Swing trading takes advantage of the tendency for prices to ebb and flow in the short-term, to move in directions against the trend, and to reestablish that trend again. Wait for the counter trends to occur and then trade in the direction of the trend.
One of the simplest of Gann’s methodologies is the use of swing chart patterns as a study of market swings. The construction of a swing chart results in what Gann called a trend line indicator. Using the high and low for the period, whichever exceeds the previous period becomes the trend line indicator. Market swings are the true reflection of price movement and that means we can all know that ‘Price tells the trend’. It’s the simplest way to keep our mind focused on market direction at the beginning of a new swing and exiting at or near the end of that swing to await the development of a new swing trading opportunity.
The illustration shows a 2-bar swing concept. A 2-bar swing chart measures swings only after the market has made two higher highs or two lower lows without an interrupting counter move. A 3-bar swing chart requires three higher highs and three lower lows.
Gann swings are shown in Ensign using the Pesavento Patterns draw tool. Go to the Pesavento Patterns property form and change the Study Mode to one of the 5 Gann selections. Ensign can display 1-bar swings through 5-bar swings.
The Gann swings look like this 2-bar swing example. The counts are shown using the colors selected for the Up Trend Marker and the Down Trend Marker. The Pesavento Patterns, Support and Resistance levels, and Fibonacci levels can optionally be added to the swings.