Price & Time

Fibonacci & Gann Introduction and User Guide

Please do not distribute this book to others. It is for your use only

Copyright 2005 David Rivera, All Rights Reserved

Reproduction or translation of any part of this work by any means,
electronic or mechanical, including photocopying, beyond that permitted by
Copyright Law, without permission of the author, is unlawful.
All charts and option quotes are courtesy of Barchart.com
 Risk Disclosure Statement

The risk of loss in trading stocks, commodity futures and options can be
substantial. Before trading, one should carefully consider their financial
position to determine if futures trading is appropriate. One should realize
that when trading futures and/or granting/writing options one could lose the
full balance of their account. It is also possible to lose more than the initial
deposit when trading futures and/or granting/writing options. All funds
committed should be purely risk capital.

Past performance is not indicative of future results. David Rivera and Rivera
Publishing do not intend to give investment advice. The contents of this
book are for informational purposes only.

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 TABLE OF CONTENTS

Introduction 4

Fibonacci Basics 5
Examples 6

Gann Basics 14
Examples 15

Using The Software 23

Final Word 26

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 Introduction

This book should be used as a reference to the basic techniques of trading

price and time.

This will not be an all intensive study on these techniques. I will explain the
basics and will give you examples of trading with both Gann and Fibonacci.
I will then explain how to use the software. The software is needed to
calculate the potential Price and Time points.

Both techniques you will learn, in essence, teach the same thing. That a
market will make a move after Time and Price meet. What does this mean?
Most of us, when analyzing a market based on technical analysis, will look
at the chart patterns. We look at the highs and lows of the patterns.

There are also traders which trade by dates. They trade by spotting seasonal
patterns. Some trade by 45 day cycles or even by full moons. The trading
philosophy you will read about in this manual is based on trading with both
price and time in mind.

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 Fibonacci Basics

Fibonacci was an Italian mathematician born around 1175. He was one of

the first people to introduce the Decimal Number system into Europe.
Different trading methods are a result of his work and the fact that in nature,
plants and flowers grow naturally within the Fibonacci Series. I would
only like to cover the basics of this as it concerns trading. This is because
human behavior of the masses also follows this pattern.

Traders that utilize fibonacci in their trading are primarily looking for
potential reversal points. There are different ratios based upon the Fibonacci
numbers. The basic ones are .382, .50 and .618. We are looking for the
market to reverse at these ratios.

The distance between the high to low or low to high will be calculated. Then
it will be multiplied by .382, .50 or .618. If Soybeans move from 600 to 900,
we would take the difference of 300 and multiply it by the fibonacci ratios.
Then take that numbers and subtract them from the second price.

300x.382 -900 = 785.40

300x.50 -900 = 750
300x.618 -900 = 714.60

These would be the potential price reversal points.

The ratios for the date is the same concept. If the move between the first
price and the second price was 30 days, then multiply 30 times the 3 ratios:
.382, .5, .618.

30 x .382 = 11.46
30x .50 = 15
30x .618 = 18.54

So if we round off the ratios we have roughly 11, 15 and 19 days for our
potential time points. When any of the potential price ratios hit with any of
the potential time ratios, we are looking for a reversal in the market.

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aldila.jpg (GIF Image, 612x360 pixels) file:///C:/WINDOWS/Desktop/Price%20&%20Time%20Pic...

Let's look at the high of this stock on June 8th. It's high is roughly 18. It's low on
June 23rd is roughly 10. We plug in these numbers with the dates if we want.
We now can see the possible reversals. When any of the price and time points
match up, we have a potential reversal.

The price hit the .382 ratio of 13.06 and it happened on the .618 ratio for the
time at 7/02/04.

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The low and high on this chart is roughly 12.25 and 26.5. The
date for the low is May 10th and the date for the high is July
1st.

The price hit the 50 percent ratio of 19.38 and the time just
missed the 50 percent ratio of July 27 by one day.

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The biggest move on this chart is from 76 down to 71. If we plug in these
numbers into Fibonacci, we will come up with 3 potential prices. When we plug
in the 2 dates, we come up with 3 potential dates. The ratios do not have to be
the same. Just because the price stopped at the .618 ratio does not mean the
time should stop there as well. The .618 ratio of 74.09 was the approximate
high on June 7. The date we have for the 50 percent ratio is June 6th. June 6th
was a weekend. Besides, one day different is fine. We have a possible
retracement after these 2 points hit.

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After one reversal already in May, you are waiting to see if there will be
another one. You plug in 440 to 375 and notice that a potential
reversal is at 407.50. The market touched that price and reversed on
June 1st, one day before a potential time reversal.

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 Gann Basics

Gann was a Stock and Commodity trader in the early 1900s. There is a
debate about his trading prowess. One of his trading arsenals was the Square
of Nine. The square of nine looks like a pyramid if you can visualize it in 3
dimension. It is based on mathematical principals. Each price has a
counterpart that is a certain degree away from it. If you break 360 degrees
into small 45 degree angles, you will have 8 sections. You can use 2-4 digits
with the Gann calculations and turn any fraction into a whole unit.

With Gann, the reversal does not have to be in a different direction than the
original price. If you used a high as your beginning price and the market
goes lower and then turns higher, your Gann point might be a high that will
reverse to a low. Any trend that is about to possibly reverse regardless of the
direction of the market.

The time degrees on the Square of Nine are based on the 360 degree
revolution of the earth. There are 4 equinoxes: spring, summer, fall and
winter. There will always be 4 potential Time points.

When the potential Price points and the potential Time points meet, we will
look for a reversal.

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Looking back on this stock you notice that the low was 22 on
May 10th. You are in June and you wonder at what price might
there be a reversal of the trend. You plug in the time and price.
As it turns out the next trading day after June 25th, the market
hit 31.4. You are off by one trading day and .60 in price but it is
very close. It is a possible reversal.

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August 16th this stock climbed higher from a low of roughly

43. After the market moves higher we are looking for
possible reversal points. We can see from the calculations
that the price 69 and the date October 1 are both potential
ponts in Price and Time. The price hits 69 and barely goes
over it one trading day after the potential Date.

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There was a high of 341 on April 8th. You enter

these potential points. One trading day before the
first Gann angle (May 24th) the market hit a price
angle at 280.

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After reaching 799 on March 24, beans hit a couple of Gann Price and Time
points. On June 25th, one day after the Gann angle, the market hit 703, one of
the Gann price angles.

The next place where Time and Price meet is on August 11th, one day after a
Gann Time angle. The market touched 553. This Price is not on the immediate
left where the Gann angles are displayed. You need to look at the chart and you
will see the number at the upper left part of the chart. It is 2 lines down from
757, which is in red. If you want to see it on the chart, enter the last number
which is 690 and work your way down. Enter the last number from there and
keep going as far as you want.

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 Using The Software

If you can use a calculator, then you can use these programs.

Fibonacci

You must have a high and low of a particular market.

Enter the first price of the market you are looking at. If the market is high
and then falls enter the high in the Price 1 area. Enter the low price in the
Price 2 area. Next, use the Date1 area to choose the date of the first price.
Then find the second price in the Date2 area.

Press calculate. The software will calculate what levels the market could
touch based on the Fibonacci ratios. You will see lines from left to right and
from top to bottom. The lines from left to right are the potential Price areas.
The lines from top to bottom are the potential Time points.

You can only do the price or time if you want. It will only figure out the
ratios based on price or time if that is what you want. If you are only
interested in the time ratio, then leave the price sections blank. If you are
only interested in the price ratio, then do not change the current date that is
displayed.

After you become experienced with Fibonacci, you can configure the
software to calculate different ratios. Normally, we are looking to project
prices that are within the range of the high and low. We can also project a
price that is beyond the high and lows. If the market made a low and then
rebounded, then dropped again, we can calculate how much higher the
market will go. Use ratios of 1.382, 1.50 and 1.618.

You do not have to use both time and price. See what works best with your
style of trading.

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Gann

With Gann, we will just need one price and one date. This could be any high
or low. Preferably a major high or low. Enter this price and find the date this
occurred from the drop down Date menu. The program will find 8 potential
prices above the market and 8 below. These are where the lines cross
through the prices.

The number with the black surrounding is the price you entered. The
numbers with the blue surroundings are the prices above the price you
entered. The numbers with the red surroundings are the prices below the
price you entered.

You can look on the chart to get more prices by looking above and below
where the line crosses. Also, if you want more numbers to be displayed to
the left, just enter the high or low listed and start again. If you want to see
the next 8 prices above the market, enter the highest number you see as the
starting price and calculate again. If you want to see the next 8 low prices
enter the lowest number you see.

You will see 8 Dates displayed. These are all Dates in the future where there
is a potential reversal.

As with fibonacci, you dont need to enter both Price and Time. You will
find with the Gann Square of Nine that there are many more situations where
the price hits but the time does not. Use your experience and study these
situations.

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Saving

You can save all calculations and notes for future reference. Choose a
project name and click the save button. Name the file so you will recognize
it easy in the future. Something like CornJuly2. When you want to refer to
that file again, click Open and find the file. To erase the current
calculation and start over, click New.

Export

To save the calculations and your notes in a text file, click the Export
button. You can print these out and keep in a file.

Printing

You can either print to file or print to your printer. If you print to file, you
will be able to open it up in your web browser or through a program like
paintbrush.

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 Final Word

Both Fibonacci and Gann can be used as stand alone methods of technical
analysis. There are many traders that swear by these techniques. I
recommend that you combine what you already know with these techniques.

Use with any other fundamental or technical indicators. Make a folder on

your desktop and save all your exported notes and print to file and save all
the details. In your notes, write about why you think the trade will turn
around.

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