| William Delaware
(or as he preferred W.D.) Gann was a pioneer in
the area of time and price analysis of market
activity. Born in Texas in 1878,
Gann's basic premise was the future is just a
repetition of the past and that time governed all
market movements. Gann traded with and taught
time and price analysis methods that could
predict market highs and lows. Gann reputedly had
the knowledge to forecast the price and time of
the yearly high and low for commodities and
stocks. Each year Gann published a forecast for
the following year. In 1928 he published a
forecast of the date of the September 1929 US
Stock Market High and that a Black Friday would
occur A FULL YEAR IN ADVANCE. In 1932 he
recommended buying stocks at the all time low in
the Dow in June and July.
|
The Uncut Version of
the article that appeared in the Sydney Futures
Exchange
"Your Trading Edge"
Magazine
- seen here with a full
set of charts |
Gann died in 1955 leaving
his partner in the publishing company
Lambert-Gann, Ed Lambert, responsible for the
Gann knowledge. In the 1960's Billy Jones
purchased what remained of Gann's papers, charts
and copyrights to his published works from Ed
Lambert.
It
took a semi-trailer to remove all of it!!
|
W.D. Gann, both a keen trader and a
workaholic, published many books. The titles were:
- The Truth of the
Stock Tape
- How to Make Profits
from Puts and Calls
- Tunnel Thru the Air
- Magic Word
- How to Make Profits
in Commodities
- 45 Years In Wall
Street
- New Stock Trend
Detector.
As well he produced many
instructional courses on trading later compiled by Billy
Jones into 2 trading courses; The W.D. Gann Commodity
Course and the W.D. Gann Stock Market Course
| Gann was a
prolific researcher throughout his
lifetime with interests in numerology,
weather forecasting and astrology. A very
religious man and a 33rd degree mason,
Gann claimed he learnt about forecasting
price movements from the Bible. His
knowledge of mathematical and
astrological relationships was very
advanced. He used this knowledge to
formulate trading and technical analysis
techniques which students could follow to
identify support and resistance levels
for most free trading markets. Gann and the
creator of Elliott Wave theory R.N.
Elliott shared some similar beliefs about
market activity. Gann believed that Bull
or Bear campaigns took 3 or 4 sections to
complete the move. Elliott believed that
there were 3 impulse waves in a Bull or
Bear trend, with the possibility of an
extended 5th Wave to give Gann's 4th
section. Gann believed that markets most
commonly retraced 1/2 (50%), 5/8s (62.5%)
or 3/8s (37.5%) of the previous range.
Elliott believed that markets most
commonly retraced 61.8%, 50% or 38.2% of
the previous range.
Gann had an
arsenal of price tools he taught students
and it was reputed he charged $5000 for a
weekend course in the 1950's. This
article will cover many of Gann's
important time and price tools. Other
tools such as The Square of Nine, Square
of 144, Square of 90, Hexagon Chart and
Gann's various Master Calculators will be
covered in future articles
Gann's books are
required reading for any trader or
analyst who wishes to understand the
basic ways to view any market. The
knowledge outlined in his works can
easily be overlooked due to the abundance
of information he presented. Just the
same the pattern of information remains
identical throughout all of his published
work. Gann always said "History
Repeats" and repetition was his way
for students to get the message.
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Gann's work included Money
Management Rules and Trading Psychology concepts
expounded by many of today's top traders. He believed
that you did not have to be in the market all the time to
make money. Here are some quotes from W.D. Gann taken
from his last book, "How to Make Profits in
Commodities". Page 11. Published by Lambert-Gann.
"TIME
TO STAY OUT OF THE MARKET: This is
something important for everyone to know.
You cannot make money by trading in the
market every day or by getting in and out
every day.
There comes a time when you should stay
out, WATCH and WAIT until you determine a
DEFINITE CHANGE IN TREND.
Long periods of rest and relaxation
protect your health and help your
judgement which will result in profits
later." "THE BEST
WAY TO TRADE: The most money is made by
swing trading, or in the long pull
trades, that is following a definite
trend as long as the market trend is up
or down, you must learn by rules to wait
until the market gets out of a rut or a
trading range.
Wait for
a definite indication that it is going
higher or lower, before you take a
position for a long pull trade. Always
figure that YOU CAN BE WRONG and that the
market could reverse. Therefore, follow
your profits up with a STOP LOSS ORDER,
or get out when you get a definite
indication that the market has reached a
turning point and that the trend is
changing."
|
Charts
As
a picture is worth a thousand words we will now
look at some charts. Please examine each chart
closely as there are some important points on
them.
Figure - 1
Gann Swing Chart Showing Trade Entry Levels
Figure - 2
Reversal Patterns Help Identify Swing Points
Figure - 3
Anniversary Dates
Figure - 4
Gann Time Counts in Degrees 1/8th and 1/3rds of
Year
Figure - 5
Gann Examples of Price and Time Squaring
Relationships
Figure - 6
Price Range Squaring Between Similar Campaigns
Figure - 7
Time Squaring Between Alternate Tops and Bottoms
Figure - 8
Price Retracements of Previous Campaigns
Figure - 9
Gann Time and Price Cycles Squaring Together
| Gann summed it up
best with a set of rules to follow, his
bottom line though was, "Do not
trade on guesswork or gamble on hope.
Knowledge brings profits. Never trade
without STOP LOSS ORDERS."
|
I hope
these examples of
technical analysis methods
will illustrate what is possible
if you do a little work. |
Bryce
Gilmore is a
private trader, and analyst.
He designed and programmed
Cycletrader/Wavetrader
software which has been used to create
all charts seen in this article.
For more detail see home page
He has also authored
several books, two are currently in
print,
Geometry
of Markets [c] 1989
Geometry
of Markets II [c] 1993.
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Bryce
Gilmore
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