Trading NIFTY with the Gann’s Square of Nine
Dive into the world of a legendary trader named W.D. Gann and a powerful forecasting tool he created called the Wheel of Nine. With a hunger to tap into its full potential, countless traders enroll in expensive courses, hoping to demystify the intricacies of Gann’s calculations. In this blog post, we introduce a revolutionary forecasting tool that automates complex calculations based on Gann’s findings. We created a TradingView indicator that calculates and draws support and resistance levels. This user-friendly tool will provide you with an edge against millions of other traders.
Price Projections More Powerful than the Traditional Fibonacci Tool
The “Wheel of Nine” was one of numerous forecasting tools created by W.D. Gann. By measuring the angles formed by market price movements and the segments of the “Wheel of Nine”, traders can make predictions about potential turning points, trend changes, and important dates when significant price action might occur.
What I did is that I used a formula that describes the relationships between numbers in the “Wheel of Nine” to create a powerful indicator for TradingView charting platform.
On the chart below you can see three Gann’s levels of support drawn but the indicator. The Gann’s Levels indicator for TradingView calculated them using only one data point, the maximum price reached in the late November 2022:
You can see that once price hit every level of support drawn by the indicator, it stopped trending down and entered into a consolidation phase.
The chart below shows how price reacted to the first Gann’s level of support, a 45 degrees projection down off the late Nov’22 top:
In mid-December 2022 NIFTY tested the first support at 45 degrees down level three times. The key moment for traders was when NIFTY failed to get back over that level on December 21, 2022 (the first down red arrow). This is when the basic law of the technical analysis kicked in:
“A broken support turns into a resistance.”
The very same pattern replayed in Jan-Feb 2023 when NIFTY tested the next level of support, the Gann’s 90 degrees down off the Dec’22 top:
Let’s zoom-in to better see the battleground around that important support at 17,645:
Based on that chart we can conclude that Gann’s level of support is when bulls try to stop decline. Another important takeaway is that price tends to undershoot important level of support but then bulls push it back over the support level.
On the chart above you can see that Nifty made an important low on Feb 1, 2023. If you are a trader the most important question to you is how high that bounce can go or where to expect bear to stop the corrective rally.
This Gann’s Levels indicator is the best tool that allows you to find the right answer. What you need to do is to pick that low as a new starting point and switch to upward projections in the menu of the indicator:
It’s time to learn a fundamental rule of trading using the Gann’s projections:
If bears fail to break a support of one of the Gann’s levels, we always expect bulls to start a rally and test the first level of resistance. The first level of resistance for any price move is 45 degrees up off the last major low.
Note that the corrective rally topped at the Gann’s level of resistance, the 45 degrees up off the low made on Feb 1, 2023!
It’s time to learn another key rule of trading using the Gann’s projections:
If bulls fail to break over a resistance at one of the Gann’s levels, we always expect a move down to the first level of support. The first level of support for any price move down is 45 degrees down off the last major high.
Look how bears pushed NIFTY down off the top made in mid-February 2023 to the first support level at 45 degrees down:
Note another rule of thumb that will improve your trading:
the first test of a Gann’s level of support or resistance has the highest probability of producing a strong bounce.
Note that bulls tried to reclaim the broken level of support 17,482 three times in late February — early March 2023.
Let me remind you one of our rules:
If bulls fail to break over a resistance at one of the Gann’s levels, we always expect a move down to the first level of support.
Note two red down arrows. They mark failed attempts of bulls to reclaim the broken-support-turned-resistance. The fundamental law of trading says:
“A broken support turns into a resistance.”
Let’s look what happened in March 2023:
Bulls failed to defend that support level at 45 degrees down off the mid-February top and price plunged to the next level of support, 90 degrees down, 16,827. The drop stopped only 40 points away from the Gann’s level of support.
Now let’s come back to first chart I showed you in that article. It shows projections off the top made in late November 2023:
Note how bulls stopped the whole move down at the 3rd level of support / 3rd target which was the 135 degrees down off the major top made in Nov’23. Bears tried to break it several times but failed.
Let me remind one of the fundamental rules of trading:
If bears fail to break under a support of the Gann’s levels, we always expect a strong move up towards the first level of resistance.
Note that price quickly rallied to the previous Gann’s level, the 90 degrees down off the November 2023 top and managed to slice through it. In majority of cases, when bulls push price over an important Gann’s level, it would come back down to re-test it from above. This is exactly what happened next:
Look at the green arrow on the chart above. It points to the moment when bears tried to push price back under the Gann’s level but failed.
This is when the fundamental law of the technical analysis kicked in:
“A broken resistance turns into a support.”
Our rule of trading the Gann’s levels says:
If bears fail to break under a support of the Gann’s levels, we always expect a strong move up towards the first level of resistance.
To calculate targets for a rally we simply move the starting point of the Gann’s projection to that new low made on April 20, 2023:
On the chart above you can see that the Gann’s levels indicator drew several target levels / resistance levels using only information of the last low made on April 20, 2023.
Those levels would help you to expect where price would meet resistance from bears for months ahead.
And the 180 degrees up projection almost nailed the September 2023 top!
Now look how a projection down off the September 2023 top nailed the bottom of a pullback on October 26, 2023:
Watch this introductory video where I explain how Gann’s projection work:
I hope I showed you enough examples to inspire you to study Gann’s works and their potential applications in technical analysis of stock charts and trading. This tool is much more powerful than widely used Fibonacci extension. Moreover, you really need to learn and practice a lot how to pick three points on your chart to produce correct Fibonacci extensions. This indicator only requires you to pick one point at your chart, either a local top or a local.
I offer that The Gann’s Levels indicator for TradingView as part of a package of my proprietary indicators:
You can start your subscription here.
Alternatively, you can subscribe for a yearly plan for this indicator only.
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Important Disclaimer
Neither the author nor the publisher of this article is registered as an investment adviser nor a broker/dealer with either the U.S. Securities & Exchange Commission or any state securities regulatory authority. Readers of this article are advised that all information presented here is solely for informational purposes, is not intended to be used as a personalized investment recommendation, and is not attuned to any specific portfolio or to any user’s particular investment needs or objectives.
Trading stocks, options, or futures carries a high level of risk, and may not be suitable for all investors. Before deciding to trade, you should carefully consider your objectives, financial situation, needs and level of experience. The author provides general overview of trading methods that does not take into account your objectives, financial situation or needs. The content of this article must not be construed as personal advice.
Past results are not indicative of future profits.
