23
Jan
2020
What are the Gann Swing Charts?
Analysing price action from chart patterns could be a difficult task. Spotting trends early on as they develop takes experience. Moreover, this analysis is subjective. Not all traders have the same technique to identify trends, leading to inconsistent decisions. This is where swing charts can help.
Swing charts remove unnecessary noise from price charts, so that the interpretation of price action becomes easier. Trends can be spotted by looking for progressively higher highs or lower lows. By using them with other technical indicators, traders can make decisions regarding stop-loss and take-profit points. One of the earliest swing chart strategies was created by William Delbert Gann, a renowned 20th century market theorist.
Gann Charts
Gann stated that markets follow mathematical rules and that there exists relationship between price and time. He devised a strategy to identify the swing ‘highs’ and ‘lows’ on the chart. There are 4 basic aspects in Gann swing charts:- Up day- Higher high and lower low
- Down day- Lower low and lower high
- Outside day-Higher high and lower low
- Inside day- Lower high and higher low

Example of bars showing higher high and lower low
A trend line indicator moves from highs to highs on each up day in an uptrend, until a reversal occurs. When that happens, it would qualify as a down day or an outside day. The trend line has to move in 3 up days consecutively, to qualify for an uptrend. Similarly, in a down trend the trend line moves from lowest lows of one down day to the next. This happens until an up day or an outside day happens. When an outside day happens during an uptrend, and the high is reached before the low of the day, the trend indicator will go towards extreme price levels before reversing to the low of the session. In case the low is reached before the high of the day, the trend indicator will continuously move higher towards the high of the session. The trend line indicator doesn’t react to an inside day. These market swings can be considered important indicators of true price movements. They help traders to stay objective and focused on market direction. Swing pivot-highs and pivot-lows can be used to identify support and resistance levels. Gann swing charts can remove the element of constant time interval from price data. Each line represents an indefinite period of time; as many days as the market moves along the current trend.