FOREX

TRADING
FOREX TECHNICAL ANALYSIS
FOR 100% MONTHLY RETURNS

GANN TRADING FOREX SYSTEM

Don Chauncey
 Risk Disclaimer
RISKS ASSOCIATED WITH FOREX TRADING

Trading foreign currencies can be a challenging and potentially profitable

opportunity for investors. However, before deciding to participate in the Forex market,
you should carefully consider your investment objectives, level of experience, and risk
appetite. Most importantly, do not invest money you cannot afford to lose.

There is considerable exposure to risk in any foreign exchange transaction. Any

transaction involving currencies involves risks including, but not limited to, the
potential for changing political and/or economic conditions that may substantially affect
the price or liquidity of a currency. Investments in foreign exchange speculation may
also be susceptible to sharp rises and falls as the relevant market values fluctuate. The
leveraged nature of Forex trading means that any market movement will have an equally
proportional effect on your deposited funds. This may work against you as well as for
you. Not only may investors get back less than they invested, but in the case of higher
risk strategies, investors may lose the entirety of their investment. It is for this reason
that when speculating in such markets it is advisable to use only risk capital.

Risk Disclaimer

Trading foreign exchange on margin carries a high level of risk, and may not be
suitable for all investors. Past performance is not indicative of future results. The high
degree of leverage can work against you as well as for you. Before deciding to invest in
foreign exchange you should carefully consider your investment objectives, level of
experience, and risk appetite. The possibility exists that you could sustain a loss of
some or all of your initial investment and therefore you should not invest money that you
cannot afford to lose. You should be aware of all the risks associated with foreign
exchange trading, and seek advice from an independent financial advisor if you have any
doubts.

Benefits and Risks of Leverage

Leverage allows traders the ability to enter into a position worth many times the
account value with a relatively small amount of money. This leverage can work with
you as well as against you. Even though the Forex market offers traders the ability to use
a high degree of leverage, trading with high leverage may increase the losses suffered.
Please use caution when using leverage in trading or investing.
 Hypothetical Results Disclaimer

THESE RESULTS ARE BASED ON SIMULATED OR HYPOTHETICAL

PERFORMANCE RESULTS THAT HAVE CERTAIN INHERENT LIMITATIONS.
UNLIKE THE RESULTS SHOWN IN AN ACTUAL PERFORMANCE RECORD,
THESE RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, BECAUSE
THESE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THESE RESULTS
MAY HAVE UNDER-OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF
CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED OR
HYPOTHETICAL TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO
THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT.
NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS
LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THESE BEING
SHOWN.

The information that may be presented is based on simulated trading using systems
and education developed exclusively by MTI. Simulated results do not represent actual
trading. Please note that simulated trading results may or may not have been back-tested
for accuracy and that spreads/commissions are not taken into account when preparing
hypothetical results.

No representation is being made that any account will or is likely to achieve

profits or losses similar to those that may be shown. Past performance is not indicative
of future results. Individual results vary and no representation is made that clients will
or are likely to achieve profits or incur losses comparable to those that may be shown.
 COPYRIGHT AND DISCLAIMER
Copyright 2015 by Don Chauncey. All rights reserved.

No part of this publication may be reproduced or transmitted in any form or by any

means, mechanical or electronic, including photocopying and recording, or by any
information storage and retrieval system, without permission in writing from the author
(except by a reviewer, who may quote brief passages and/or short brief video clips in a
review).

Disclaimer: All the material contained in this book is provided for educational
and informational purposes only. No responsibility can be taken for any results or
outcomes resulting from the use of this material. While every attempt has been made to
provide information that is both accurate and effective, the author does not assume any
responsibility for the accuracy or use/misuse of this information. The author makes no
representations or warranties with respect to the accuracy or completeness of the
contents of this work and specifically disclaim all warranties, including without
limitation warranties for a particular purpose. No warranty may be created or extended
by sales or processed materials. The advice and strategies contained herein may not be
suitable for every situation. This work is sold with the understanding that the author is
not engaged in rendering legal, accounting, or other professional services. If
professional assistance is required, the services of a competent professional person
should be sought. The author shall not be liable for damages arising here from. The fact
that an organization or website is referred to in this work as a citation and/or a potential
source of further information does not mean that the author endorses the information the
organization or website may provide or recommendations it may make. Further, readers
should be aware that Internet websites listed in this work may have changed.
Table of Contents

Risk Disclaimer
COPYRIGHT AND DISCLAIMER
Introduction
Chapter 1: Behavior of the Market
Chapter 2: Science of Geometrical Angles
Chapter 3: Defining Correct Price Unit For 1x1 Angle
Chapter 4: Defining Correct Price Unit For 1x1 Angle across All Time Frames
Chapter 5: Drawing and Using the Gann Fan
Chapter 6: How to Trade on Support Points in Direction of the Main Trend
Chapter 7: How to Trade When Two Angles Cross
Chapter 8: How to Trade after Consolidation of the Two Angles
Chapter 9: Summary of the Rules
Chapter 10: Money Management
Chapter 11: More Examples and Explanations
Conclusion
 Introduction
I became a profitable trader not by luck, not by chance, not by rich parents or rich
acquaintances, and definitely not by university which I did not go to. I began my path
towards a wealthy lifestyle by learning about forex in a little room at the age of 19 and
nothing else but a desktop PC.

If you think that my success in trading has anything to do with luck or knowing the
right people you are wrong. It all has to do with practical knowledge and proper use of
science and use of your brain of course. But not any kind of “knowledge” is useful
knowledge. The knowledge must be real and correct and mostly, practical.

Imagine I would tell you right now to fly an Airbus A380 from Frankfurt to New
York without having a slightest clue how to fly a plane. Would you be able to do it? No.
But the pilot who knows how to fly a plane will have a very easy time taking off and
landing safely in New York. He will even have fun on the way. If you listen to people
who speak of impossibilities in trading successfully it is like listening to a guy who is
still learning to drive a bicycle telling you that flying a plane is not possible or too
difficult and you taking his word for it. Be the person who does not chat with people
like this. Be the person who simply learns what he or she wants to know and then do
what he or she wants to do using the acquired knowledge.

I have learned what I did about trading and investing from the most profitable
trader of the mankind’s history and adopted his findings with my own findings. That man
was William Delbert Gann. I am trading with accuracy and profitability beyond my
initial expectations, and even those were high. His methods and his knowledge enabled
me to see the market in a whole another way that I was not able to see before and I
dedicate this book to his methods of trading and explain how to use those methods to
make consistent profits in the forex market.

The beauty of my trading does not come from money management, which is the
least important thing in trading if you do not know how to trade in the first place. The
beauty of my trading comes from knowing and understanding the market behavior and
then following the trend. The only way I separate myself from other traders is that I
know what the market will do and do not speculate.

To trade with profitability in any market you must go beyond fear, hope and
aftermath blame, and begin a path of exact knowledge where emotions no longer open
your trading positions but exact science does. The only way you can know exactly at
what time the sun will rise tomorrow at your place is due to exact science. The same
goes with trading.

Mathematics is the only exact science and by understanding the simple science of
mathematics and how they apply to markets you can easily master any market in this
world from forex to shares to commodities. To make things easier for you, I will tell you
that all markets in this world follow the same principles and by understanding those
simple principles you will be able to trade anything you have access to, and not just
forex market.

Understand the following before you read this book: I will not teach you basics
of forex trading. I might mention a thing or two but in general I will assume that you
already understand the basics of trading such as trend lines, candlestick formations, and
have an idea of how useless standard indicators are in predicting the market. If you have
basics checked, you will make a very good use of my book and become a very good
trader yourself quite quickly I believe. If you don’t have those checked you might need
to learn some basics before you can understand this book. But do not worry. Even if you
are an absolute beginner you will still make a good use of this book. It is written in a
correct language and explained in detail so it is meant for everyone.
 Chapter 1: Behavior of the Market
Everything in this universe is governed by natural laws. From stars and planets
down to the atom. Human behavior is governed by natural laws as well. Understanding
how these principles apply to forex market and then using a plane of chart and proper
tools to identify people’s decisions about the market direction will make you a
profitable trader.

99% of forex participants are losing money because they cannot care less whether
they know even a tiny bit about trading or not and insist in gambling their money away
by asking advice from others. Trading with profits require no luck, no insider
information, no prior experiences, no public education but only simple knowledge. And
this is nothing out of reach. Once you have knowledge you can begin trading profitably
from the day one and only improve your trading afterwards.

If you look at any chart you see a 2 dimensional plane with time on the x axis and
price on the y axis, so you are dealing with a geometrical space. Both of them are
equally important in predicting the direction and strength of the market and turning
points where people change their general opinion and majority of market participants
trade in the same direction, making a trend. You must take both time and price into
consideration in order to fully understand what the market is doing and where it will be
going next.

Standard indicators that come with most trading software such as moving
averages, MACD, stochastic oscillators, and so on, are useless in predicting the actual
future of price movement because they only consider price changes and disregard the
factor of time and they show only price itself in a smoother way. They do not show
anything else but what you already see on the chart.

Price has a tendency to trend. What that means is what it means in every business.
When one product gets attention from the people, masses of people tend to follow it.
Not because they are smart but because they feel that if something is popular or “trendy”
it must be something they also want to have it and be part of it. Trends are usually
cyclical in nature so they have a tendency to swing up and down in a certain time
intervals.

The same goes to investing into businesses, commodities and currencies. If people
see that a particular currency starts to gain strength in comparison to another currency,
therefore in a currency pair, people naturally assume that there is something going on
and they want to profit from it. So if the price is rising over the last certain amount of
time people assume it will rise even more so they buy more of that currency and drive
prices even further up. The same goes for prices falling, or when the second currency in
a currency pair starts to gain strength.

As the prices start to move higher and higher more and more people start to sell
(or buy the second currency in a pair) simply because they think that price cannot get
any higher and will soon start to move back down and so we get fluctuations or
vibrations of the price that are moved based on how people’s decisions are being
influenced by their thinking, greed and fear. This is why there are so many swings on a
shorter time frame and longer time frame. We call these moves trends, simply because
price rise or fall for a certain duration of time without making any significant move in
the other direction. Every trend has little trends within and those little trends have even
smaller trends within.

Although there is a big trend of price moving up that can last for several years,
months, weeks or days, there will be many trends that can move up and down within this
bigger trend up. This is a natural occurrence and this is why many traders will agree that
the biggest profits can be made when you trade in the direction of the bigger underlying
trend just when the smaller opposite trend within this big trend has ran out of juice and
the prices will start to make another smaller trend up in the direction of the main
underlying trend. The same applies to the uptrends and downtrends.

The reason why trend lines work is because people make their decisions based on
fear and greed and the masses always work together as one and they are what moves the
prices. So when one trend gets exhausted it will change direction and once it gets
exhausted again it will change direction again and so on. And those turning points
happen at accurately measurable points in time and price which we draw on the chart as
trend lines.

Now, if you draw simple trend lines connecting several tops or bottoms in any
uptrend or downtrend you will see that price has a tendency to conform these lines
where the market as whole takes support from more people of the same opinion and
move on in the main direction or resist to go any further in the same direction and
entirely change the trend direction.

Here is an example of daily EURUSD chart where you can clearly see bigger
trends in a certain direction containing smaller trends or swings within the main trend
going up and down. Every time the market moves against the big trend it will hit a
certain support level from where it will start to move back in the direction of the main
trend. Those support levels are mathematically correct in nature and can be detected
with proper tools if you correctly analyze the geometry of the chart and do not take it as
a random occurrence, which it isn’t. So, every time those support levels are reached you
can trade in the direction of the main trend, be it up or down. I will soon discuss these
geometrical support and resistance lines.

You can go to smaller time frames or larger time frames of the chart and you
will see the same behavior of price on any time frame from monthly charts down to the
minutely charts. Once again, the best profits are made when you are aware in which
direction the bigger trend is going and then enter a trade every time the market makes a
shorter move in the opposite direction, takes support on one of the geometrical support
levels without going out of the main trend, and continue in the direction of the main trend
again.

You can trade this way on any time frame. I am particularly fond of using the daily,
weekly and monthly charts to do my analysis and trading decisions because they give me
a lot of free time during the days so I can live my life and do not spend it on staring at
the monitor. But hourly charts are just as useful in trading.

The trading method I will talk about is the most accurate way of determining the
main trends and determining natural support lines where market takes support to
continue in the direction of the main trend.
 Chapter 2: Science of Geometrical Angles
Every uptrend or downtrend is in a geometrical proportions with time and price,
which means that it has to move a certain price units and certain time units to complete
its cycle before changing direction again.

There is a point in any uptrend or downtrend where both time and price come into
balance, where price is neither faster on the x axis nor faster on the y axis. At that point
market is neither weak neither strong, neither rising neither falling but it is in perfect
balance. You identify that point by drawing a geometrical angle from any extreme top or
extreme bottom that travels one unit of price per one unit of time so it splits time and
price in half, giving us a perfect balance point between price and time. This line is also
called a 1x1 line, since it is drawn one unit pf price per one unit of time. Here is the
example of the same daily EURUSD chart with 1x1 line drawn on it:

This diagonal line, or 1x1 line is showing the balance point between buyers and
sellers and if this line is broken after the market was trending under it on the downtrend
or above it on the uptrend, you have a signal that the main trend will most likely change
direction.

This is not a random line. It must be drawn from extreme top or extreme bottom,
from the extreme beginning of the trend (on any time frame), and not from any other top
during the trend, and it must be drawn at one point of price per one point of time. This
line does not follow the price. This line requires only one point to be drawn and it will
stay fixed in the future at all times throughout the duration of the trend. It will not change
position.

From our example of a downtrend you can clearly see that as long as the market is
under this line it is in a downtrend and the moment it crosses this balance point of time
and price it begins a new uptrend.

Now, what you have to know is how much points of price can be taken as one unit
on any time frame. One bar always represent one unit of time, be it on the daily, weekly,
monthly or hourly charts, but one unit of price changes from one time frame to the other.

On our last chart of daily EURUSD, this line in particular is drawn at $0.00200
per day, so one unit of price is taken as $0.00200 (which is called as 200 points) and
one unit of time is one bar, in this case one day. This means that for every day, line
makes a move of $0.00200. So after 10 days, this line is $0.02000 lower from the base.
Why did I draw this line at 200 points per day and not anything else? I will tell you why
in the next chapter.

In our case we have a trend down and this trend will have several up and down
swings while the main trend moves down, which is clearly visible. While the trend
lasts, the price should never get out of the trend zone, meaning that the price does not
cross this 1x1 line and stay above it. On a downtrend, price should stay below this line
at all times from the extreme top to still be in an active downtrend and on an uptrend
price should stay above the 1x1 line (which would go from extreme bottom towards top
in a new uptrend).

You need to wait for at least 3 or 4 bars or more in one direction before you draw
this line so that you are sure that market is making a new trend. There is no use to draw
lines from tops and bottoms any sooner than that. And once the market makes several
bars in one direction you begin trading in the direction of the trend. I will explain how
to trade in a moment.

There are times when price is rising, making a smaller uptrend, but it is in fact
rising only to take support on a bigger downtrend and vice versa for the uptrends, like
we can see in our example. With a mathematically exact tool such as this, these market
behaviors are instantaneously spotted and identified with absolute accuracy so you can
never enter the market in the wrong direction by misunderstanding price behavior or not
knowing exactly where market is going.
 At many times or at least at one point in every trend that 1x1 line will be reached
and then the market will usually either bounce from this line (taking support) without
breaking over it and continue back in the main direction or move over this line starting a
new trend in the opposite direction. To see the same chart again, you can see that the
market took support on this line and made another swift move down and the second time
it reached this line it went straight through and began a new uptrend.

This 1x1 line is your most important trend line of all trend lines you can have
drawn on your chart. It is scientific in nature and it splits time and price into half so you
know that as long as the price is under this line on the downtrend you are still in the
downtrend and as long as it is above this line in the uptrend (drawn from below going
up) it is in the uptrend. Just this information alone is a powerful piece of information.

I draw a second 1x1 line on the same chart that is the support for the uptrend.
 What confuses many new traders who get to know Gann angles and his methods of
trading is that they read that his angle must be drawn at 45° but they do not understand
what that really means and why did Mr. Gann say so.

If you randomly draw a line at 45° on your current chart as you see it and then
shrink or stretch the price chart, this 45° angle will completely change the position
based on the price so it becomes useless to trade with it, so you would need to scale the
chart correctly so that it is in perfect proportions with both time and price at all times,
and only then you could use the angle drawn at 45°.

There is a good reason why Gann spoke of this 1x1 line as a line of 45 degrees.
You have to understand what 45° really means. The following two examples are from
the same price range and both have a 45° angle drawn on them but you can clearly see
that as I stretch or shrink the chart, the price will change position with respect to the 45°
angle, so to get that angle at the correct position you would need to scale the chart to
stay at predefined price per time units.
Now, what is really important is not that the 1x1 line is set at 45° going either up
or down on your chart. This is how mr. Gann was drawing his charts simply because he
was drawing charts by hand and so he drew them on a paper with 1/8 inch squares
where one point of price made the same distance as one point in time (in inches), so his
1x1 angle always came out to be drawn at exactly 45°. He could not stretch or shrink his
paper charts, so his 1x1 angle was always drawn at 45°. However, it is not degrees of
this angle that are important but that this line is drawn at one unit of price per one unit of
time, and this why Gann also talked about this angle as 1x1 angle most of the time and
not as a 45° angle.

Due to computers, you can stretch or shrink the chart on the y axis as well as on the
x axis while having 1x1 line drawn on it, and this 1x1 line will change the angle in
degrees, but it will still stay on the same position relative to the price and still giving
accurate results, still being drawn at one unit of price per one unit of time. Instead of
thinking about degrees, think about how many price points per one time unit a line is
drawn at.

So, if you would need to draw 1x1 line at 200 points per day, you could also scale
the chart to be drawn at 200 points per day and then this 1x1 line would also come out
to be drawn at exactly 45°. But still, what matters is that this 1x1 angle is drawn at 200
points per day and not that it comes out as a 45° angle.

I use Metatrader 5 free trading software to do all of my trading and analysis and it
is far the best trading software out there, especially for drawing the angles. All
graphical material in this book is taken from the MT5 trading software and I highly
recommend you to use it as well. You can download it for free from the official website.
 Chapter 3: Defining Correct Price Unit For 1x1 Angle
It is very easy to draw the angle in MT5 because you only need to select “Gann
Angle” tool and draw it from any extreme top or bottom of the trend and specify how
many points per bar you want the line to be drawn at. The line will automatically attach
to the top or bottom and get aligned to your settings. In our previous chart example, you
would need to draw this line at 200 points per day or $0.00200 per day.

To make sure you understand that common misconception of degrees, forget about
drawing the angles at degrees such as 45° for 1x1 line, because degrees are completely
irrelevant and your angles will not be drawn at exact degrees on your computer
software once you put them on, unless you would also scale your chart so that this line
aligns with 45°.

So, how do you identify how many price points should be used as one unit of
price?

In cases where a currency pair trades at lower prices, below $1.00000 or below
$100.000 and lower, $0.00100 (100 points) or $0.100 (also 100 points) per day must
be used as a 1x1 line.

This is because price fluctuations are always relative to their current strength of a
particular currency and so although it takes the same amount of days for one move to
complete, it will take more or less price units based on how strong one currency is in
comparison to the second currency in a pair.

At $1.00000 both currency pairs are equally strong, meaning that the same amount
of wealth is held in each currency throughout the world. At $2.00000 first currency is
twice as strong as the second currency and at $0.50000 the second currency is twice as
strong as the first one. And the same goes for anything in between or above and below.

If the price for EURUSD is at $2, that means that you need $2 to buy 1€. If it is as
$0.5 you need only 50 dollar cents to buy 1€. So you need much more or much less of
one currency to buy 1 unit of another currency.

In other words, if you have $0.5 and the market price for EURUSD is at $0.5 and
you want to have twice as much dollars you need 1€ to increase your worth by 2. So you
buy $0.5 more with €1 and you are now at $1.
 Now, you have $1 in total. After some time market price for EURUSD gets up to
$1.0. Once again, you want to double your entire worth of $1. Now that the price for
one dollar is exactly one euro, you need €1 as well, to increase your worth of $1 by 2.
So you buy $1 more, again with only €1 and you are now at $2. And so on. As entire
world’s market does this, they spend the same amount of euros to move the price from
$0.5 to $1.0 than they spend to move the price from $1.0 to $2.0 or even from $2.0 to
$4.0.

This is why the stronger the market is in one particular currency, greater the
fluctuations will be in price units simply because you still need the same amount of lot
size of the other currency to buy the second currency in a pair. And all traders trade with
the same lot sizes more or less in their trading because it costs them the same amount of
money, only that once they exchange the dollar for euro they either have more or less of
the second currency for the same amount of the first currency.

So if EURUSD would be trading below $1.00000, at $0.75000 or around, 100

points per day is a correct 1x1 line. If it would trade between $1.00000 and $2.00000,
then you have to use 200 points per day to get the correct 1x1 line. Above $2 and less
than $4 you need 400 points per day to get a correct 1x1 line. So you have to use a
bigger or smaller amount of price units as one point of price while you keep one point
of time as it is.

That goes across all currency pairs. You always double or halve the basic unit,
which is 100 points per day across all currency pairs based on how high the price is
trading, or (0.00100 or 0.100 of the value of a particular pair).

Use 50 points per day for 1x1 line if price is in the range between $0.25 and
$0.50. Use 100 points per day if the price is in the range of $0.50 and $1.00. Use 200
points per day if the price is in the range of $1.00 and $2.00. Use 400 points per day if
the price is in the range of $2.00 and $4.00. And so on. If the price happens to make its
trend going from one range to the other then you simply use one of the values that seem
to provide the best angle. That goes for all currency pairs.

For the currency pairs that are trading at hundreds such as $100.00 and so, you use
the same principle and you use 100 points per day when price is ranging between
$50.00 and $100.00 and so on.

One point of price is considered a last digit in a price. That will either be
$0.00001 for EURUSD and similar currency pairs or $0.001 for USDJPY and currency
pairs that trade in hundreds.
 All of this is done one the daily chart. On other time frames the principle is the
same only different price units apply. More on that later.

This simple science of relativity is clearly visible on the following examples and
if you draw the lines yourself right now on any daily chart of your choice you will see it
in practice yourself.
 First daily chart of EURUSD is taken from the year 2001 when the price was
ranging between $0.83000 and $0.93000. I have used 100 points per day or $0.00100
per day to draw a 1x1 line from the extreme low, which splits time and price in half for
that particular uptrend. As long as the price stays above this line the market is stronger
and it is in the uptrend and the moment it breaks under this line the market is weaker and
a new downtrend is highly likely. 200 points per day would clearly be too steep and 50
too shallow. You see that the line itself is not really drawn at 45°, and I could simply
stretch the chart a bit on the y axis and the entire setting would stretch. But degrees don’t
matter when we use computers, so I don’t care to play with the scale.
 The second chart of daily EURUSD is taken from the year 2010 when the price
was ranging between $1.19000 and $1.34000, and later higher than that. I have used 200
points per day or $0.00200 per day to draw a 1x1 line from the extreme low, which
splits time and price in half for this particular uptrend. As long as the price stays above
this line the market is stronger and it is in the uptrend and the moment it breaks under
this line the market is weaker and a new downtrend is highly likely. 400 points per day
would clearly be too steep and 100 too shallow.

In this particular case, price did not made a long downtrend after it has broken
through the 1x1 line coming from the first extreme low. Entire setting was just a small
downtrend before market continued back up again. I could easily draw another line
coming down from the last top to get a balance point on that new small downtrend. Once
the price has broken through this 1x1 line it started a swift long move up again.
 Trading itself is not conducted on the breakouts. This is what many traders think
when they get to know Gann angles and try to trade whenever a breakout occurs.
Trading itself is done when the market is making support on these lines and not on the
breakouts.
 Here is another example of daily EURUSD chart taken from the year 2013 when
the price was ranging between $1.27000 and $1.40000. I have used 200 points per day
or $0.00200 per day to draw a 1x1 line from the extreme high, and you can clearly see
that price was following the line all the way to the end of the trend and once it has
broken through it began a whole new uptrend without going under the last low. 100
points per day would clearly be too shallow for 1x1 line and 400 points per day too
steep for this particular setting.
 Here are two more charts of daily GBPJPY at two different times. First chart
shows the downtrend and uptrend of 2007 when price was ranging between ¥250.000
and ¥220.000, which is why I used 400 points per day (or ¥0.400 per day) to draw 1x1
line. When the price is below ¥200.000 and still above ¥100.000 I use 200 points per
day to draw 1x1 angle on GBPJPY. If it would ever go above ¥400.000 and still stay
below ¥800.000 I would use 800 points per day to draw 1x1 line.

You can see that only these lines split price and time in half in the current setting
and any other line would either be too shallow or two steep. The market clearly follows
these lines and those who are trend-line-fans will like this kind of trading a lot since
those trend lines provide perfect accuracy in determining trend direction and can use
these lines as support and resistance lines that will provide much better trading
decisions than simple trend lines connecting several tops and bottoms.
 The following is a daily chart of GBPJPY of 2012 when price was ranging
between ¥115.000 and ¥130.000, which is why I used 200 points per day (or ¥0.200
per day) to draw 1x1 line. Any other line but this would either come out to be too steep
or too shallow. It is usually very easy to determine the correct 1x1 line just by looking at
what the price was doing until that point when you draw a line and if the line appears to
be drawn at the right steepness or not.

1x1 angle will always give you the only exact support in any uptrend or downtrend
based on the pure geometrical science. No other line would show this true natural
halfway point between buyers and sellers but this 1x1 angle. Simple trend lines that only
connect two tops or two bottoms cannot be used at detecting true trend direction as these
angles can.
 Chapter 4: Defining Correct Price Unit For 1x1 Angle
across All Time Frames
You cannot use the same price unit on the daily chart as you do on the weekly or on
the hourly chart because you have less bars or more bars drawn for the same movement,
which is why you have to compensate for this change by dividing or multiplying the
value from the daily chart as many times as necessary to get the correct value for the 1x1
line on the time frame you are observing. One week has 5 days, and one month has 4
weeks (rounded) so if you draw 1x1 angle on the daily chart at $0.00200 (200 points)
per day, you need to draw 1x1 angle on weekly or monthly charts at $0.00500 or
$0.01000 per week or per month on majority of currency pairs.

One day has 24 hours, so you need to divide the value you use for 1x1 angle on the
daily chart by 24 and then multiply it by 2 as many times as necessary to get the angle at
perfect steepness. If you draw an angle on the daily chart at 200 points per day then on
the hourly chart you would draw a 1x1 line that goes up or down at 33.33 or 66.66
points per 1 hour (or $0.00033333… or $0.0006666 per 1 hour) to compensate for the
change in time frame and get the correct angles for H1 chart. If you observe the 3 hourly
or 6 hourly or 12 hourly charts than you use the same value as you use on the daily chart
only divide it by 2 as many times as necessary to get the correct steepness for the 1x1
angle on those time frames.

100 or 200 points per day is the basis for a daily chart across all major currency
pairs and crosses. On some more exotic pairs such as USDSEK you need to multiply all
values by 2 as many times as necessary, sometimes you can get up to 1600 points per
day on some pairs. But you do not use a basis of 1000 points per day on those currency
pairs although it might seem as a better idea. It is not. Once those currency pairs start to
trade really low you will use 400 and 200 points per day as well.

On XAGUSD (Silver) you need to use $0.060 or $0.120 per day to draw 1x1
angle, which is 60 or 120 points per day (that comes from 300/600 per week), and on
XAUUSD (Gold) you need to use $2 or $4 per day for 1x1 angle, which is 2000 or
4000 points per day or less or more if it is needed. Of course, as the prices start to rise
much higher or much lower you will have to double or divide by two these numbers as
well.
 Chapter 5: Drawing and Using the Gann Fan
Now that you understand the 1x1 angle and what information it conveys, you can
move on to the advanced use of the angles. By drawing additional angles left and right
of the 1x1 angle you get to know how strong the market is in its trend and when it is
taking true support on the bigger down or bigger up trend.

You should divide the space on the left side of this 1x1 line in half, where buyers
are twice as strong on the uptrend or twice as weak on the downtrend. That line goes up
2 price units for one time unit, and if 1x1 line was drawn at 200 points per day, then 2x1
line is drawn at 400 points per day. When the market is trading above 2x1 line on the
uptrend you know that it is stronger than when it is trading only above 1x1 line. Twice
as strong in fact, so it will make twice as much move in price as it will in time.

You should further divide the space between the 2x1 line and vertical line to get a
4x1 angle, where buyers are 4 times stronger than the sellers. In our case, that line is
drawn at 800 points per day. Again, when price is above this line on the uptrend you
know that the upward move is really strong and 4 times as strong as if it is only above
1x1 angle.

You should further divide the remaining space in half one more time to get a 8x1
line where buyers totally dominate the movement of the price and are 8 times stronger
than the sellers. In our example that line is drawn at 1600 points per day.

The same rules apply for the uptrend and for the downtrend. There is one more
line you can draw and that is 3x1 line, which splits the space between the 1x1 line and
the vertical line in 2/3, so it goes up or down 3 price units per one time unit. In our case
that would be 600 points per day. Gann said that 3x1 line is most useful on the weekly
and monthly charts or on the daily chart when the price is far from the base of the trend,
but I find it equally useful on the daily chart as well regardless of how far the price is
from the base of the trend.

This is how angles look on the chart. The following two examples are from a daily
chart of GBPAUD:
 You should also draw the angles on the shallower side of the 1x1 line which will
be your support and resistance points on the downtrend once the trend reverses.
 Those are all 9 most important angles that you need to draw from any extreme top
or bottom in order to get future natural support and resistance lines. If the market stays
above the 1x1 line on the uptrend it is strong and it is going up. If it stays above the 2x1
line it is twice as strong and more swift moves can be expected. If it stays above the 4x1
line then the market is really strong and above 8x1 line buyers are 8 times stronger than
the sellers and price is really rising straight up. The same rule applies to the downtrend.

All 9 important angles (4 on the steeper side and 4 on the shallower side of 1x1
angle) combined are called a Gann Fan, and majority of experienced traders have heard
all about it. Using Gann Fan tool in MT5 is very easy. You only select the extreme top or
bottom the fan will be drawn from and select how many price points per bar 1x1 line
will be drawn at and all other 8 lines are set automatically.

You need to wait for at least 3 or more bars in the same direction before you
decide to put a Gann Fan on the chart. This way you trade on more significant trends and
not on any minor move that happens. Minor moves on the daily chart would be traded on
the hourly charts (H1, H2, H3, H6 etc…) where you would get significantly more bars
to trade with and also enter the market much sooner as you do not wait until the day
ends. You would also exit trades much sooner. Hourly charts are for those traders who
like to spend a significant portion of their daily time trading.

One thing to mention at this point is that if you use Metatrader 4 platform to do
your analysis, do not use Gann Fan tool as it does not draw it correctly. Use only Gann
Line tool and draw every line individually. Metatrader 5 on the other hand draws Gann
Fan correctly so you can draw all 9 angles with a single click of the button. If you use
any other platform make sure that angles are drawn correctly. I have no experiences
with any other software so I cannot make any comments regarding those.
 Chapter 6: How to Trade on Support Points in Direction
of the Main Trend
Here is how trading in the direction of the trend is done, using angles as support
lines.

You draw a Gann fan from every extreme top or bottom so that you get future
support and resistance lines.

Every time in an uptrend when price is trading up and then it comes down and
rests on the 1x1, 2x1, 3x1, 4x1 or 8x1 angle, without breaking and staying below that
angle, you enter a long position on the first bar that closes higher than it opens after the
price rests on the angle.

When the price comes to the angle and takes support, one or more of the bars that
are on the angle must be exactly on the angle with either the high/low of either of the
bars or with the closing price of the first bar and second bar confirming the new swing
direction. First bar can also close on the other side of the angle and then the next bar
immediately regains the angle closing on the side of the trend again and you can enter as
well. If the bars strikes through angle and then it goes back and closes far away from the
angle that is a clear indication that market is likely to go through that angle pretty soon
so you do not make any trade.

What also matters is that the angle where price takes support was not yet broken
through from before. If that would happen that is an indication that this angle is not a
strong support since it was already broken through before and cannot be used anymore.

You always open a trade on the close of the bar so on the daily chart that would be
on the close of the day and not during the day when the result of that day is still
unknown. If one bar breaks through the angle and closes on the other side and then the
next immediate bar goes back over the line and closes on the other side again, you enter
the trade just as well.

Here are 4 examples of daily charts from four different settings. You can see that
on each chart price makes a top/bottom on the angle perfectly with first or with second
bar. After that, the next bar moves again in the direction of the main trend confirming
that this line is a strong support line and the market will continue. On the bottom left
chart you can see that the first trade did not made profits because the price hit the stop
loss before making any significant profit. But that is just fine since losing trades happen
rarely.

On the uptrend, stop loss is set just below the bar that rests on the angle and profits
are taken once the first bar with the body of the opposite direction is formed or you
manually trail a stop loss and place it under the low of every consecutive bar until the
stop loss is executed and you take the profits. Reverse the rule on the downtrend.

Here is a more detailed explanation of the entry points from the example of daily
EURUSD chart with one downtrend and one uptrend:
 Here are the 3 trades you would take on the downtrend:

You can see that there is another support on the 2x1 line after the second short
trade but I did not made that trade. I usually don’t enter a trade the second time on the
same angle unless that angle is 1x1 line. The market usually does not stay above 2x1,
3x1, 4x1 and 8x1 lines as long as it can stay above the 1x1 line.
 After the price breaks up through the 1x1 line after the downtrend and three
successful short trades, it comes back down to the same 1x1 line which now acts as a
resistance line and at the same time it takes support on the 1x3 line coming up from the
low giving us a double signal that market has reversed and has taken its first support on
a new longer uptrend that follows. The moment a white bar is formed and closed and
confirm that market really has taken support on the 1x3 angle and is continuing up, you
enter a long trade. These entry points should be easy to understand.

Never exit a profitable trade just because you are in some profits as you can very
easily see the price going on much longer and that will not make you happy. If there is
no reason to exit a trade, don’t.

Now, what you have to know about these lines is not just that prices have a
tendency to take support on them while trending, which gives us perfect opportunities to
enter the market in the direction of the main trend, but also that once any of the angles
are broken, price has a tendency to move to the next nearest angle and either take
support there or break through that angle as well going again to the next one. Once 1x1
line is broken, on the downtrend for example, you can expect that prices will rise higher
until the first shallower 1x2 line and so on.

We get three more long entry points on the new uptrend alongside the 1x1 line later
on. This is the accuracy that accurately drawn angles provide and you should get the
same accurate results on every chart if you draw the angles with the values I provide
and don’t make up your own values, what many inexperienced trades like to do with a
Gann fan.

Instead of trading on the breakouts of 1x1 line alone you wait for a first support on
a new trend and then trade in the direction of the new trend. This is what we have done
on our first long position in our example – the first arrow that points up.

You can see that I have made one more short trade on the new uptrend, so in a way
I was going against the uptrend. Here is why: when the price makes a top on one of the
angles on the shallower side from the previous high, you have an opportunity to go short
if you have an additional confirmation signals such as a “doji” bar formation as in this
example as well as confirmation from the other angles, in our case the 1x3 resistance
line going up from the last bottom. I would exit this short trade after the first white bar is
created and closed because I know I am going against the trend and if I have no reason
to believe that the market is turning down then I treat it as if it isn’t and take profits on
the first signal of potential higher prices.

Here is the continuation of the same uptrend:

The last trade in this uptrend is a bit different because price have broken through
the line, but still the same rule applies. Whenever the market breaks through the line,
closing below it, and then immediately regains the angle going back again closing above
it with the next bar, we consider this as a signal to go long as well, with the stop loss
just below this bottom. Why? This means that although sellers showed strength for a
short period of time, buyers confirmed that it is not the seller’s time yet and higher
prices can be expected again. You would follow the trend all the way up to the first
colored bar in the opposite direction with this trade in particular, getting profits of the 8
days. Rule is reversed on any downtrend occasion.

Know that under normal conditions you should trade only in the direction of the
trend, so when the price is above the 1x1 line on the uptrend or below the 1x1 line on
the downtrend and all the steeper lines. This is the safest way of trading and most
comfortable one as well. In fact, you can make a fortune by trading just on the 1x1 angle
alone every time the market makes support on it, and as a beginner you might find this
the easiest thing to do.

Whenever a market takes a support on the 1x1 line or steeper angles without
breaking over them you have an opportunity to trade and go with the trend. Price can
also spike through the line and then close on the other side of the line again, which is
considered an equal signal or close on the other side and then immediately going back
over closing on the other side again.
 Chapter 7: How to Trade When Two Angles Cross
As you become proficient at trading with the trend using angles as support lines
you can consider trading at turning points that form at the crossroads of two lines from
the two opposite trends. Trade when one angle on the right side of 1x1 line crosses with
another angle coming from the other direction at the same point where price itself
reverses and closes a first bar in the direction you want to trade in. Those angles can be
any of the 9 angles and not just those on the left side of 1x1 angle.

Take a look at the following daily EURUSD chart for examples where each top
and bottom is created where two angles cross – in both time and price. No other top or
bottom in between would be traded, simply because they are hanging in the air and have
no support from the two angles.

First short trade is an obvious one and it is in the direction of a new downtrend
that follows the basic rules of trading with the trend. Price broke through and went
below the 1x1 line from the previous long trend up, giving as a signal for a possible
trend reversal, and on the next bar it took support on the 1x8 line coming from the new
top. This is our entry point to go short. There could be more points at which to take
profits. I would close out half of the open position after the first colored long bar was
created and leave other part to compile into more. I would leave it open until that last
colored bar which hits 1x4 line coming from the top and the white bar was created and
closed.

Last three trades have a confirmation from the set of the two angles. Shallow lines
act as support lines and the steeper lines act as resistance lines. In each instance market
reverses where two lines meet. When the price hits a shallow support line and a steep
resistance line at the same time, making an obvious turn with a confirmation bar closing
in the same direction, the profitable trade is very highly likely. This can be a highly
profitable addition to your trading but use this system with caution. You are not trading
with the trend but rather at turning points.

Any use of indicators such as MA’s, oscillators, MACD’s and others is completely
useless and waste of your time. It is true that you can still make profits if you know how
to use those indicators in your favor, but it takes far more time to make the same amount
of money simply because you are never really sure where the market is going, where the
stop loss should be placed and when to close the trade. You have no real outlook of the
market behavior using standard indicators.
 Chapter 8: How to Trade after Consolidation of the Two
Angles
This kind of signal is very easy to spot and almost always results in good profits.

Whenever the price starts to narrow into the corner of the two angles from the two
different trends and those angles were not yet broken through from before, you wait until
the price breaks through one of the angles and you enter when the bar closes on the other
side of that angle in the direction of the breakthrough. The price must also be
below/above the 1x1 angle coming from the last top/bottom before the breakthrough
began. Here is the example of the daily NZDJPY chart:

You can see that price began to narrow and consolidate between the shallow 1x4
angle coming from the top (1) and 1x1 angle coming from the bottom (2). Neither of
those two angles were broken before. After 1x1 angle was broken downwards and
confirm the downward move with a closing price you enter a short position.

The price also stayed below the 1x1 angle coming from the last top (3). In fact it
even stayed below the 2x1 angle. You can take profits when the price gets close to the
1x2 line coming from the low (2). You can place a take profit a bit above the 1x2 line so
that once the price gets close to that line you take profits automatically. Remember the
rule that once the price breaks through one angle it has a tendency to go to the next one
below it? This is your good take-profit strategy for situations like this.

These consolidations between the angles happen all the time, mostly on the hourly
charts where you can take good profit in only few hours.
 Chapter 9: Summary of the Rules
Here is the sum up of trading rules:

1. Whenever a price makes a new move for at least 3 to 4 bars, draw the Gann fan
from that extreme low or high using the appropriate price unit for one bar based on the
time frame and price range of the currency pair you are observing.

2. Trade when (and if) price takes support on any of the steep angles in the
direction of the trend if that angle was not yet broken before. Whenever price comes to
the angle without breaking over it and the next bar closes on the same side of the trend
you enter a trade in the same direction. If the same bar already closes higher than it
opens you enter immediately. If the price closes under the line and then the next bar
immediately regains the angle and closes above it you enter as well.

3. Whenever a price makes a top or bottom at any of the crossroads of two angles
from two latter top and bottom, trade as well, with confirmed bar in the direction of the
new swing.

4. Whenever a price narrows in the corner of the two angles wait for a first
breakout and enter in the direction of the breakout when the bar closes.

5. Stop loss is always placed a small amount under the signaling bar in the uptrend
and above the signaling bar in the downtrend. Make some room for the price to move
and breathe and do not place a stop loss directly on the top or bottom.

6. Take half of the profits when you get the first bar of the opposite color as well
as trail the stop loss manually and place it below bottom of the every consecutive bar on
the uptrend until the stop loss order is executed and you take the profits of the second
half. Place a stop loss above every top of every consecutive bar in the downtrend.

----------

All of which you have just learned through the examples in this book apply to all
currency pairs, silver and gold as well as shares, indices and every other market with
different price per time units. The lowest time frame I ever trade on is a 1 hourly chart.
4 hourly chart is just as good. Weekly chart provides an outlook for the long term. Daily
chart is excellent. When you get a trading signal on a weekly chart you know that you
can expect a long-term trend in that direction that will last for several
weeks/months/years. Then, you observe the daily chart and start entering the trades on
every opportunity and start taking profits while the long weekly term is headed in its
direction.

You should also observe the monthly chart. This is your long term outlook and
when you get the signal on the monthly chart you know that you can expect a new trend
in that direction for several months, probably years. Then, you observe the weekly chart
for first signal in the new long trend that will follow. Then, you go down to the daily
chart and trade on every equal signal in the same direction as well.

You can always use the greater time frame for the bigger underlying trend
detection, and then use smaller time frames to enter several trades in the same direction
with assurance that price will be going on for quite some time.

Trading with the angles will keep you safe and secure from the traps of emotions,
which empty accounts of 99% of market participants. Hope, fear and greed are
eliminated once you have angles on your chart and clearly see what the market is doing
and where it is going on both smaller time frame as well as bigger time frame. This will
prevent you from taking the wrong trades in the wrong directions.

You are always free to use the angles in combination with any of your own
preferred methods of trading but I doubt that this will be necessary.
 Chapter 10: Money Management
You should use proper risk management, but you can trade with greater lot sizes
than you would with conventional strategies, simply because you risk much less by
understanding the market much more. Losing trades are greatly reduced by analyzing the
market with the angles, so you have much more assurance in a steady and consistent
profitability. This is what I have been experiencing so far and I am sure I will never
experience anything else because laws of the nature will not change anytime soon and
angles will always show the same natural balance points.

I use the following simple money management: I increase or decrease my lot size
on any single trade so that possible losing amount (entry minus stop loss) comes out at
about 5% of the account balance. You can of course decrease or increase this amount
per your own judgement and experience.

Due to the fact that you can usually have many open trades at the same time at any
time your equity will probably stay above your account balance at any time even if there
is one or more trades on the losing side at that moment. Also, because I manually trail
my stop loss orders on the trades that are in profits I count this locked-in amount
towards my account balance and increase the lot size for new trades as I progress
through trading.

If your account balance would fall for significant amount than you should also
decrease your new traded lots so your risk remains in 5% risk ratio at all times.

Money management plays no role in profiting and only serves a purpose of

protecting your capital and increasing it the fastest way possible while still staying on
the safe side.

Without managing your capital correctly you can find yourself investing too much
on potential losing trades and too little on potential highly profitable trades. Keep your
consistency in lot sizes and you will find it safe to trade that way.
 Chapter 11: More Examples and Explanations
Here is an example from the 1 hourly chart of GBPAUD. You enter on every
colored bar after the support has been taken or the line regained, and use a trailing stop
loss above the top of each bar. First three trades deliver a good profit. The fourth trade
did not really go far. This is why you have to use a manual trailing stop loss and place it
above the top of each consecutive bar so that if the prices reverse you still get some
profits or only a minor loss. Reverse the rule on the uptrend.
 Conclusion
This is all you really need to know about trading with the angles. Although the
book is short it cannot be any longer to say all you need to know.

Knowledge makes things simple and powerful. You can see how easy it is when
you clearly see if market is in the trend, how strong it is and know once it has reversed.
You can make a fortune trading on just 1x1 angle alone whenever the price takes support
on it and bounce off again to continue a trend. I usually trade only on forex and metals
because volatility is the best. You can also trade palladium and platinum which are also
easy to trade just as gold and silver are. Gold and silver generally move the same way,
so on many occasions you can trade on both at the same time in the same direction taking
profits on both of them.

All you have to do is draw the angles across your charts right now and start
trading when opportunities start arising. If you do not trade but only study the charts,
growing your wealth isn’t possible. If you limit your desires because of disbelief and
doubt than you are living way below your means and possibilities keep searching for
ways to have more money.

Do not enter the market at any time just because you want to trade. Trade when you
know for sure what is about to happen and you clearly know where stop loss order must
be placed and for how long the market might be going. If you find yourself in doubts at
any time, do not enter a trade. I can assure you that if you follow these simple rules of
trading and use proper angles as I described and trade only in the direction of the trend
you are on a sure way to fortune. You will quickly learn what the market is doing on any
occasion and your confidence in your abilities will increase as well.

I highly recommend that you read two of my other books that will give you an
insight into the world of silver and gold investing.

1. Silver Investing: http://www.amazon.com/dp/B00X2ENP8A/

2. Gold Investing: http://www.amazon.com/dp/B00WWUBH12/

All the best,

Don Chauncey
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