Bryce Gilmore - An Introduction To The Methods Of Wd Gann.pdf - Forex - E-nauka

AN INTRODUCTION TO THE METHODS OF WD. GANN

By Bryce Gilmore - www.bryce-gilmore.com

Author of

Geometry of Markets I & II

Dynamic Time and Price Analysis of Market Trends

WaveTrader/CycleTrader Software

All the charts in this article were created using the WaveTrader/CycleTrader program

This is the uncut version of the article published in

YOUR Trading EDGE Vol. 1 No. 5 November 1996

William Delbert Gann (or as he preferred W.D. Gann) was a

pioneer in the area of time and price analysis of market activity.

Born in Lufkin 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.

Gann died in 1955 leaving his partner in the publishing company

Lambert-Gann, Ed Lambert, responsible for the Gann

knowledge.

1878-1955

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!! Billy has since

passed away but his wife, Niki is now the custodian and has the

Gann material in safe keeping. Her address is

http://www.wdgann.com/index.htm

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 through the Air

Magic Word

How to Make Profits in Commodities

45 Years In Wall Street and 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 early 1950’s, before his death in 1955. 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.

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 judgment 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."

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.

Gann's main trading philosophy was to trade with a close stop loss and select the most

opportune trades in the direction of the main trend. To confirm a trend was in progress, he

would look for lower highs and higher lows to form after a major reversal in trend. The

method he used to monitor trends and filter out any random market noise was the Swing

Chart. Figure 1 shows an example of a Swing chart. After July 30 1996 Gann would have

said the trend in the SPI was up as it was making higher lows and higher highs. Gann

would be a buyer of the SPI from 2170.

Gann placed a lot of importance on the daily price patterns. He talked at length on the

different types of reversal patterns you can use to identify an imbalance between supply

and demand.

Figure - 2 shows some of the bar chart patterns Gann looked for to confirm turning points

or to get him out of trades quickly with minimal loss.

Gann taught students to face the facts and eliminate hope and fear. For instance, if a

trader receives a margin call, he should close the position immediately, for the chances are

he is wrong. He also taught that a successful trader studies human nature and does the

opposite of what the general public does. Most traders lose money because they are too

greedy, they over trade, they expect abnormal profits in normal markets.

Gann's analysis techniques for predicting major market tops and bottoms were based on

cycles. Gann believed that the future was only a repetition of the past. Gann maintained

that as each new generation exerted its influence on the markets similar bull and bear

markets would unfold.

Gann's 20 year cycle relies on the fact that human nature never changes. Therefore as

each new generation came to power they would behave similarly. Their inexperience in

speculation would cause markets to rise and fall to prices unwarranted by supply and

demand. The result is that when the BOOM is over, the young generation suffer severe

losses, get some valuable experience and are not eager to try it again. To predict a top or

bottom for the year Gann would look at the market activity in the years back 10, 20, 30, 40,

50, 60 and 100 years for similar conditions.

The first basic technique Gann taught students was to watch anniversary dates with past

market tops and bottoms for a change in trend. When it came to shorter term analysis of

time, Gann devised a system of counting off time in solar degrees of a year from past

market tops and bottoms. He counted divisions of the year in eighths and thirds. When

clusters of time counts from past tops and bottoms highlighted a future date, that date was

significant for a reversal of trend.

Figure -3 shows the major anniversaries in the All Ordinaries

The cycle of one year has 365 days. The circle of one year has 360 degrees. The Earth

revolves around the Sun in an elliptical path moving closer to and away from the Sun

during its orbit. This is the reason the days and degrees relationships speed up and slow

down. To explain, there are 4 cardinal points in the circle, 90, 180, 270 and 360 degrees.

As the Earth

moves around the

Sun the daylight

hours

progressively get

longer and

shorter every six

months. The

shortest day of

the year in the

Southern

hemisphere is

June 21, (in the

Northern

hemisphere it's

the longest day),

the shortest day

is known as the

Winter Solstice

(this is 270 o ). The

longest day of the

year is December

22, 90 o , the

summer solstice.

September 21 (360 o ) and March 21 (180 o ) are the days when daylight and darkness are

equal, these are the Equinoxes.

........

The four seasons of the year evolve around these 4 points. Some people may recognise

Bryce Gilmore - An Introduction To The Methods Of Wd Gann.pdf

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