Gann Swing Charts
Swing charts are a powerful tool to see price in its purest form. Time has been removed from the chart and price is viewed as a single line drawn upward, as prices
advance and moves downwards, as prices decline. Developed by W.D.Gann in the early 1900’s swing charts allow traders to see both peaks and troughs in the market more clearly.
Most trading software has the ‘swing chart’ viewing option, but if not it is very easy to ‘see’ them by eye just by looking at a bar chart. (Many traders actually hand chart their bar charts and swing charts; most often these simple indicators are the most effective).
Swing Chart Construction:
1. The swing chart is drawn from the HIGH and LOW information from bar charts.
2. UP BARS: If we have UP bars (higher highs with higher lows) one after the other, the swing chart is drawn UP to the highest high until there is a DOWN bar.
3. DOWN BARS: When there is a DOWN bar (lower high and lower low) following an UP bar the swing chart line will stop, draw a line to the right and then reverse direction and continue downward until there is an UP bar where it will again draw a line to the right then change direction upwards.


4. As you can see the swing lines can be drawn connecting on either an ‘angle’ as a chart overlay or in a ‘boxed’ fashion independently – both work just as effectively and it comes down to the personal preference of the trader.
5. OUTSIDE BARS: an OUTSIDE bar has a higher high and a lower low than the previous bar. (Include OUTSIDE bars in the Settings for the Swing chart).
6. INSIDE BARS: an INSIDE bar has a lower high and higher low, and essentially show indecision in the market. (Do NOT include INSIDE bars in the Settings for the Swing chart). The TIMEFRAME settings of the swing chart can be changed to any time frame – however, if you are watching the daily bar chart then you most likely will be watching the daily swing chart rather than any other time frame, you may however also watch a longer time frame like the weekly swing (which would give more indication of the overall ‘trend’). Backlash uses the swing chart for two reasons; it gives the Trailing Stop Level and an Emergency Exit.
• TRAILING STOP = 1 day swing chart.
• EMERGENCY STOP = 3 day swing chart.

Trailing Stop Loss: (natural exit point)
LONG Trade: The trailing stop loss is brought up immediately underneath the DAILY swing LOW, (the low price less the spread), as soon as it is confirmed.
SHORT Trade: The trailing stop loss is brought down immediately above the DAILY swing HIGH, (the high price plus the spread), as soon as it is confirmed. (Trailing stop calculation example - see following page). SWING CONFIRMATION: If we had 2 daily UP bars, the swing chart would be pointing up, and if there was then 1 daily DOWN bar (where the low of the current daily bar fell below the low of the previous bar then the swing chart would stop at the high of the last UP bar then draw a line to the right, then draw downwards to the bottom of the first daily DOWN Bar waiting to see which direction it changes to in next (Image 1.).

So if the Long TRAILING STOP LOSS is to be set underneath the DAILY swing low you cannot move it there until the swing low is created (confirmed), and the way that is created is when the last DOWN bar is followed by an UP bar (Image 2.) confirming that the last DOWN bar is in fact the lowest point in that movement.
(If you immediately moved it up underneath the first DOWN bar you run the risk of being unnecessarily stopped out because there may be 2 or more DOWN bars in the ‘corrective’ movement before the market continues on its way up again.)

Important: If you have an OUTSIDE bar (blue) you are to immediately bring the Trailing Stop Loss up underneath the bar without waiting for the swing low to be confirmed.
Trailing Stop Price Calculation:
LONG example: If the swing low was created at 1.1100 (low of the Down or Outside bar), then the trader is to move the trailing stop up underneath that price level, (swing low less the spread). If the currency pair had a 3 pip spread the new trailing stop level would be 1.1097.

MARKET LOW: From the market low the price moved UP for 1 day, then on the 2nd day had a small inside bar (whichis ignored).
Bar #1: Next there is a DOWN bar – what we are watching for is if the next day it confirms the low of the pull back by taking out, or exceeding, the high of the bar labelled #1.
Bar #2: This bar is an OUTSIDE bar. As the market opened (price on the bar marked with a tick to the left) the price slightly opened lower temporarily creating a DOWN bar as it exceeded the previous bars low, before travelling up for the remainder of the day – taking out (exceeding) the high of bar #1, which is what we were looking for. So now you can bring your Trailing Stop up underneath the low of the OUTSIDE BAR (which is done anyway automatically for outside bars).
As you can see, if the Trailing Stop was moved to the low of the first red DOWN bar (labelled #1) it would have been unnecessarily stopped out the next day by the OUTSIDE bar. The market then continues up for 2 UP bar days.
Bar #3: is the second DOWN day, so you wait for either the market to fall down again the next day, or the high of bar #3 to be taken out, (exceeded) so that you can immediately bring your Trailing Stop up underneath.
Bar #4: the market fell down to create another DOWN day, so again you wait. Now looking for the high of bar #4 to have its high taken out, or exceeded, (which happens the following day allowing you to move your Trailing stop up immediately underneath the new confirmed daily swing low).
The Swing Chart overlay is a good way to learn how to identify the swing lows and
highs just by looking at a bar chart (rather than switching to a swing chart view), but with the extra indicator on your chart it can get a little messy, especially when learning the new trading plan, it may cause you to miss some of the other important indicators. Alternatively, you can have your bar chart and swing chart side by side or even better learn to read the where the swings are just by looking at the bar chart.

Emergency Exit

Sometimes the market has very quick advancements or declines without making the normal natural pullbacks or pauses that create a swing low or swing high were we place our Trailing Stop Loss. And if the market advances or declines rapidly and then reverses quickly moving too fast again into the other direction, there are two things we do not want to miss out on.
1. Capturing as much profit as possible from the first rapid advancement (if there has not been a swing low or high to move our trailing stop loss to).
2. Reversing our position to take advantage of the new direction.
Therefore, an emergency exit has been created where traders are to immediately exit should the 3 day Gann Swing cross and close 1 daily close below the 21 Day Moving Average. (As you can see in the chart that you would lose a lot of profit if you waited for the market to retrace back down to your trailing stop, (dotted line).
Instead your exit is at the last red bar as it closes below the 21 Day MA. The 3 day Gann Swing was said by W.D Gann to be a good indicator of a change in trend, and is
simply represented on the bar chart as minimum 3 consecutive lower daily lows (long trades) or more; or minimum 3 consecutive higher daily highs, or more. A trader doesn’t even need to view the swing chart to see this indicator in action, the bar lows or highs are the indicator.