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| This book is not about W.D.Gann, Bradley Cowan or anybody else, who has attempted to correllate market movements with the cosmic clock. There may be general references to their trading calculations and methods, but essentially this work will try to build upon their groundwork, especially in relation to TIME. Many readers of W.D. Gann's works have been left in confusion. Firstly by his oblique writing style, that may have been induced by a fear of ridicule by other traders. These people did not have Gann's insight and his understanding of the cosmic clock and its association with market timing. Secondly, the need for charts of the markets, that he referred to in his works. These are sometimes difficult to procure, especially by overseas students of time and price. For some traders, the need to "square" the price and time axes on their charts has reduced them to drawing the charts by hand - just like Gann. This has made the study of price and time somewhat laborious for most students and many give up the chase, settling for easier methods. Some graphical examples of Gann's methods may be found at:http://www.solarmatrix.com/gann/bcroom/bcroom.html In fact, the first time the author presented the forerunner of this book to traders,
the reaction was: For an easy-to-read explanation of Gann's basic principles refer to Pattern, Price & Time by James A. Hyerczyck - a John Wiley publication. Taking the trader beyond Gann projections and into some practical suggestions for incorporation into a trading plan, is the aim of this book. Gann was a trader, mathematician, numerologist and astrologer. As a trader, conjecture will always reign about his capabilities. However, his other skills showed brilliance for a trader of his era. As a mathematician, he recognised the importance of market geometry, using the two dimensions of time and price. Likewise as a numerologist, Gann may have been first to recognise the power held within the numbers themselves, when relating them to the markets. Astrology and its application to the commodity markets seemed to be Gann's passion, but for fear of ridicule, he sometimes wrote his works in a confusing way to mask the origin of his underlying reasoning. Long-term support and resistance lines on some of Gann's charts actually plotted the paths of the planets.
Likewise, today's trader can plot planetary movements on the price chart of any market. In the chart above, the sun's (apparent) movement is shown by the 1 x 1 line which has supported the Australian All Ordinaries Index, since 1997 on the short-term daily chart. Some charting programs, like Metastock, have astrological symbols built into the program, so that you may add them to your charts for ready reference. Geometrically, Gann saw the astrological aspects, cited in degrees of a circle as potential points for market reversals. Most important of these are:- the semi square - 45 degrees, the square- 90 degrees, the trine - 120 degrees, the opposition - 180 degrees and the conjunction at 360 or zero degrees. By transposing these values to the price and time axes on the charts Gann was able to project some major market reversals geometrically. One of his theories was the "square of time and price", where both time and price would converge and price would then reverse direction. This theory works well on the sun's trendline, that is the 1 x 1 line, as shown above. However, using other planetary trendlines has provided many false trading signals, though others provided traders with accurate turning points in the markets. Gann's charts required "squaring" of the time and price axes for accurate tracking and forecasting in his system. This required many laborious hours of work producing hand-drawn charts, on graph paper that featured eight squares per inch. Such paper may also be difficult for overseas students to obtain. On the issue of scale, it may help some traders to reduce every move down to its lowest price and time scale. For example, if a market moves 1 point per day (like corn) then it is fine to use equal scales for both time & price. This process is known as "squaring" the scales and in this case, the 1x1 line is 45 degrees. However, say another market moves 5.75 points per day, then it is more difficult to "square" the scales on your chart. So what to do?? If this market trades for about 5.75 hours per day, then it may be better to "square" the scales by using 1 point per hour. By doing this, we have maintained our "square scale" and the angles remain true. Of course, you need to adjust both scales rationally, to fit all the data in the space that you have, otherwise you can end up with an enormous amount of paper with very little data on it. In our study on price and time over the past few years, it has become evident that the 45 degree angle is a special case and does not occur frequently in most markets. To alleviate the stress that the angles cause some traders, it is easy to convert the angles to "rise" and "run" figures that can be used with Gann lines or Gann fans in Metastock or other charting programs. Each market will exhibit its own "signature" rise & run numbers that repeat constantly with time. Some of these are detailed later in this chapter. Since Gann's time then, many software programs have included this squaring-of-price-and-time feature as the basis of their "blackbox algorithms". Others have picked up on other areas, that Gann experimented with in his quest for the holy grail of trading. Gann wheels, depicted in various shapes and sizes, are readily available from commercial interests distributing Gann-related tools. Most of these tools relate price highs and lows to likely pressure points that occur in a 360 degree chart. Best known of these is probably the cardinal square or the square of nine. Here's a link to some more information about these tools: http://www.geocities.com/WallStreet/Floor/5202/gann-s9.html Harmonically tuned number sequences were also tools available to Gann in developing his objectives for both price and time. Some of these number sets were based on natural cycles in the universe, while others were simply based on mathematical functions of summation, square roots and multiplication. These cycles can be seen in musical scales, moon phases and other luminary and planetary movements. For example, the following numbers all seemed to hold importance in Gann's projections. 30 - 45 - 60 - 90 - 120 - 144 - 180 - 240 - 288 - 360 Ahead in this book we will add to this list and present, graphically, an explanation of
why Gann's approach was incomplete. Some of Gann's numbers coincided with the Fibonacci
summation sequence as detailed below: Using these numbers to project anticipated "squaring" of price and time resulted in many accurate forecasts in a variety of markets.Though hailed by many since as the traders' holy grail, there still seemed to be a need for a better timing device. Another approach to associate time and price was to divide the calendar year of 365
days by 8 (= 45.625), then use harmonic cycles of this number on both the time and price
axes. Some of those numbers are:- These numbers were the basis of the multiple trendlines called the Gann Fan, though in modern charting packages the fan may be configured using any ratio. In some cases, division of the price range by 8 was used. One of Gann's efforts to combine price with time accurately was the cardinal square overlaid with a "seasonal clockface". Zero hour was set at the northern spring equinox on March 21st to coincide with the price of the commodity on that day, as depicted on the price spiral on the cardinal square. Well documented seasonal changes in markets often occur at these times: Starting at the beginning of Gann's trading year, on March 21st, some markets will show
regular breakouts or reversals on these dates: Some of these dates are tied to seasonal market activities, like the harvesting, packing and shipping of some crops. One important assumption that Gann made, from a technician's viewpoint, was the abilty to use the same value for cycle lengths in all time frames. This will become even more evident in our studies of TIME. In summary, our work on time and price has led us deeper and deeper into cycle analysis - sometimes it's very confusing, sometimes it is very enlightening (and rewarding). Always, it is thought provoking. As always, research and development of new trading ideas is an ongoing project, though this book may well set a firm foundation for future cycle traders to build their craft upon. So, to cut through some of the rubbish that is out there, we recommend that you read as much Gann-related material as you can. It is NOT necessary to buy any expensive Gann course, simply that you can identify with the principle of "squaring" time & price. At this point, it should be mentioned that you will not be literally squaring a price, but instead, projecting price and time ranges to likely reversal or breakout points. Once this concept has been grasped, you can marry it to cycles that are evident in almost every market. Using Gann Lines and Gann Fans in your charts Using "speed lines" on charts may also help to identify cycles - these lines move up a (y#)points for (x#) periods. In your charting programs Gann lines & Gann fans can be set to parameters that agree with the market under study. Some common rise and run settings may include: Wheat rally - 29 x 59 monthly 29 x 9 weekly 29 x 4.5 daily These lines will usually pick up the second high from the starting point quite accurately. Wheat decline - 29 x -324.8 - shoot for 2nd low ahead. Corn daily and monthly: |
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