in a stock.

Gann surmised from his studies and tests that everything is in a state of vibration, not only the stocks themselves but also the forces that controlled the stocks. These vibrations can only be recogniszed by the movements they generate on the stocks and the stock values in the market. Since all large movements in the market are cyclic they perform in harmony with the periodic law.

Gann was satisfied that after he had spent many years in studying vibration he was certain that vibration explained every possible stage and state of the market. Gann also confirmed that through the Law of Vibration stocks and commodities are not unlike atoms and are energy centers so therefore they are actually controlled by mathematics and like atoms attract and repel, which accounts for why stocks and commodities sometimes front the market but at other times don’t move at all.
Natural Cycles and Financial Astrology: Gann
As well as being a trader, a forecaster of stocks and commodities trading, a financial analyst particularly using his version of time cycles and time factors, and a mathematician, he was also a financial astrologer. Since Gann introduced his cycles and angles theories people have realized that the numbered cycles he used are simply astrology numbers. Gann often said that the important point about cycles is identifying the time when they will reverse.

Gann actually used different cycles in his own life and he even used them to predict other things apart from stocks and commodities. He predicted economic events, natural disasters, wars and the outcome of sports and competitive events. Gann saw several factors as being key to trading successfully in the market.

Gann always preached that knowledge was the key to be a success in the market. He realized from an early age that natural laws were the driving forces that moved the markets. He himself studied the relationship between the natural laws and the markets for a period of at least ten years. He claimed to have spent these ten years travelling to England, Egypt and India to gain the knowledge he needed. He also spent hours upon hours even nights in the British Museum studying ancient mathematics, geometry and astrology and relating them to the financial markets. Some techniques which Gann used in his technical analysis were derived from structures and shapes that had inspired him in Egypt and India.

When Gann returned from his knowledge travels he published his theories that the markets moved because they were governed by the ‘Law of Vibration’. Once this law was studies and understood anyone could tell what a future price would be at a certain time with unfailing accuracy. The problem with Gann’s theories which he claimed were based on ancient mathematics, geometry, numerology and astrology is that he never explained how his theories worked and the details of which are kept hidden. There is no doubt his theories work because Gann made millions from using them and today many traders use his angles theories as a technical analysis tool. Probably the most unbelievable Gann prediction was the one he made in 1909 when at the beginning of September with September Wheat trading at around $1 he predicted that it would sell at $1.20 before the end of September. On the 30th of September in the morning September Wheat was trading at $1.08 but Gann insisted that it would reach $1.20 before close of business. When the market closed on the 30th September Wheat was trading at $1.20 exactly as he had predicted.

According to his many followers Gann’s forecasts were up to 85% accurate which is an amazing ratio for predicting the markets.

Gann insisted that there were no market movements that could not be explained by his angles. He said that if he was given the historical prices and the historical timings he could use his mathematical and geometrical principles to forecast the future prices, market reversals and market trends. Gann’s proof was never shared but he always explained that his predictions were based on cycles and astrology.