The Basics: Pattern, Price and Time
The three basic concerns of Gann theory are pattern, price and time. By "pattern" Gann meant identifiable and recurrent price formations in charts of stocks and commodities. Gann taught that these patterns could be recognized time and again, and could be used to forecast price movements since these various patterns always tend to repeat.
Role of Scientific Law
Gann considered the key to his success a theory he formulated based on his study of scientific laws and his observation of the laws governing the motion of bodies, which he called the "Law of Vibration". He insisted that his scientific law governed the motion the motion of everything from humans to planets, and could also be seen in the marketplace. He described his discovery of this law in detail in an interview he gave to Richard D. Wyckoff, editor of The Magazine of Wall Street, in the early 1900s. Part of that interview is excerpted below:
Gann: The Mathematician
Gann possessed an extraordinary gift for mathematics. He was a mathematician by nature, so it only followed that much of his technical theory should be concerned with numbers and with mathematical relationships in the markets. Certain numbers took on a special significance in his work, namely, 16, 25, 36, 49, 64, 121, and 144. His numerical theory of the market was based on his study of the Bible, along with ancient Egyptian number theory.
Time: The Strongest Market Influence
According to Gann, time had the strongest influence on the market because when time is up, the trend changes. Concerning the importance Gann assigned to the time factor, consider the following Gann quote, in reference to his analysis of the October Eggs futures contract: