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Theory behind Gann HiLo


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  #1 (permalink)
 turkmay 
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Can anyone tell me the basis for the Gann HiLo indicator....price, volume, momentum, etc.?

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 cory 
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turkmay View Post
Can anyone tell me the basis for the Gann HiLo indicator....price, volume, momentum, etc.?

I look at the code and it deals with price only but there is no guarantee that the coder follows Mr. Gann idea. Disclaimer: I have no idea of what was Mr Gann idea either.

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 Fat Tails 
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turkmay View Post
Can anyone tell me the basis for the Gann HiLo indicator....price, volume, momentum, etc.?

I do not know why this indicator is named after Gann. But if you look at the code, it can be easily understood:

It uses two moving averages with a short lookback period calculated from the lows and the highs. I have put them on a chart below. You will notice the SMA calculated from the highs (green) and the SMA calculated from the lows (red).
Consider the following areas

-> above SMA calculated from the highs (green): bullish
-> between the two SMAs : neutral
-> below SMA calculated from the lows (red) : bearish

Based on these two moving averages you can create a system which is always in the market (similar to the parabolic stop and reverse). These are the conditions

-> when price first closes below the red line: exit long and enter short
-> when price first closes above the green line: exit short and enter long

The width of the neutral zone can be regulated by the period and type of moving average that you use.

The original formula that I have seen does not specify that price should close above or below the bands, but I have found it more pertinent to use the close outside the channel to enter a position.

The width of the channel is about 1 average (true) range. In the chart below I have used a period of 12. You will get near-identical signals, if you use a SMA with a period of 12 and add/subtract half an ATR(12). Just to show how similar the results are, I have added a second chart below with the SuperTrend M1 (which comes close but uses a lagging range and a median, so that I needed to make a slight adjustment for the settings). Both indicators triggered 8 SAR signals during the last 2 hours of trading for ES on last Friday. Out of these

-> 6 signals were triggered on exactly the same bars
-> 1 signal saw the Gann HiLo leading by 2 bars
-> 1 signal saw the SuperTrend M1 leading by 2 bars

However, the SuperTrend allows to use a multiple of the average true range and not only one setting for the volatility as the Gann HiLow. So if you use the SuperTrend, you do not need this indicator.

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 turkmay 
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Thank you both for the info.

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Nandemoya
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Ooooooaaaaaaaa!!!!
Thanks a lot for telling the function of the GANN hi/lo!!! I never thought it can be that easy to rebuild the signal with just SMAs. Now I understand, why it give similar signals as SMAs, but is closer to the chart.
Thank You! Thank You! Thank You!

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 Fat Tails 
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This is an older thread. I have since posted the Gann HiLoActovator in 2012.

It allows you to use 27 different moving averages.

https://nexusfi.com/download/ninjatrader-7/indicators/1223-download.html?view

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Last Updated on August 2, 2013


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