Gann for Stoolies
84 replies to this topic
Posted 05 May 2004 - 08:41 PM
First of all, I want to emphasize to all, I am no Gann expert or "recognized" Gann Trader. What I have learned is from home studies including Halliker's Gann Masters I and II and Gann's Commodity Course, Bill McClaren's Gann Made Easy, Ruff's Application of Gann's Natural Laws, Ferrera's Gann Pyramid-Square of Nine essentials and many various articles in Trader's World Magazine and other publications. Most enlightening was the expensive time I spent in Connie Brown's Gann Course. And last but not least, tidbits from some of the many trader's I know.
Software that I use for Gann Analysis:
Gannalyst 3.0 Professional
Gann Trader 3
Metastock- mostly my own home brew Gann formulas since very little is available for Gann Analysis using MS.
Volumes have been written about WDGann and somewhere I read Gann's writings themselves were enough to fill a small town public library! So where to start?
Well, I am a very practical sort of person I like to think so we are going to skip over a lot of Gann funnymentals and go right to charting with something useful that we have already been discussing, Gann Squaring of a Low. It is the simplest method of Gann to apply and so seems "stupid" that it even works!
The low must be a MAJOR multi-month and better yet multi-year low. Of course you don't know this right away but as time passes and you suspect it may be a significant low, draw the chart and watch it.
Simply take the low price and project it forward in PRICE and TIME. I have found WEEKLY charts are the most often timeframe that "work" although it can be done with daily and monthly charts. Also divide the low by 2 and plot the 1/2 increments.
Look for price S/R primarily at the whole increments but often you will see them at the 1/2 increments. Look for IT swings at the TIME increments, be ready for a reversal often RIGHT ON IT! Also I draw a fan with Sq Low 1:1 and sometimes 1:2 and 2:1. Again you will be amazed how price action follows the lines up and down especially the 1:1.
Now this all seems very simplistic on the surface, and you are certainly thinking why on earth would something like this work? Trust me, the math underneath it is not so simple. It is just a coincidence that you get away being able to do it in this simple matter. That's why this is a good Gann method to learn first, it's one of the easiest to implement but all the theory and math underneath it are not. Squaring the Low is actually using the square of nine which is a square root alrgorithm and natural growth processes often exhibit it's growth and decay characteristics (similar to Fibonnacci) and again when you really get into it, FIB and SQ9 are inter-related, a "secret" hidden within the Great Pyramid's dimensions and mathematical relationships. Michael Jenkins,Bryce Gilmore, and especially Connie Brown really delve into the details some of which I will get into as we go along.
Here's the current HUI Square of the Low Chart:
Anyone have questions or wants to chime in their own knowledge or experience using Gann, have at it!
Posted 05 May 2004 - 09:22 PM
WD Gann on "TOPS"
"Tops in the broad market take time to form. It is rare situation when a top in the market comes in without a test of the high in the topping formation or a marginal new high above a series of previous highs. Individual stocks rotate into the top, some finding their tops before the general market and some after. When time has expired for a bull trend, months may pass before a bear trend sets in. In these months you may see large, volatile sideways movements in many stocks.
Also extremes in price movement and optimism with groups of stocks moving in excess of five percent per day! The last weeks of a top will usually be punctuated with extreme speculations and many smaller issues jumping 20 percent in a day or two. You do not want to short early in the final stages of a market top, and must beware of sudden blow off moves! Unlike spike lows, spike tops are not common in the indexes. Look for divergences, at the top there are many. The number of stocks advancing versus those declining will not confirm a new high if the top is setting up. Look for very large volume with little price advancement. But again the time cycles are the most important factor. Tops generally take a minimum of 3 months to allow for distribution before a true bear trend begins. Often there is a strong move up and then start a long sideways move. Instead of breaking down out of that sideways move, the market will give a forty five or ninety day move up to higher highs and then form a final topping pattern."
OK, seems appropriate I post this now! A lot of us are aware of topping characteristics but still get impatient and forget MAJOR TOPS TAKE TIME!
Everything I have seen the past month or so points to another major TOPPING PROCESS in the works.
Posted 05 May 2004 - 09:45 PM
What book or books are you getting the 45 to 90 day time frame from? I have read most of his works and the only thing that I was disappointed in which Wyckoff covered more in depth was the study of volume. I have the commodity course. Were those covered in the stock course Jones offered? I was most impressed with his time factor work. It has been very helpful in trading gold. Notice how many highs we have made in the first weeks of the month particularly between the 3rd and the 7th.
Don't steal. The government hates competition.
Posted 06 May 2004 - 10:03 AM
Yes, that's the one of the biggest edges Gann offers are methods of analyzing the time axis for swings with his many Static and Seasonal Cycles and Square of nine. Only other methods are Hurst Cycles and using Fibonacci extensions.
That's why I value Doc's service and every trader should too. Methods to incorporate trading the time factor are very limited, Doc has one of the best.
Not to mention the price S/R cmaps that he provides which I use when looking for important S/R convergences in price.
This exerpt on broad market tops is from one of Bill McLaren's Gann articles.
The 1929 and 1987 crashes both followed the pattern of large consolidation, final 90 day run up, top, and boom!
Posted 10 May 2004 - 10:03 PM
Mr H, thanks very much for your notes/charts, greatly appreciated.
I know very little about Gann, but just enough to be dangerous! Hope you don't mind if I add a few charts here.
Regarding Gann angles, here is a weekly sp500 chart, with the angles starting from the march 2000 high (the brown line is 1x1 (1 point per week), blue lines are 1x2, 2x1, etc)
Posted 10 May 2004 - 10:09 PM
Here is the same chart but with the angles drawn from the september 2000 high, the 2x1 angle has stalled the rally so far.
I guess the march 2000 high is the proper place to start the angles, but this chart looks pretty so far
Posted 10 May 2004 - 10:17 PM
Posted 10 May 2004 - 10:28 PM
Here is a daily sp500 chart, with calendar day angles. Note the peak in june 03 hits the 1x1 angle from the oct 02 lows, and the 1x1 from the mar03 low provides support for the whole rally and is not significantly broken until recently..
Posted 13 May 2004 - 09:13 AM
Nicely done properly constructed Gann Fans. Nice to see after so many arbitrarily drawn fans. A lot of software have fans usually called speed fans with adjustable rise:run but not many know how they are supposed to be plotted. Gann invented fans and has very strict and actually very simple rules about plotting them. Once they are followed some amazing things start to jump out of charts! But yes, daily should be in calender days, if your software only plots trading days you need to adjust for the additional 2 days/week.
This week we go from low to high opposite what the market seems to be doing at the time but anyway it is the next valuable Gann method I use, that is, "Squaring the High"
Again it is fairly easy to do:
1)Take the last major price top (or suspected top) and divide it by 2.
and Plot the 1/2 major high level.
2)Divide the 1/2 high into 1/3 increments and plot them top down.
It will divide the space from H to 1/2 H into thirds, you can keep extending below the 1/2 high level.
3)Divide the 1/2 high into 1/4 increments and plot them top down, it will divide the space into quarters and again keep going below the 1/2 high.
The 1/2 high will be MAJOR support/resistance in a subsequent sell-off. And can provide great trading opportunities, go long the first bounce off it. After that look for a failure and high volume drop, try to short the first pull-back up to it.
Recapturing the 1/2 high after a substantial decline almost always leads to a powerful rally.
All the 1/3 and 1/4 levels will usually show reactions and can be used with other indicators to construct trade set-ups.
Here is Newmont Mining, a yellow shining example!
There is a gap on the daily just above the 1/2 high. I am looking to enter long
again when we get close, almost there. This chart is a primary reason I believe we are close to a major bottom in the miners but not quite there.
Another observation is often you will see that even prior to the major high, price was acting noticibly around these levels even before the fact. Sometime I use my Gann Square of the High grid and play aroung trying to project tops!
Posted 13 May 2004 - 11:39 AM
Hank, thanks very much for this thread, greatly appreciate the work you are putting in to it.
One point regarding angles though. From Gann’s Angles course:
Gann was obviously instructing on charting in the time honoured tradition using pen and paper; draw your own conclusions.
Posted 15 May 2004 - 08:31 AM
Gann looked for support at one half the highest price. Here is an example of a fantastic silver company which received support around that number. SSRI. The high was 17.35 and the stock bottomed on May 10 at 8.65. There are also price non-confirmations coming into the lows in the CCI.
Don't steal. The government hates competition.
Posted 15 May 2004 - 09:26 AM
SSRI, Great Example, thanks for posting, I don't track SSRI but do PAAS and SIL but will put this on my radar screen. Gutsy traders enter on first bounce off it intraday. Being a more cautious position trader I would like to see the second test on lower volume and a bullish candle would be nice. See if I get it!
Thanks again for a great real-time example!
Posted 15 May 2004 - 07:31 PM
BGO has the same setup, high of 4.30, half = 2.15. A similar thing happened for the last peak in 2002
Posted 16 May 2004 - 08:21 AM
This might be a shade off topic but I have been going crazy trying to work fib retracements in the price of gold. I have seen any number of all-time price highs reached on January 20 1980 ranging from 850-878. Can someone nail this one down for me once and for all? I have been using $875 for a compromise number. Notice the low on the first correction into the 445 area before the secondary high in September 1980 at 720. With the exception of one excursion to 505 in the late 1980's one half the highest selling price has capped all price rises. Interestingly enough 3 times the square of 12 (432) has capped this price rise. There is much to uncover in this genius' work. The more you learn the less you realize you know. He still studied the markets and uncovered new things well into his 60's. A true mathematical genius.
Don't steal. The government hates competition.
Posted 16 May 2004 - 09:03 AM
Been a while since I looked at gold LT but I have it somewhere here charted with exact high and an EW count and/or Gann stuff on it. Might take a while but let me look in my directories!!!
I have been looking at the dollar and this is my count.
We are close to a larger bottom IMO but I really think to keep the so far beautiful symmetry for this huge 3rd wave we need one more drop close or more likely beyond the last low close to the 80 mark for a W.3:5:5. But then this is only W.3 of a huge 5 wave down.
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