Gunn writes in his famous or some people feel infamous course on commodity trading: “You can make a fortune by following just this rule.” What he was referring to was the all-important 50% Fibonacci retracement rule. Also called by Gann the “average” or “half-way point”. The rule is very simple, you take a recent high and subtract the extreme low of the price stage (or vice versa), divide by 2. You will then use that price point as a buy or sell opportunity, depending on whether prices are coming down from the top or rise from the bottom.
When the market cannot hold that level from a high (it will break) If it holds, the old high will be challenged (I then look at the price action at the end of the High bar, not the overall high) or will be pushed down by a rally is an indication that the entire move will be tracked. Again, I would look at the close of the lowest bar to be looked at with the price action, not the ultimate bottom.
The “angle of death” was used as an important indicator of time and cost. This is a Gann line that is 45 degrees drawn up from the bottom. (I also use it, drawn from the top and cast as minus 45 degrees into the future.) When that 45 degree line can’t hold, Gann considers the initial move up or down. Hence the name “Death Corner”
I have worked with this Angle for many years and find it a fantastic way to gauge market prices. However, there can be many breaks up and down through this line (creating the old chainsaw not covered by any health insurance in the world) and this led me to discover what I call vector trading using this line and two other important angles. It can be used in an area of the market where I think the bottom is locked or the top is locked. These areas are easily calculated and constantly changing. They are my lines in the sand for short term or long term breakouts. I will introduce you to the other important vector trading angles and how to use them for precise entry and exit. These levels can stick to a tight stop loss and you will immediately know if you are on the right side. Which is always good.
OK, what are the other two important angles and where the hell did I get them? Well both are discussed in Gann’s theory, but one is a time factor that I just converted to an angle. My angles are 36 degrees and 21 degrees (the time factor converted to an angle is also a Fibonacci number) used with 45 degrees of Gahn. To use them in your charts, draw a 45 degree Gann line from the bottom, from the same bottom draw a 36 degree line and also a 21 degree line. Watch how the market uses them for support and resistance. These angles can help you with all market movements.