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When it comes to WD Gann Grid trading, MetaTrader provides excellent free grid drawing tools for professional traders. However, many traders struggle to use it effectively in their trading strategies.
In this tutorial, we will cover all the fundamental components of a grid chart and learn how to integrate it into your daily forex and CFD trading.
What is the WD Gann Grid Indicator?
The WD Gann Grid drawing tool allows you to plot support and resistance levels with timing. When charted correctly, it is visually appealing and can assist with the following trading aspects:
- Entry Points for Trades
- Exit Points for Trades
- Stop Loss Placement
- Trail Stop Loss Implementation
- Setting Profit Targets
Components of the WD Gann Grid:
The Gann Grid is composed of three major elements:
Bullish Grid Lines & Channels:
This channel is formed by two diagonal bullish grid lines. If the market consistently rises within this channel, it indicates a bullish trend. However, it’s important to note that sticking to a single bullish channel is not always necessary due to market imperfections. Let’s explore an example for better understanding.
In the instance of the AUDJPY (Australian Dollar/Japanese Yen) pair shown above, the Gann grid is plotted from point A to point B on the chart. Points A and B represent higher low points. The trend appears to be moving toward the next bullish grid channel. In this case, the target could be around the next marked conjunction points or potentially before another conjunction point near 95.09.
Another example with the same pair involves plotting the Gann Grid from point A to point B, where a higher low is identified. Point C interacts closely with our grid levels, affirming the accuracy of our plotting. Following the sharp downtrend from point C, a short pullback is observed, providing a potential buy entry point. The last pin bar low could serve as the stop loss.
Another example with the same pair involves plotting the Gann Grid from point A to point B, where a higher low is identified. Point C interacts closely with our grid levels, affirming the accuracy of our plotting. Following the sharp downtrend from point C, a short pullback is observed, providing a potential buy entry point. The last pin bar low could serve as the stop loss.
Bearish Grid Lines & Channels:
The bearish channel is established by two diagonal bearish grid lines. A market continuously falling within this channel signals a bearish trend. Just as with bullish channels, it’s important to recognize that a single bearish channel may not always hold due to market dynamics. Refer to the example below for clarity.
In the above images, the Gann grid chart is plotted from point A to point B, representing higher or low points. The occurrence of a double-top pattern suggests a bearish trend. The chart clearly depicts the market descending within the bearish Gann grid channels. At one juncture, it breaks even lower into the next channel, presenting a potential sell entry opportunity.
Conjunction Points:
Conjunction points are areas where two diagonal grid lines intersect. These levels hold significant importance as they often mark trend changes or continuations.
In the image above, drawing WD Gann grid lines from point A to point B, a higher low is established. A minor correction takes place near the conjunction point during the uptrend, followed by a breakout to a higher high. Notably, a double-top pattern forms around the conjunction points.
After breaking the initial bullish trendline formed by points A and B with a substantial downward bar, the trend continues to reverse, crossing below points A and B.
Setting Stop Losses & Trail Stops:
Following a breakout, it’s advisable to place the stop loss at the pullback low for sell positions or the last pullback high for buy positions. Continually trail the position as long as the market creates higher highs or lower lows. This approach can yield greater profits over time.
Final Thoughts:
The grid chart layout is an invaluable tool for quickly identifying market structure. With practice, your eyes will become accustomed to interpreting it with just a glance. Utilizing additional indicators like RSI and moving average crossovers for confirmation on entry and exit points can enhance your trading strategy.
