Applying Gann’s Law of Vibration in Financial Markets
William Delbert Gann (1878–1955) claimed to have discovered a repeating pattern of time and price that allowed him to predict market tops and bottoms. He believed that collective behavior creates cycles over time, which he called the “Law of Vibration.”
🌊 Vibration Theory in Financial Trading
If group behavior creates a repeating pattern, then by calculating where the pattern will appear next, you can make precise predictions about the market’s direction. However, no one has ever clearly explained how Gann’s Law of Vibration actually works. In this article, we will explore the Vibration theory and its implications for financial trading.
🏛️ From Pythagoras to Gann -The Ancient Origins of the Vibration Theory
The origins of Vibration theory date back to the fifth century BC. The Pythagorean school (570–490 BC) studied the natural frequencies of various systems, such as strings and vessels, and concluded that a system’s natural vibration is an inherent property—appearing independently of any external excitation. Pythagoreanism held that everything in nature is interconnected, and the movement of one element generates harmonic associations, or vibrations, with all others in the system. Observation and mathematics were seen as the keys to understanding these natural associations.
Later, legendary analyst William Delbert Gann developed the “Law of Vibration” and used it to predict major movements in equity and commodity markets. Gann, a highly successful trader, combined mathematics and astrology to study key patterns and time cycles associated with market events.
Natural associations create patterns: “The pattern is said to emerge as a result of discontinuities in the perpetual processes of expansion and contraction within the cosmos. According to Mr. Gurdjieff, the discontinuities are a function of the Law of Seven, and the forces of expansion and contraction are a function of the Law of Three.” {Tony Plummer (2013)}
Read more: A Modern Trading Approach to the Law of Vibration (W.D. Gann)
If you trade Forex currencies, the trading cost includes the spread between the Ask and Bid, and in some cases, volume-based commissions (if you're using an ECN/STP broker). In this example, we’ll focus only on the spread and ignore any commissions.