The indicator is based on W. D. Gann's method of retracement studies. Gann looked at stock retracement action in terms of Halves (1/2), Thirds (1/3, 2/3), Fifths (1/5, 2/5, 3/5, and 4/5) and more importantly the Eighths (1/8, 2/8, 3/8, 4/8, 5/8, 6/8, and 7/8). Needless to say, {2, 3, 5, 8} are the only Fibonacci numbers between 1 to 10. These ratios can easily be visualized in the form of division of a Circle as follows :
Divide the circle in 12 equal parts of 30 degree each to produce the Thirds : 30 x 4 = 120 is 1/3 of 360 30 x 8 = 240 is 2/3 of 360
The 30 degree retracement captures fundamental geometric shapes like a regular Triangle (120-240-360), a Square (90-180-270-360), and a regular Hexagon (60-120-180-240-300-360) inscribed inside of the circle.
Now, divide the circle in 10 equal parts of 36 degree each to produce the Fifths : 36 x 2 = 72 is 1/5 of 360 36 x 4 = 144 is 2/5 of 360 36 x 6 = 216 is 3/5 of 360 36 x 8 = 288 is 4/5 of 360 where, (72-144-216-288-360) is a regular Pentagon.
Finally, divide the circle in 8 equal parts of 45 degree each to produce the Eighths : 45 x 1 = 45 is 1/8 of 360 45 x 2 = 90 is 2/8 of 360 45 x 3 = 135 is 3/8 of 360 45 x 4 = 180 is 4/8 of 360 45 x 5 = 225 is 5/8 of 360 45 x 6 = 270 is 6/8 of 360 45 x 7 = 315 is 7/8 of 360 where, (45-90-135-180-225-270-315-360) is a regular Octagon.
How to Use this indicator ?
The indicator generates Gann retracement levels between any two significant price points, such as a high and a low.
Input :
Swing High (significant high price point, such as a top)
Swing Low (significant low price point, such as a bottom)
Degree (degree of retracement)
Output : Gann retracement levels (color coded as follows) :
Swing High and Swing Low (BLUE)
50% retracement (ORANGE)
Retracements between Swing Low and 50% level (RED)
Retracements between 50% level and Swing High (LIME)