A dvanced & B C asic hart 's

of

Gann & Fibonacci

______________________________________________________________________________

By

GENE NOWELL

www.gannline.com

MATHMATICAL PRINCIPLES OF THE HIGHEST ORDER

LIE AT THE FOUNDATION OF ALL THINGS

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Her I loved and sought after from my youth. I sought to take her for my
bride and was enamored of her beauty. She adds to the nobility the splendor
of companionship with God; even the Lord of all loved her. For she is
instructress in the understanding of God, the selector of his works. And if
riches be a desirable possession in life, what is more rich than Wisdom, who
produces all things? And if prudence renders service, who in the world is a
better craftsman than she? Or if one loves justice, the fruits of her works
are virtues; For she teaches moderation and prudence, justice and fortitude,
and nothing in life is more useful for men than these.

King Solomon

My sincere thanks to Larry Williams (www.ireallytrade.com) for his wisdom and

permission to share some of his formulas in my book.

I would also like to thank Mathew Verdouw for his permission to reproduce the
charts generated by his fabulous program Market-Analyst.
www.market-analyst.com/software

Finally my thanks go out to Daniel Ferrera and Brad Stewart for their permission
to reproduce the Square of 9 Table. www.SacredScience.com

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 Table of Contents
Chapter:

1.) The Gann Scale Page 7 - 12

2.) Applying Angles to Charts Page 13 – 22

3.) Swings and Angles Page 23 – 38

4.) Angles of Support/Resistance Page 39 – 50

5.) Applications & Strategies Page 51 – 57

6.) Types of Squares Page 58 – 76

7.) Harmonic Numbers Page 77 – 84

8.) Trendline Indicator Page 85 – 88

9.) Square of 9 Page 89 –122

10.) Market Science & Behavior Page 123 – 126

11.) Gann's Rules for Trading Page 127 – 134

12.) Money Management Page 135 - 138

13.) The Fibonacci Spiral & Golden Ratio Page 139 - 145

15.) Entering a Trade Larry Williams way Page 146 - 147

© 2015

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 Introduction

Who was W.D. Gann? W.D. Gann has arguably contributed more to
Technical Analysis, and in particular the understanding of the
relationship between Time and Price, than any other person that
traded the world markets. It was Gann’s mathematical genius and
his ability to see the patterns in the market (that at the time
nearly everyone else ignored) that made him so successful and has
a legacy that continues to this day.

William D. Gann was born June 6, 1878 in Lufkin, Texas. His father
was a cotton farmer in Texas. Growing up on a cotton farm, young
William began calculating times of the year when cotton was at its
best price and suggested to his father not to sell at harvest. As
his theories proved successful, he moved on to other commodities
and began experimenting with historical data.

He started trading in 1902 when he was 24. He was believed to be a

religious man by nature who believed in religious as well as
scientific value of the Bible and spoke of it as the greatest book
ever written. This can be repeatedly observed in the books that he
wrote over the years. He was also a 33rd degree Freemason of the
Scottish Rite Order, to which some have attributed his knowledge
of ancient mathematics. He was also known to have traveled many
places like India and Egypt and studied the ancient Greek geometry
along with the Indian and Egyptian cultures. It is believed that
during this time on his journeys, he discovered the "Square of 9".
He called this the "SPIRAL CHART". I will cover this in a later
chapter.

Gann used ancient math and geometry (geometric angles) on his

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charts and described the use of angles in his book The Basis of My
Forecasting Method (1935). There has been a general disagreement
whether he made profits by speculation himself. However, his
famous Ticker Interview[11] shows that his claim to profits was as
real as his documented forecasts.

As you will see later in this book, his forecasting methods are
still valid. His most effective tool was the Square of Nine
(Spiral Chart). People have asked me how Gann Angles are going to
help in their trading? And how this Gann Math is going to blend in
with the type of trading they do? My answer is the simple
techniques I teach in this book are no more difficult to learn
than Moving Averages or Stochastics or the RSI. I know there are
people who trade on these alone and hope that these basic tools
will to bring them to riches. Moving Averages alone are not a
formula for success. Truth of the matter is, most Moving Average
systems are 50% accurate at best. It is better to flip a coin and
call it.

One grain broker told me back in the early 1980's, he had a

spinner on his desk which divided the circle into 8 equal
segments. Every other segment was BUY - SELL- BUY...etc; When a
client called, and asked the broker which way he thought the
market was going that day, he would flip the spinner with his
index finger and pass his wisdom onto the client. He had a 50-50
chance of being right and in the mean time, he received a
commission from it. Believe it or not, people like this do exist.

Bottom line is, if you want to get serious about a business, you
must do your homework. Trading Stocks, Commodities, Forex or any
market for that matter, is no different. You must dive in and get
your hands dirty (so to speak) and do some work. You must have a
Plan of Action. When Angles are used to analyze any market, it is

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like building the wooden frame of a house on a foundation. The
foundation is already laid in the form of Market Movement captured
on charts. It is my intention to reveal to you how this frame work
can be used as a tool for showing timing points for trend change
and support/resistance levels.

In the early 1980's I attended a Larry Williams seminar trying to

obtain some of his wisdom in trading the commodity markets. I left
that seminar with an indelible mark on my memory. The one
statement he made that stands out most in my mind was his
description of the commodity markets. He said, "The commodity
markets are like a roaring tiger stalking around looking for prey.
The trader is like a hunter with a single shot rifle. He has one
shot and it better be a good one or the tiger will pounce all over
him". I think that sums up today's markets in a nut shell.

The point is you better be prepared to exit stage left just in

case your single shot missed, (your analysis was wrong). I don't
know about you, but I want that door on the left side of the stage
to be as close as possible. I do not like to risk a lot of money
on any trade. Getting in the market at the point of least exposure
is one of my goals and it should be for every trader. How do we
accomplish this goal? Well, in this book, I hope you will find the
answer to that question through the guidelines provided which show
the least amount of exposure to your trading account and to find
your comfort zone.

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 Chapter 1
The Gann Scale
What I present in this book is a foundation on how to use angles
on charts along with an depth study of the Spiral Chart or better
know as the Square of 9. These two important elements of
Technical Analysis help to confirm Time and Price points that lead
to Support/Resistance areas and a change of trend. The first part
of the book covers the theory of angles and the related math as a
foundation with reference to how and why they are used. The middle
part of the book covers the application of the Square of 9 for all
types of trading. And finally, I hope to instill the importance
of good money management and how to use patience and wait for the
right time before making a trade.

Words from W.D. Gann

"Speculation or investment is the best business in the world if
you make a business of it. But in order to make a success of it,
you must study, be prepared, not guess, not follow inside
information or depend on hope or fear. If you do, you will fail.
Your success depends on knowing the right kind of rules and
following them”. Gann said, "Keep this well in mind, For Stocks or
Commodities to show up trend and continue to advance, they must
make higher bottoms and higher tops. When the trend is down, they
must make lower tops and lower bottoms and continue on down to
lower levels. But remember, prices can move in a narrow trading
range for weeks, Months or even years, and not make a new high or
a new low. But, after a long period of time when Stocks and
Commodities break into new lows, they indicate much lower prices.
And after a long period of time when they advance above old highs

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or old tops, they are in a stronger position and indicate higher
prices. This is the reason why you must have a chart which goes a
long way back, in order to see just what position a Stock or
Commodity is in, and at what stage it is between extreme high and
extreme low.
You will go broke trading on hope and fear. You will never succeed
buying or selling when you hope the market is going up or down.
You will never succeed by making a trade because you fear the
market is going up or down. Hope will ruin you, because it is
nothing more than wishful thinking and provides no basis for
action. Fear will often save you if you act quickly when you see
that you are wrong. The fear of the market is the beginning of
wisdom. Knowledge which you can only be obtain by in depth study,
will help you to make a success. The more you study past records,
the surer you are to be able to detect the trend of the future".

Setting up and Scaling Charts

What I mean by scale is to have the price in direct proportion to
the time. There are a number of rules Gann used in his analysis
with angles and scaling. One of these rules was the use of correct
charts. There are several types of charts that can be used for
analysis. For illustration purposes, I will use two of them. There
is the Market Day chart, which only shows trading days and then we
have the Calendar day chart which encompasses the entire calendar
year and shows all 365 days. Any type of chart that posts the
High, Low, and date will be fine because time and price are a
measuring instrument and as long as they are uniform, an angular
structure can be applied.

When working with a market day chart, the important thing is to

set up all the data with no spaces (gaps in time) for non-trading

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days like weekends or holidays. If you have the capability to set
up a calendar day chart, you will find important timing points
that are not shown on the market day chart. These must be laid out
in the correct format.

As long as the format is uniform, it will be sufficient for

angles. A Gann format features four, six, eight and sometimes ten
squares to an inch. Soybeans and most grains use the eight squares
format where as the S&P 500 index uses the 10 squares format.
Chart 1 shows the Gann 10 squares format and the S&P 500 index.

Chart 1

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Market-Analyst gives the user the flexibility to change these
squares to any number. Notice the large squares have 10 smaller
squares going up in price and over in time. This should be scaled
to the commodity or stock being traded. In the S&P each smaller
square equals 25 points, or 1/4th of a hundred. Because there are
10 squares in each large square, each full square is worth 250
points. Therefore, the 1x1 angle will be 1 unit in time and 25
points in price.

Chart 2 shows the 8 squares scale as used in the grain markets.

Chart 2

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In the Grain markets the scale will be 8 as in cents. In the old
days, grains started trading in 1/8th increments. So Gann used the
8 squares per inch to equal a whole cent because corn and wheat
were trading at less than a dollar. In today's Soybean market,
eight units of time equals eight cent in price because we are 10
times that of the price from when Gann did his scaling. Chart 3
shows Gann Angles applied to a Soybean chart using this 8 to 8
ratio.

Chart 3

The dark angle is the 1x1 and the gray the 1x2. These angles will
be significant in determining support/resistance if the chart is

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scaled properly. Once this concept is understood, you will have
the ability scale any chart including intra-day charts and apply
the same rules.

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 Chapter 2
Applying Angles to Charts
Calculating a Gann Angle is the equivalent to finding the
derivative of a geometric line on a chart in a simple way. Each
geometrical angle, which is also found in the square of 9, divides
time and price into proportionate parts. Gann called the 1x1 the
most important angle or the 45° angle, which he said represented
one unit of price for one unit of time. If you draw a perfect
square and then draw a diagonal line from one corner of the square
to the other, you have illustrated the concept of the 1x1 angle,
which moves up one price unit per day and over one unit of time.

As I mentioned in chapter 1, if you apply Gann Angles in the

traditional manor, scaling is one of the most important parts of
angle analysis. Once you have an understanding of how to apply the
proper scale to charts, you will be able to use these Angles
effectively.

Scaling a chart is similar to laying out a set of stairs. The "Stringer" is the
result of calculating the height of the drop, length of the run, rise of the
stairs and depth of the thread. If these calculations are correct, then the
last stair will equal the "Landing". The thread depth and riser height are Time
and Price. The Stringer is the Gann Angle. Your landing target will be dictated
by the price of the market.

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Chart 4
When the scale is correct, it will help in drawing the vector for
the 1x1. Fortunately, Market-Analyst has the capability to default
to the proper scale on each chart. This saves a lot of time. Here
is what Gann said about scaling, angles and their use; "When scaling a
stock or commodity, There are three kinds of angles. These are the vertical (price), the
horizontal (time) and the diagonal which we use for measuring time and price movements.
This diagonal angle is called the 1x1". Gann also pointed out that when
these angles are accurately drawn from tops and bottoms or extreme
highs and lows, they will be able to measure space and time
correctly with little or no mistakes.

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What does he mean, measure space and time correctly? Lets examine
this in depth. Chart 5 is a Continuous Sugar chart. The lowest low
on this chart is 13.39. If the chart is scaled properly and the
angles are drawn up from the low, we should have some kind of a
change in trend when time and price come together.

To begin with we have the 13.39 starting point in price. Using

that number as a bench mark, we count 13.39 days to the right and
find that the uptrend ended on that very day 13.39 days out in
time from the low (X marks the spot). This is your "Landing"
target which was given to you by the 13.39 price low. This was the
highest closing price of the uptrend.

The market price began a sideways action and continued for another
13.39 days until it broke the 1x1 angle and began a down trend
(Arrow). This was exactly 26.78 days (2 X 13.39) from the low.
When time and price came together at 26.78 days and met at the
1x1, we had a time and price convergence.

Examine Chart 5 closely to see how this occurred. Later on in the

Square of 9 chapter we will examine a few more of these
occurrences. Also notice how price reacted to each angle drawn up
from the low. Especially note how price retraced down the 1x8
angle before finding enough buyers to move price higher.

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Chart 5

Getting back to scaling, if you're trying to scale a stock or

commodity like Heating Oil, use 10 squares per inch. Heating Oil
is priced at Dollars per Gallon with 4 decimal places to the
right. So it would be thousands of a dollar for the minimum
fluctuation. In the following chart, I set the squares at 10. Each
smaller square will represent .01 cent or points and one day in
time. The larger square equals 10 cents and 10 days in time. The
smaller squares were used by Gann for the drawing of angles. In
his day it was the best way to find the equivalent of one unit of
price and one day in time. In other words 1 cent and 1 space to

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the right, is the balance of time and price and the reference
points for the 1x1 angle. The reason we use 10 is because the
price of Heating Oil is measured in cents per dollar and the
current price is within the $1.00 to $2.00 range. If Heating Oil
were below $1.00 the scale would change to the next 1/10th lower.

It is the same with a stock that has a price of less than $1.00.
Once the security moves above $1.00 the scale for each small
square will be changed to .01 cent from tenths of a cent.
Therefore making each larger square worth 10 cents. Keep in mind
what Gann said; “Volatility increases as price goes higher”. You
will therefore see wider price fluctuation per trading day or week
or month. This is especially true at the tops of markets.

In Chapter 6 I cover Types of Squares. Once the proper square has

been applied to a chart and a market is moving higher, we will see
how these squares are compounded as price goes higher. If the
square of 90 is being used and price moves more than 90 higher,
then price will be in the second square up from the bottom and the
angles change because volatility and ranges have changed and we
must adjust the scale to a different price level.

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Chart 6 is Heating Oil scaled to .10 cents. If your computer
program has the capability to do this, then when you draw a 1x1
you will be able to see if the vector is correct thus making the
angles significant in your study of price and time. This will help
you to obtaining good results.

Chart 6

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Chart 7

On Chart 7 the 1x1 is labeled (X). The angle below it is the 2x1
(arrow). This angle moves down at a rate of 2 price per 1 day,
which is a faster trend. This chart shows market Price moving down
four visible months at the rate of the 2x1 until it broke and
moved below to the 3x1 angle (Star) which is 3 price per 1 day.
This shown on Chart 8 .

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Chart 8
When a situation like this occurs, it is wise not to take a long
position until a signal comes in along with a few other
confirmations that a bottom has been put in. In this case, Heating
Oil has been in a Historic Downtrend and all cycle indications are
showing that a bottom is near or has been put in. More
confirmation is needed.

Chart 9 has the proper scale in place and a Gann Box which has the
angles drawn on this Continuation chart of Lean Hogs. The breaks
in price are the different contract months rolling over. The
angles show how Hogs are sensitive to the 2x1 and 1x2.

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Chart 9

Notice how price moved up from the start along the fast moving 4x1
angle. When the contract rolled over, market price followed the
1x1 and remained in this trend for two months occasionally finding
support on the slower 1x2. Once price broke away from the 1x1
angle it moved to the slower trending 1x2 angle.

Finally I have a Soybean chart which is scaled 10 Cents to every

small square and $1.00 for every large square. This is because
Beans are over $10 a bushel. The angles are drawn off the $15.08
high which was put in on May 22, 2014.

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Chart10

It is interesting to see the possible formation of a bottom here.

Price came down made a low. Moved up and went sideways for two
months and it appears to be making a higher low. This is all
taking place during the historic down trends in the overall
commodity market place. It is interesting to note that price is
following the slower trending angles down which usually indicates
that a change in trend is on the horizon.

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 Chapter 3
Swings & Angles
Now by this time, you might be wondering how is this going to make
me money in my trading? Bear with me, it will all come together
shortly. The most common place to start an angle would be the
lowest low or the highest high. You can easily look at a chart
after the fact to see where this place is in price and time.
However, if you know the mechanics of Gann’s major and minor
swings, you will be able to identify these and other significant
points to draw angles. Make sure the low or high being used is a
(major) swing point. Gann wrote about his major and minor swings
and gave examples. His minor was a two day swing. His major was a
three day swing. Chart 11 shows the Gann three day (major) swings.

Market-Analyst has the capability to adjust these swings to any

time frame you wish. Chart 11 is a snapshot from the summer of
2012 Live Cattle continuation. I have chosen this time frame for a
very important reason. I am going to change the time frame of the
swings to seven days from three days and show how the angles
interact with price in future days. I am going to be using the May
Low and the July low to draw a set of Gann Angles.

The reason I'm doing this is because I would like to compare Larry
William's (www.ireallytrade.com) seven day swing to Gann's three
day swing. Chart 11 has the three day swing of Gann and Chart 12
the Larry's seven day swing. Lets take a look at the results.

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Chart 11
Notice how the May low is picked up by the computer in the three
day swing. The low in July is also picked up by the computer. Now
in Chart 12, the May low is by-passed. And the July low is now the
lowest swing of the year which is a 7 day swing point.

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Chart 12

Ok now lets draw a set of Gann Angles off this low in May (Chart
13). After that, I'll draw angles from the July low. The angles
drawn from May show how insignificant they interact with the
ensuing price action (chart 13).

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Chart 13

Chart 14 shows the angles drawn off the seven day swing low in
July. The 1x1 angle (star) shows major support resistance and
change of trend (once penetrated) and the other arrows drawn are
at support/resistance areas. If you compare the angles drawn off
the May low to the July low, you can see the May angles have no
significance what so ever. This is a good lesson for you Gann
Experts who draw angles from major lows and highs. Some times
there are double bottoms and tops that have to be considered. And
the 7 day swing may be able to filter these points of interest.

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Chart 14
These charts illustrate where to start angles and where not to.
There are swing points after trading ranges that must be
considered. The lowest low or highest high that was established
will most always be, but may not always be a valid point to draw
angles from. This pattern of higher highs and higher lows must
continue by X number of days to establish a major swing to
reference. In this case the major swing (X) equaled seven days.
Just look at how the ensuing price action reacted to the angles.

To achieve a swing, consider the low day as day #1. The next day
that exceeds the day's high without making a lower low is day #2.

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Day #2 high must also be exceeded without making a lower low. This
is day #3. There are now two higher highs and two higher lows. Day
#3 high must also be exceeded and the forth and fifth going on to
seven. So on the seventh day we must have another high over the
previous day and that low must not be violated. The lowest low now
becomes the (major) SWING LOW. When doing this analysis on a
weekly chart, you may have to lower the swing number.

There are two rules to go along with the other swing rules:
1.) An inside day is not to be counted (it is a neutral or non-
trend day).
2.) The pattern of making higher highs must not be interrupted
until the major swing is completed. Reverse these rules for a
Swing High.

Other ways to determine swing points:

Set Moving Average to 18 period.
Rule #1. Use a weekly chart if you are looking for longer term
more powerful cycle lows and highs! When looking for a Cycle Low,
there must be at least 7 consecutive bars below the 18 period
moving average (the bars can touch the MA line, but ideally more
than 50% of the bar must be lower than the MA line). This must be
followed by at least 7 consecutive bars above the 18 period MA
line. Once this occurs, you have a Cycle Low and a place to draw
angles.

Rule #2. When looking for a Cycle High, there must be at least 7
consecutive bars above the moving average (the bars can touch the
MA line, but ideally more than 50% of the bar must be higher than
the MA line) followed by at least 7 bars below the 18 period MA.
Once this occurs, you have a Cycle High.

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When drawing angles off these lows and highs they will cross at
future points. Angles of 2x1, 1x1 or 1x2 which derive from
different swings of the past, may show a change in trend at that
date where these angles cross. The most significant of these
angles will be the 1x1. Always check to see where these
distinctive 1x1’s cross one another when drawn from different
points of highs and lows of the past.

Different Contract Months

When doing analysis, look at the most actively traded contract
months of each commodity (usually the 3 nearby months). This gives
an overall picture of the market that you are following. It shows
each contract and its relationship to its own set of angles and if
they have reached a significant angle of support or resistance.
Take Soybeans as an example; If the May beans are showing that
price has come to a support angle, the July or November contract
may also have found support on different angles. This is a good
indicator that at least a temporary support has been found.

Observe one month such as May reacting to the even numbered

angles, the 1x2, 1x4 and July reacting to the odd numbered angles,
the 1x3, 2x3. Study each month to see which angle the contract has
reacted to in the past and is currently reacting to. By doing this
you will know the "LIVE" angle for future support or resistance.

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Gann identified a total of nine significant angles, with the 1x1
being the most important: Gann Fan drawn from a low:

8x1 Very Fast Trend

4x1 Faster Trend

3x1 Fast Trend

2x1 Moderate trend

1x1 Average Trend

1x2 Moderate Trend

1x3 Slow Trend

1x4 Slower Trend

1x8 Very Slow Trend

Gann also observed that each of the angles can provide support and
resistance depending on the trend. As stated before, on a down
trending market, a reversal is signaled when prices move above the
1x1 angle. Chart 15 is a classic example of this price action.
Price was moving down at the rate of the 1x1 and finally
penetrated it to the upside. Once this took place, price rallied
up to the 1x2 and stalled. then retraced back down. The Star*
indicates the 1x1 and the arrows are the points of interest. A
very high percentage of the time, prices will move up to the next
angle (1x2). In other words, as one angle is penetrated, expect
prices to move and consolidate at the next. Take the time to study
chart 15.

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Chart 15

A rule of thumb is that price will most likely mirror the angles
it followed on the way down on the opposite side of the 1x1 as it
moves on the way up. An example is if price found support on the
fast moving 2x1 angle going down and then penetrate the 1x1 on the
way up, then expect price to find resistance against the 1x2.

Very high and very low priced securities will follow faster and
slower moving angles respectively. The angle with the highest
probability for support/resistance will depend on where price and
time are from of its origin. The lower the price, the more likely
the slower moving angles will offer support and resistance. Also

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the higher the price, the faster angles will offer support and
resistance. The 1x1 will always be the most significant of all.

The next chart 16 is an extension of chart 15. It shows a

horizontal line being drawn from the point where price penetrated
the 1 x 1 angle on the way up. When we extend this line forward in
time you can see how it offered significant resistance to price.
Because Time and Price were square at that precise point at the
1x1, we can use this as a reference for the future.

Chart 16

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Three ways to square time and price
According to Gann There are three ways to square time and price.
The following list of three are not necessarily in their order of
importance.
1.) Squaring the range: One of his most important and valuable
techniques is to watch a security when price is squared by time.
When time and price come together, you will be able to forecast
the important changes in trend with greater accuracy.

Chart 17

Chart 17 illustrates this established range. It remained in that

range for several weeks or a few months moving up or down in this

33
range never getting more than 24 points outside from the bottom or
top, a 1x1 can be drawn to find trend change points. Start the 45
degree angle from the highest and lowest point in the range and
move it up to the top of the range and then down. We move the 45
degree angle back to the bottom, then back to the top of the range
again moving it up or down over this range until the security
breaks out into new low levels or new high levels. You will find
that every time the 45 degree angle reaches the top of this range
or the bottom of this range, there is some important change in
trend.

If price finally moves out of this range, then the horizontal line
should only be moved if price moves back into the range and starts
trading within it again. You should then begin a new set of angles
at the new top or bottom and continue again. Always watch to see
if the 1x1 angle is penetrated or when time is squared out again
with price, which would be important for another change in trend.

2.) Squaring time with extreme low price: The next important
number to square is the lowest price or bottom of any important
low. Example: If the bottom of a security is 29, then at the end
of 29 days, 29 weeks or 29 months, time and price are equal. Then
watch for a change in trend as based on its bottom or the lowest
selling price. As long as a security continues to hold one bottom
and advances, you can always use this number noting every time it
squares out. In the example on chart 18, Boeing had a low in March
of 2009 of 29. Market-Analyst has drawn the square of 87 which is
3x29. Watch especially when the security reaches the third square,
the fourth square and again the seventh and ninth squares of time.
These squares occur frequently on the daily or weekly chart. But
on the monthly chart, it could take years to square out.

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The Boeing chart 18 shows how trend changed at the end of the
first square of 87 (bottom arrow). Then another trend change
occurred at the 3rd square up in price (second arrow). These
harmonic numbers can be used to follow this chart up as long as
the low of 29 is not taken out.

Chart 18

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Chart 19

As a follow up to the previous Boeing chart, chart 19 is Boeing at

the end of the 3rd square of 87 or 261 trading days out from the
2009 low of 29 (arrow). Nice trend change occurred. This is July
20th, 2010. Once again the number 3 is very significant (3rd
square). And the harmonics of 29 are in place and will be until
the 29 low is taken out.

3.) Squaring time with extreme top or high price: The third
important point to square time with is the extreme high price. The

36
time period must be carried across from the high of the daily,
weekly or monthly charts, and the square of the top price in time
must be noted and watched for a change in trend. If the top of an
option is 56, then when it has moved over 56 days, 56 weeks or 56
months, it has reached its square in time and an important change
is indicated.

Both major and minor tops and bottoms on all time periods must be
watched as they square out right along. Most important of all is
the extreme high point on the monthly chart. This may be very high
and work out a long time period before it squares the top, in
which case you have to divide the price into eight equal time

periods and watch the most important point like the ¼, ½, ¾,

The 1/3 time frame should also be watched, but most important of
all is when time equals price.

Lets go back to the Boeing chart. This next chart 20 is when

Boeing hit 107.83 in July of 2007. Market-Analyst has the
capability to do Gann Squares ending in decimals. So I put a
square of 107.83 at the top of the chart and beheld the results.

I went to the third square out and what do you think I found? Yep
a significant change in trend on the exact day of the end of the
third square (arrow). This beautiful trend change produced a 20
point drop. This is some powerful information my friends. We can
thank Mr. Gann for it when we reach that Mansion in the sky.

37
Chart 20

If market price is nearing a low point and squaring out a top,

look to see if that time frame has other relationships to previous
lows and highs that might be squaring out time from another
period. This would be a double indication for a change in trend.
And this is very powerful!

When referencing a previous high or low, Gann divided the larger

numbers into eights of time. Look for changes in trend at or
around these too. These three techniques of squaring price and
time are very powerful if you are a position trader and will
definitely help to find a change in trend.

38
 Chapter 4
Angles of Support/Resistance

Some of the rules Gann put in place can relate to the use of
angles. One of the more common rules is old resistance is new
support. What once was a high and is penetrated by price closing
above that high is now support. Most traders look at this
statement picturing a horizontal line on a chart. This rule can be
applied geometrically to angles along with the typical horizontal
line of support/resistance. The rule can also be reversed to say,
Old support is new resistance. There is a technique used in
fundamental analysis which is drawing parallel channel lines from
highs and lows for support and resistance. The technique may have
been copied from the original work of the late Roger Babson in his
Action Reaction Lines. The basic principle is to draw channel
lines from lows and highs and connect parallel lines to other
points to identify the consistency of market symmetry. The theory
is taken from Newton's Law "That every action has an equal and
opposite reaction".

This same principal can be applied in another method by drawing

the 1x1 angle off lows and highs to find the rate and strength of
market price. This technique can be used as a guide to finding
channels for future support/resistance.

Getting back to the Newton's Law; when a market does top, there
will be a high probability that the market will retrace to the
down side at the same rate at which it went up. If not, then watch

39
for the next move up and the following retracement, for it may
have the same rate of descent (an equal and opposite reaction).

Once the high is in, the 1x1's drawn down from the high will be a
guide to the strength of the falling price. When price begins to
move above the down trending 1x1, it is an indication that the
retracement has been completed or that it is about to end. A
trader can build a system based on this technique. This pattern in
price movement has a very high repetitive percentage.

Market Strength Relating to Angles

Consider this! When price is low the volatility will be low and as
price moves higher volatility increases. Therefore, if we analyze
any price movement in relationship to the volatility, we must
consider which angles will be the live angles. This means when
price is low and moving up or down at a slow pace, the more active
angles will be the slow moving angles such as the (1x4). As the
price moves higher we must use the faster moving angles to find
support and resistance, 4x1, 2x1.

If price is above the 1x1 and above 50% of the square or overall
range of the stock or commodity, look for the faster moving angles
to provide support and resistance. And if price of a stock is
above the $50.00 level, look for the faster moving angles to be
most significant. Also if price is above the 50% level of the all
time low and all time high, consider the faster moving angles to
be the live angles. If price penetrates an angle or 50% to the
downside on an up trending market, you may not have to sell
immediately. You may see price moving up just under the rising
angle but be aware, it could break to the downside any time.
Reverse this rule on a down trending market.

40
Chart 21
On Chart 21 study the price movement in relationship to the 1x1’s
drawn. Price is moving up below the rising 1x1 (arrow) until
another force affected it. This was in this case, the 1x1 coming
down from the 50% point of the square. Gann stated if the market
moves to the downside or away from a rising 1x1 angle it will
almost always go to the 1x2 (slower angle). This does not
necessarily mean a change in trend, but it does show a slowing
down of the advance which can be applied in two ways.

First, if the price is following the 1x1 up, then breaks away to
the downside, look for price to "Gravitate" to the 1x2 sloping up

41
from the same reference point as the 1x1 and having a continuation
of the trend in the same direction, but at slower rate of
increase, unless the 1x2 is penetrated. At that point look for a
change in trend.

Second, if price is following the 1x1 down then breaks away to the
upside, look for price to find resistance at the 1x2 sloping down
from the same reference point as the 1x1.

This slowing down of the advance can be misunderstood. What it

means is the price levels reached will not be as high off the lows
as the first advancing wave. There may be a sharp rally, but not a
sustained one. There is a phenomenon in charting called right and
left translation. Simply put, on advancing markets, the rally will
be longer in duration than a falling market and vice versa. If you
examine the Chart 22, you will see this translation.

Angle Symmetry & Elliott Wave

In Elliott wave theory, the first impulse wave of a 5 wave up
usually sets the tone for the rest of the price move. In Chart 22
I have drawn a set of Gann Angles from a low and connected the 1x1
to the first significant high point of the move up, which is wave
#1.

You can see the impressive results on how the other Gann angles
relate to price. The 1x3 showed resistance and the 1x8 offered
support 3 times before a big move to the upside took place.
Finding symmetry of price movement using this technique is not
explained in Gann's writings. However, if you study some of his
charts where he used just angles, you will see the 1x1 going from
low to exact high in a move.

42
Chart 22
Once price symmetry is found, a trading plan can be set in place
using these kind of setups. By observing your favorite indicators
and market price when it approached the 1x8 angle, a buy order on
a break out to the upside could have been put in place. This
technique is quite effective day trading the hourly charts.

Here is the same technique using a different starting point. The

following Copper Chart 23 has a set of Gann angles drawn off a
high down to the first impulse wave low using the 1x1 angle as the
timing line. As Price moved up, it reacted to the 1x4 on the

43
retracement. The breakout to the downside took place soon after
Copper rolled over to the next contract month. Price bounced
between the 1x2 and 1x3 angles then broke to the downside.

Chart 23

Chart 24 of the EUR-USD shows how market symmetry can be found by

squaring the first part of a range. The only difference is the
lines will be Fibonacci Fan Lines.

44
Chart 24

What I have here are three fan lines. .382, .50 and .618. These
three angles are very important for future support resistance as
you will see in the next Chart 25. Before we go on to that one,
let's look at what occurred on Chart 24. After drawing the Fan
Lines from the low to the top of the first impulse wave, price
came down to the .618 angle (Dash) and found support. Three months
after that, price came crashing through the .618 angle but
continued the move up. Now here is where Gann's statement comes
in. What was once support will now be resistance. Lets look at
Chart 25.

45
Chart 25 shows the same EUR-USD Daily six months later. Price
moved up to the .618 angle to find resistance at the once
supportive angle and at that point began a long term down trend. I
have observed this so many times in my day trading and I bank on
it. It is an excellent tool that will work on any time frame. Of
course nothing is perfect so use stops.

Chart 25

46
Drawing Angles from Double Tops and Double Bottoms
I would like to answer a question that has been presented by so
many traders; When price is at a double top or double bottom,
which point should angles be drawn. To start with, do cycle number
counts backward using Gann Square Numbers, Square of 9 Dates and
Fibonacci numbers. Use either calendar day or market trading day
counts. By doing this you will be able to disclose any cycles
falling on these highs and lows. In Chart 26 I have used one of
Market Analyst's many great features, the Square of 9 Dates.

Chart 26

47
The program allows me to look backward in time to see if there
were any cycles relating to the tops in question. The Stars
indicate the Double Top. On Chart 26 I have referenced the left
high and put the Square of 9 Dates going backward in time. The
arrows point out that four out of five cycles have referenced
either an exact high or low. In Chart 27 I have referenced the
right high using the SQ 9 Dates and the results were not
impressive. One out of nine cycles picked a low. The remainder
were not significant. So lets do a set of Gann Angles off the left
high and then the right high to prove my point.

Chart 27

48
Chart 28
In Chart 28, the set of angles are drawn from the left high. All
kinds of support resistance and timing are found on the angles.
Now lets draw a set of angles from the right high.

49
In Chart 29 most of the significant highs and lows are not even
touching angles or for that matter just hanging in space.

Chart 29

In addition to this, you can look at the closing price of the

double top. Which ever is higher at the top or lower at the bottom
will be the point to draw the angles. If you do not have any
reference material on Gann counts, the book "How to Make Profits
Trading Commodities" is a good source for the aforementioned. It
is a great book that shows Gann numbers and his cycle time counts.

50
 Chapter 5
Applications & Stratagies
Gann stated that if a perfect hole were to be bored through the
earth from one side to the other and the through exact center of
the earth, and if an object were to be dropped from one opening,
that object would eventually gravitate to the exact center. This
is his theory in the use of the 50% support resistance levels of
price and time.

This same law applies to the 1x1 angle. This is the Gravity Angle.
As stated earlier, some traders assume that one unit of price will
equal 1 unit of time. This can be critical if the angles are going
to be one of the confirmations used before taking a trade.

There are several indices and commodities that do not trade in

equal numbers for minimum tic fluctuation. Here are a few. S&P
500, NYFE, HOGS, PORK BELLIES, CATTLE, BONDS. Therefore, if the
1x1 is not scaled properly, the 50% rule will have no
significance.

This 50% rule applies to the 1x1 angle in Chart 30. One of Gann’s
most effective tools when proving his mathematics was drawing the
1x1 angle up from zero price referencing a time frame of a major
high or low then use that time frame to start a 1x1 angle up from
zero. The following Boeing chart illustrates this very clearly.

Leading up to 911, Boeing was in a bear market. When 911 hit,

Boeing along with most of the Stock Market began a price free
fall. It eventually found support on 1x1 angle up from zero
referenced 12/08/2000 as shown on Chart 30.

51
Chart 30

The fast angle 2x1

The 2x1 fast angle along with the 1x1 and 1x2 are the most
important to watch. These three angles usually contain most price
movement. They will also give you most of your timing. When rising
prices follow the 2x1 angle and break away to the 1x1. This will
usually occur in the middle phase (50%) of a move.

Keep time counts from the place where the angles were drawn and
where they broke away from the 2x1 and you will have an idea,
within a couple of days, where the current trend may come to an
end.

52
2x3 and 3x2 angles
The 2x3 and 3x2 angles are the angles most forgotten. They will
sometimes be the rate at which price will move up from lows and
down from highs. This will depend upon current market price and
where it is in relationship to overall price. An example would be
a stock trading around $33.00 or $66.00 would most likely be
sensitive to the 2x3 and the 3x2 angles which may offer support
and resistance. Furthermore, there are some commodities like Gold
that are sensitive to the thirds.

When price breaks away to the downside from a rising 3x2 it will
most always go to the 1x1 and a high percentage of the time to the
2x3 which is the other side of the 1x1. In contrast, if price
breaks away to the upside from a declining 2x3 it will most likely
move to the 1x1 in the same direction and most likely find
resistance at the 3x2.

Furthermore, look at the past price movements and observe the

relationship to the odd and even angles and the fast and slow
angles. This is the beauty of knowing the correct vector and using
the proper scale for the 1x1. If the scale is right, then all the
other timing angles will have significance with price movement.

1x4 and 1x8 Angles

The 1x4 angle has a direct relationship to the 1x2. If price moves
away from the 1x2, it will usually go to the 1x4 and find support
or resistance, depending where overall price is. The 1x4 is half
way between the 1x2 and the 1x8. This angle should be considered
as a temporary resting place for price as shown in Chart 31.

53
Chart 31

Notice how price did not stay on the 1x4 for very long before it
rallied up. Count time when price moves away from the 1x4 going
back to the beginning of the move. Whether working with the 1x4 or
1x1, always consider the time factor from where the market is in
relationship to the beginning of a square. This time can be used
for future time counts. If you are working in a square of 144 or
90 or 52 for daily or weekly charts, be sure to keep track of the
¼, ½, ¾, in time and price.

54
1x8 Angle: Though a slow rate of ascent or decent, the 1x8 is a
very important angle. The reason is when a set of angles are drawn
off any major high or low they represent a part of a circle. If a
set of angles are draw off a low and price begins to move up, and
if the move upward is the beginning of a new bull market, price
will most always retrace before continuing its upward move.
Sometimes all the way down to the 1x8 angle. Sometimes a full
7/8's of the move up will be retraced geometrically, or about 1/4
of a circle. The 1x8 should be the barrier to keep the price from
falling back to the starting point and possibly lower. If the 1x8
does not hold, price will usually go much lower.

This penetration and breakaway may not happen for a few weeks. In
fact it could happen several months out into the future depending
upon which chart is being used (Daily, Weekly or Monthly).

The Soybean Chart 32 is an example of this retracement down to the

levels of the 1x8. Even though the 1x8 angle was penetrated, it
contained price as it slowly moved up and built a base as the
accumulation phase took place before the huge move up. In this
chart, the whole phase took over five months.

55
Chart 32

There are several ways a trader can apply the 1x8 to their own
strategies. First, it is necessary to understand what Gann meant
when he said to buy at double and triple bottoms, & sell at double
and triple tops. His strategy can also be used with the angles.
This is especially true when applied to the 1x8 angle. The soybean
Chart 32 shows price moving down to the 1x8 and forming a triple
bottom. However if the chartist is using horizontal lines as
support/resistance, it would not look like a triple bottom. Each
time price went to the 1x8, it rallied for the first three times.
Then the fourth time, it went through.

56
The fastest angle 8x1
When price is following the fast angle 8x1 either up or down it is
in a power trend. Markets that follow this trend line will
experience a short "burst" then move sideways till it touches a
slower moving angle. Then resume the trend at the rate of the new
angle. You do not want to try and pick tops when price is
following this angle up or bottoms when prices are falling at the
rate of the 8x1.

“It is never too high to buy or too low to sell”. Go with the
trend and you will be your best friend. Do not get married to your
opinion. The angles will give indication of a trend change or a
sideways market.

1x1 Formula for Calendar Day Charts

When drawing a 1x1 angle on a calendar day chart, use the
following formula. The square of nine is helpful. The following
example is drawing the angle up from a low.

First get the price from the high or low you plan to draw the 1x1
angle from and find it on the square of 9. Now do the square root
of the price. This will give you the number of calendar days you
must count out to the right to draw your angle. Now you need the
price to intersect with this time frame. Locate the price from
which you started on the square of nine. Then go 180 degrees
around the square and find the number opposing it. Subtract the
lower number from the higher. This number will be the difference
in price added on to the starting point. Draw the 1x1 from the
start to the intersecting points of time and price. You can then
do parallel lines off other lows.

57
 Chapter 6
TYPES OF SQUARES

What exactly is a square when it relates to market activity? There

is nothing in Webster's definition that can specifically define a
square and how it relates to price and time. However, Gann gave an
ongoing flow of examples on how the two elements of time and price
can be squared out. In this study, there are two types of squares.
They are the Static (stable) and the Variable (price adjusted).
They can be used separately or together to show time and price
resistance points.

The static square gives natural resistance areas which relate to

important numbers of time when referencing historic highs and
lows. The time price resistance points formed from the stable type
are fixed and do not change. Examples of a static square are the
Square of 144, the square of 90, the square of 52 etc; So if we
take 144 days in time from a starting point and 144 units of price
up or down, and draw them on the chart, we have a square according
to Gann. However if we look at this on a chart, it will look like
a rectangle. Regardless, the numbers form a Mathematical Square.
They can also be referenced from the Zero point in time which is
the beginning of trading for a stock or commodity (natal date), or
a major low or high in price. These squares and the variable
squares are what Gann said to watch especially out to the third,
fourth, seventh and ninth time frames.

58
Constructing a Square
Squares consist of geometric angles, support resistance lines and
timing. The price and time support resistance levels of a square
should include 1/2, 1/4ths and the 1/3rds. These can be applied to
static or variable squares, and squares of the range.

To get away from the static and variable squares for a moment,
lets examine the squaring of a range. Take the most recent range
from high to low and apply the components of a square to the
difference in price. The place to start is the most significant
high or low. This does not mean you can only use the lowest low or
the highest high, because a square may be applied to any
significant swing point. Once a major swing has been identified it
can be used as a reference point for measuring time and price.

Major highs and lows in market price provide you with the starting
points. The first thing you want to do is divide the price and
time into quarters and thirds. Some suggest eights. The goal in
doing square analysis is finding the symmetry of the markets price
movement. The angles are an instrument to find that symmetry.
Start the angles from the high and low end of the square’s range.
Then move out in time and do the same to the right of the starting
price.

Getting back to the static square. If you are working with a

static square of 90 on a daily chart and the vector is 1.00 such
as in Gold. Multiply the square number (90) times the vector
(1.00) and you get $90.00 in price. If you are coming off a low,
then $90.00 off the low will be the top of the square of 90. Now
draw the angles from the four corners of the square 90 dollars
higher and 90 time frames to the future. The angles at the end of

59
the square in time will be drawn back toward the beginning of the
square. Now draw the midway point, which is 45 dollars up from the
low. These angles should also be drawn from the midpoint in time.
Do these both forward and back in time and price! Note: When
drawing the midpoint angles they must go up and down. Try to keep
the square from being too cluttered with angles. Just use the 1x1
and the 1x2 going up and down.

To get the 1/4th divide 90 by 4 and we get 22.5. When we divide 90

by 3 we get 30, which are the thirds. If your computer program has
the capability of doing cycle lines, then it will be of great help
to you and save you a lot of work. Once again if you have Market-
Analyst, this can be done with a click or two of the mouse. If
not, then draw the lines in by hand. Next, complete the square
using the 1x1 and 1x2 angles.

60
Chart 33

I have constructed Chart 33 using Market Analyst. Numbers 1

through 8 label the 1/8th increments of time in the square. Notice
how 1/2 in price of the square stopped market price from advancing
(the thick horizontal line) (note the minor top). Once price moves
above 1/2 of the square, a significant barrier will have been
broken. Another area of interest is how price stayed above the 1x1
until just before the 1/4 in time. Once a low was made during the
1/4 time, price moved up to the 1x1 touched it three times and
retraced down to the 1x2.

Price can be monitored for strength based on the angles. The 1x1
coming down from the top left corner of the square is important to

61
watch. When price crossed above it (at the 2/3 time frame), it is
in a strong position. If price moves above both 1x1 angles, expect
an acceleration.

Chart 34

Chart 34 illustrates the third square out in time from the

originating time frame (STAR). The star is a major low on the
Coffee chart. The three arrows are the end of the 1st, 2nd and 3rd
square of 90 in time. Another significant point to mention is when
the third square reached it's end in time, price moved up to the
end of the forth square of 90 in price. This is a great example
on how to use the squares to find trend change. When the signs say
it is time, then get ready to pull the trigger.

62
Chart 35 is a variable square which can be used as a measuring
device referencing major highs and lows of market swings and uses
the price. When doing these squares a trader will be transfixed at
the amazing relationship of numbers that Gann discovered. Chart 35
is an example of a variable square in use on McDonalds Corp.

Chart 35

The square referenced the April 12, 2013 high of 103.43. Using
this number as the square itself, we have some impressive results.
The first arrow to the left shows price coming down off the high
and finding support at the end of the first square in price. The
low came in almost exactly at 103.43. The second arrow shows the
end of the first square in time. The timing at the end of the
third square (3rd arrow) was a very significant high. This time
frame was caught in the middle of a major topping cycle. This

63
square overlay is what Gann relied on so much in the latter stage
of his trading career. This is why he was so meticulous about the
correct scaling and the angles being drawn from the key locations.

On Chart 36, I have constructed a static square of 90 on a Sugar

chart. Ninety days over in time doesn't necessarily mean that the
1x1 will be 90 cents higher at the end of the square. This isn't
going to work because Sugar has never reached 90 cents. The
highest high I have on my charts is 60.05 cents made in 1974. That
said, this is a perfect setup for a square of 60 off that high.

Chart 36 is compressed so you can see how the number 60.05 is

harmonic out to the sixth square. Price made a significant top at
that time frame and continued its downward trend. How many squares
of 60.05 should be watched? In Chart 36 we find 6, which is 1/10th
of 60. Therefore keep an eye out on the 12th, 18th, 24th, etc;
This can be days, weeks and months. Since 1974 is many months back
in time, I would keep a close watch on the monthly charts. The
monthly sugar chart below shows the truth of these harmonics. In
November of 1980 which was exactly 72 months (6 years) out, there
was a major top in sugar.

64
Chart 36 is using the variable square of 60.05 off the Nov 20,
1974 high in Sugar.

Chart 36

The arrow to the left is the beginning of the square of 60.05 and
the arrow to the right is the third square out in time. The third
square yields very good results by putting in a significant top.
Since the number three is harmonic with 60 all 1/3rds should be
watched carefully. Using Market Analyst Software, makes this type
of analysis easy and accurate.

65
Which Square is the Master?
Gann said (in 1954) his most significant discovery was, working
with his "MASTER TIME/PRICE CALCULATOR. These clear plastic
overlays that he used were scaled to charts of various stocks and
commodities he pursued. He knew which square worked best with the
markets he traded. These Master squares are not just the square of
144. You can find very good results when using the variable square
from the major highs and lows. However, once you find the master
the square in the market you trade, you will be amazed how the
numbers fall in place with the harmonic time and price areas of
that square. You will then have the ability to predict time/price.

All right, let’s find which squares work best with certain
markets. Gold like the Soybean market has its own square it works
best in (sq. of 90). The meats, Financials, Softs, and other
commodities as well as Stocks work well with other static squares.
Bean oil works very well with the square of 52 on the weekly
charts.

Test various squares in the stock or commodity you trade to see

which is best. I follow 18 markets and several stocks and have
come up with the squares that I feel work best with each of these.
Take into consideration the scale when choosing a square. Do
division, multiplication, addition and subtraction, to find some
harmonic rhythm in the numbers. Look at the all time high and low
prices. If you study and work with various squares and scales, you
will find the harmonic numbers.

Market Analyst has the capability to produce the master time/price

overlay that Gann used by just clicking on the Gann Square option.
The overlay’s are scaled automatically to the number of your

66
choice. Chart 37 is a good example of the overlay being used on
the stock Wells Fargo. The high was 26.38 and the square being
used is the variable square of 26.38. The results are truly
spectacular as Chart 37 illustrates.

Chart 37

I used the 26.38 high as a starting point. Count the squares over
to the right and down to see the price support/resistance along
with trend changes at the key points of the square in price &
time. If you look closely, you will see the price coming to a peak
at the end of the 1st square (left top arrow). Two and 1/2 squares

67
out in time price peaked (second arrow top). Four squares down
price found support several times as pointed out by the two bottom
arrows. Finally, four squares over in time, price peaked (top
right Arrow).

Time Price Overlay

In the last years of his life, Mr. Gann said that one of his most
important discoveries was this time price over lay or Master
Square. At that time computers were not in use and it was a very
time consuming task to work up a chart that would include the
square an individual stock or commodity was working in. So, when
creating this overlay for a particular stock or commodity, Gann
took into account the slope of the 1x1 and all related angles, and
used the overlay from each major high and low to get Time
Clusters.

These timing clusters are a major part of his discovery. When he

would place his overlay on the chart and referenced several
different major highs and lows, he took notes on the dates of
price and time clusters coming together in the future.

One of the techniques Gann used was multiple squares. By starting

a new square from the end of the first square and keeping the old
square in place and extending the significant timing angles and
time frames, he found important points of trend change. When the
significant timing points (½ & ¼) of two or more different squares
overlap, he said these were significant points of time and trend
changes occurred at these points.

68
The scaled overlays Gann used for each stock and commodity he
traded included the square of 144. He used this in addition to the
other squares on the charts. By doing this, he had several
confirmations with other variable squares for time and price.
There was a time when he had a full time staff of people working
for him performing these duties.

With the age of the computer, it now takes a fraction of the time
and effort to accomplish the same thing. The following Chart 38 is
a time, price overlay of the square of 144 when applied to General
Electric. The High referenced was the August, 2000 High of 60.50.

Chart 38

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Market Analyst generated the Chart 38 overlay with just a few
entries into the data section then click and the overlay appeared.
Notice how price gravitates to the star clusters where the angles
come together at the half way point of the square and the end of
144 (Arrows). As you can see, these turning points in time are not
just a fluke. They are continuously performing for us.

The Square Within the Square. This is the dimension Gann

spoke of when price was moving through time. If you look closely
at the overlay, you will see these squares within the larger
square.

Chart 39

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Chart 39 of General Electric is the continuation of the square of
144 drawn from the August, 2000 high. The four round arrows are
pointing to the Square Within the Square. Look hard and you will
see the border of this square. The cluster of price came in at
exactly the end of the third square May, 2002 (arrow) and directly
in the middle of the inner square.

It is worth mentioning that the scale is in .10 cent increments

rather than in dollars. If you were to do a square on this chart
in dollars, the top of the square would be over 175 dollars and
the angles would be ridiculously out of proportion. However, if
the price of the stock were to go over 100 dollars, you could
increase the scale to 1.00 increments. “As price goes higher
volatility increases” and you must adjust accordingly.

Constructing a Square using the 1x1

This is for the trader who does not have a trading platform that
can do Gann Squares automatically. If do have one, this section
may enlighten you on how to use this in your trading. Chart 40 is
Natural Gas. It shows how time and price can be measured using the
1x1. To do this, break time down into eights of the square you are
working with. The square in this example is the static square of
144. Draw a 1x1 angle off both the price low of each quarter of
the square and down from the price high (top of the square).

By doing this you are essentially forming a Gann Grid. The Grid
can give a clear picture of market strength and weakness. Take a
look at the movement of price in relationship to the 1x1's as time
moved along. Gann's rule, "if price is above the 1x1 it is in a
strong position, if below, weak. According to the 1x1 angles in
this static square of 144, price is in a strong position based on

71
the 1x1 angle coming up from the low of the end of the square
(arrows).

Chart 40

If you study the chart closely, you will see the smaller squares
forming the overall large square of 144. The first horizontal line
up from the bottom is the first eighth in price. The angles moving
up and coming down are referenced in time from the quarter
segments of the square.

When constructing a square like this, you may need to extend the
angles from a second third and sometimes a fourth square up in

72
price and time. Since the 1x1 is the most important angle, it will
forecast the timing points of change in trend.

Let's do a follow up on chart 31 to see where price moved after

the end of the first square, since it was above the 1x1 angle. In
Chart 41 I have extended the 1x1 up from the low at the end of the
first square. I have also drawn a 1x1 down from the top price of
the second square of 288 as a reference point. Notice how price
reacted to that angle. It showed weakness because it never touched
it after three attempts.

Chart 41

73
Chart 41 of Natural Gas clearly demonstrates that as long as price
remained above the 1x1 it was in a strong position. When price
moves below the 1x1 it may be an indication that the current trend
is nearing an end. The 1x1 channels act as a guide line and must
be set up in this way using key reference points that are derived
from the points of a square.

I have started the angles from the same ¼ and ½ of the square in
time to show the effect they have on Soybeans. One of the most
important places to consider is the 50% level, especially in time.
Always draw a 1x1 angle from the 50% in time, from both the top
and bottom going forward and back in time. By doing this you will
see how the market reacted to these angles and be prepared to act.

When market price is moving into the last days of a square, watch
the (1x1, 1x2) angles for resistance or support. If they are
penetrated on a close, it is an indication that either the trend
is changing or accelerating.

74
Chart 42

Chart 42 is absolutely phenomenal. During the week of August 15,

2008 Hogs made a high of exactly 90. After applying a square of 90
to this weekly chart, you can see how time and price came together
exactly 90 weeks later and how price came back up to 90 again. It
doesn't get any better than this.

The above weekly chart of Lean Hogs is scaled using the tic value
of .025 of a cent. Four tics will equal .10 of a cent or 1/10th of
a dollar. As you work with these squares, you should make notes
for each security you trade as to which square works best.

75
When price moves to where it is equal with time, especially at a
harmonic number to the square you are using, there is a high
probability for a change in trend. It may not be the biggest trend
change in years, but it should be tradable.

76
 Chapter 7
Harmonics in Numbers

I'm trying to make these chapters flow smoothly so when we move

into the Square of 9 chapter you can apply some of the things you
have learned. The harmonics of a stock or commodity are numbers
that will work in harmony with price movement to offer support and
resistance in price and time. In order to find these harmonics,
which also relate to the angles, a few things must be taken into
consideration.

Each security traded has its own harmonic number. Look at the
given facts to find these numbers:
1.) What is the contract size?
2.) What is the minimum tic?
3.) What is the minimum tic value?
4.) What is the highest high and the lowest low in the history of
that stock or commodity then get the medium price?
5.) What is the beginning date of trading for that stock or
commodity?
6.) What was the price of the stock or commodity on the first
trade of the first trading day?
7.) Where is the current price trading?
All these are used to confirm the harmonic balance of Time and
Price which relate to significant highs and lows.

Example; if the contract size is 60,000 lbs for Bean Oil and the
minimum tic is one. The Minimum tic value is $6.00 which may prove
to be a division of a high or low. The all time low is 7.15.

77
Multiply that by 10 and you have 71.50. The all time high in Bean
Oil is 71.26 cents Adding these two together, equals 78.41. Divide
by 2 to get the mid point of 39.20 cents. There are now five
harmonic numbers. 6.0 (minimum tic value), 7.15 (all time low),
71.26 (all time high), 78.41 total of two and 39.20 (medium). In
addition to all this we also have a harmonic resistance point of
1/3 and 2/3 increments of the all time high and low. All these
calculations can be used for daily, weekly or monthly charts.
These numbers are not only used for price resistance, but for
time.

A few examples are the 71.26 all time high could be used as a
square of 72 or 144 (Gann's Master Square) and its time counts
will be in days, weeks or months as follows: ¼ = 36, ½ would = 72,
1/3 will be 48. The mid point number of 72 could be related to the
square of 36, 2 x 36 = 72. The all time low on Bean Oil is 715.
Times 4 is 2860, the most recent weekly chart on Bean Oil shows a
2900 top. Chart 43 is more proof that the harmonics of these
numbers work.

78
Chart 43

One of the more interesting points of this chart is the end of

each square in time. The first square had a very tradable low come
in at the 50% price level which was at the end of the 52nd week in
time. At the end of the second square price broke above the 52 in
price (upper horizontal line) on the exact week ending the second
square. This is an indication of higher prices, especially when
price moved above the 1x1 line moving up from the end of the first
square. You can see the importance of extending squares over and
using the 1x1 angles at these strategic locations.

Gann's rule of three can be applied in several ways. When working

with a security like the S&P 500 and price is 1186.50, make the

79
number a three digit number and drop the decimal point. This will
be very helpful when doing your angle analysis on the square of 9.
So 1186.50 would be 186. This can now be applied to timing when
extended out 186 days, weeks, or months. All these time frames
will be a harmonic point and in direct relationship to price.

The remaining harmonic numbers are the date and price of the first
trade of the security. The price will be an effective harmonic
number when using it for a time measurement. Example; if the first
trade of June Treasury Bond Futures is 102-17, then 102 days out
in time is the first place to watch for trend change on the June
Bond chart. If you like, you can break the 17 down to a decimal.
We do this by multiplying 17 times 3.125. This is 53.125 and
rounded off 53. We now have 102.53. You can use this number or use
the rule of 3. I prefer the rule of 3 so it can be easily
translated to the square of 9. But for those who want extreme
accuracy, use 102.50.

The first day the June T-Bond Futures traded is significant

because you can measure time from that date. According to Gann,
the timing points to watch for will be the anniversary date and
the 180 degree point in time. 180 degrees on a calendar is 182.5
days. There are astrological calculations that can be applied to
this, but that is a study in itself.

When Gann taught his courses in the 1930's, he showed how he used
the weekly charts in doing his forecasting and he pointed out how
the novice trader has a tendency to look only at the daily charts
and even immerse themselves in the ticker. Some look only at the
hourly, and some the one minute charts. It depends on what kind of
trading you want to do.

80
The more price history you have, the better your analysis is going
to be, especially if you are using the weekly charts. It is
preferred to have at least 20 or 30 years of daily data on any
given stock or commodity and a program that can convert this data
into weekly and monthly charts. Gann did research on the Dow Jones
dating back to the beginning of the NYSE in the late 1700’s. He
used the grand cycles of 60, 80 and 100 years. The markets I trade
have data which dates back to the 1910’s and Gold to 1975. My
stock market data for the NYSE goes back to the 1880’s.

Setting up the data to analyze a stock or commodity can be done in

two ways. As explained earlier, the first type of chart is the
Market day chart and the second chart is the calendar day chart.
This incorporates each day of the calendar. When drawing angles on
a chart, this is very important.

When drawing angles on a weekly chart, you get the entire years
history in a format consistent with time and price (no gaps). Not
one week is left out. For all practical purposes, Gann angles,
drawn on a weekly bar chart, present the most useful perspective
when seeking price and time. Gann often said that the weekly chart
was more important than the daily chart. Gann angles are still
quite flexible and can be used for any time frame, as long as the
time/price proportions are correctly calculated.

There are a couple of reasons to have as much data available as

possible. The angles and time cycles will have an effect on a
market, years later. The further out in time from the origin
(major high or low), the more powerful the 1x1 angle influences
price and time. Therefore if price moves to this key angle, a
change of trend should be expected. This is most prominent on

81
weekly charts. The trend reversal should be confirmed by using the
daily charts and checking the time cycles along with some
indicators and a system or methodology to enter the market in the
opposite direction of the current trend.

Years ago, when I worked as an Associate Broker for a grain firm

near Chicago, I had my face stuck in front of a computer screen
for the better part of the working day. I watched the 5, 15, and
45 minute charts for the grain markets. By doing this my clients
received a shorter term perspective. I therefore looked for
clients who had a short term trading approach.

Since then I have changed my impatient ways and taken the longer
term approach. Going with the trend and using the weekly charts.
For me, this is the most comfortable and profitable way to trade.

The next Chart 44 is a very fine example of what can be done with
a weekly chart and how to utilize the square of 144 with the
weekly’s to predict trend change. Notice the areas where the 1x1’s
from the top and bottom of the square cross! At each intersection
of time, there is a trend change.

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Chart 44

When analyzing markets using weekly charts, it will require

patience. Most traders do not have the patience to wait for the
move to culminate. This is a key element to have in successful
trading. The ability to have that "CALM ENDURANCE" is very hard to
develop.

This is even more pronounced when viewing the monthly charts.

Waiting for the setup to culminate can be torture to some. A
monthly chart should be viewed at least twice during the month.
During the first week and last week of trading are the times when
most professional traders view the monthly charts. This will give
the trader an idea of whether the previous month's high or low has

83
been exceeded and to see if the market will close near the high or
low end of the range. A quick check to see where the market is in
regards to the 1x1 angle should be priority. By viewing the
monthly charts one can also see if the major trend is up or down,
allowing the trader to either sell the rallies or buy the dips.

There are quarterly charts and yearly charts, but unless the data
is available to go way back, it would be futile to keep these
types of charts. A Friend of mine has an office in his family's
Grain elevator. Pasted along the inside walls are corn charts
beginning from 1899. It's very nice to have that kind of data
available. But most people do not have that luxury. If you could
find a broker who has access to long term data it would be a plus.
If this data is available, major highs and lows can be used as
starting points for the future trend changes that will occur. At
that time, major swings in the market can be used to start the
angles and squares.

84
 CHAPTER 8
Trend Line Indicator

There is another method Gann used in his trading. He called it the

TREND LINE INDICATOR. You can use any of his methods you wish or
all of them. The following shows how to obtain the minor trend.

You should always keep current daily charts with Open, High, Low
and Close. Place your Trend Line on this Daily Chart as it defines
the minor Trend of the market. Use green color Trend Line for
advancing (Up-trending) markets. Use red for declining, (down-
trending) markets.

The Trend Indicator or Trend Line is obtained by following the

daily price activity. As long as the market is advancing and
making higher tops, the green Trend Line moves up each day to the
highest price of that day and continues to move up as long as the
market makes higher tops. The bottoms are usually higher also, but
they may be the same or up to 3 tics lower than the bottom of the
day where the Trend Line is at its highest point.

A change of minor trend is indicated when the market moves 4 tics

or more below the highest bottom, you move the Trend Line down to
the bottom of that day, using a red color. Then if on the
following day, the market moves down to a lower bottom, the red
Trend Line moves down to the low of that day and continues to move
down as long as the market makes lower bottoms. The tops are
usually lower also, but they may be the same or up to 3 tics
higher than the top of the day where the trend line is at its
lowest point. The following chart is an

85
example of what a swing chart looks like using the principle of
the trend line indicator.

Chart 45

Trading the Trend Line Indications

Even though the Trend Line Indicator was a basic following of the
trend by the use of rules, it was an essential part of Gann's work
while in a trade or just before he entered into one. He gave
several rules to trade by when using this indicator. Here is
another one of them. Gann's words are in Quotes.

"The simplest and easiest rule is which ever security (stocks or

commodities) that you start trading in, place a stop-loss order 4
tics under the last Trend Line bottom and never use any indication

86
to sell out until the Trend Line breaks 4 tics. Then reverse using
the same amount and follow it down with a stop loss order 4 tics
above the most recent Trend Line top until your stop loss order is
caught then reverse again and go long. These 4 tics is an old unit
Gann used in his time. You may have to adjust this to use more
than 4 tics to allow for today’s volatility. Always allow your
Trend Indicator to be your guide and when it turns down, follow it
and do not expect a change until the Trend Indicator shows it.
That is what the Trend Indicator is for, to keep you with the
minor trend of the market. And when it changes, you must change
and reverse your position accordingly.

This rule will make the cautious trader a very large percentage of
profits each year if he (or she) trades when the market is active.
The higher the price at which a security is selling, the more
money this rule will make."

Important Gann Numbers:

Trading Days = Calendar Days Weeks = Months
5 = 7 7 = 1.5
20 = 29 29 = 7
24 = 35
49 = 70
*The sum of numbers 1 thru 9 = 45.
*45 is 1/8 of 360. This is another reason for the importance of
the 45 degree angle. The total of the following numbers 18, 27,
36, 45, 54, 63, 72, and 81 = 396 representing the sun, to which
was allotted the sum of the numbers 1+2+3+4+5+6+7+8 = 36. 36 from
396 is 360, while the remaining 360 represented the twelve zodiac
signs of 30 degrees each, in other words, the solar universe.
Then again, all natural geometry proven to be true in natural

87
forms, circle, squaring, rates of vibration, etc., are carried out
in multiples of 9.

Every arithmetical quantity into which 9 enters is reducible to a

lowest common factor of 9. The numerical symbol for Jehovah is 26
(10+5+6+5) If you add 144, (12x12 square) to 180 (the number of
degrees in a triangle), you get 324 and then add 36, the
Pythagorean numerical symbol of the Sun, you get 360. Or, if you
subtract 144 from 180, you get 36, the numerical symbol of the
Sun. 144 multiplied by 180 gives us 25,920, the number of years in
a complete precession of the equinoxes.

The Number of man is 666. It is the sum of all the numbers in

sequence from one to thirty-six added together. 36 is the “Grand
Number of the Sun. Another way to arrive at 666 is to add 396 (the
philosophical number of the solar system), to 270 (the gestation
period of man, 9 months x 30 days =270 which is ¾ of the circle.
This gives 666 again which is the number of man. Gold in ancient
cabalism is the symbol of the solar light and the cabalistic
number of the Sun being 36 makes gold and the Sun Synonymous.

If these numbers may put question in your mind, then look harder
at them and try to relate them to cycles in the markets. Ask
yourself a few questions! What makes a complete cycle? What is the
significance of symbols like those of God’s number 26....times 2 =
52 weeks in a year? 26 is essentially 180 degrees of some
preceding cycle. So, 180 degrees being an opposition, will be the
opposite of the start of the cycle. In other words, a low will be
a high on the 26 time count. Work with the numbers and you will
indwell them into your mind.

88
 CHAPTER 9
Square of Nine

Illustration 46

The above illustration is a copy of Market Analyst's Square of

nine. Gann called it the "SPIRAL CHART". In my humble opinion,
you'll be hard pressed to find a better and more thorough Square
of 9 than this one offered by Market Analyst. That said, I'd like
to lay a basic ground work and give you a glimpse of some
techniques that this multi-dimensional tool and Master Calculator
can do. The lessons are universal and open for interpretation.

89
This tool is used world wide by many Gann Traders that are seeking
price and time harmony. I believe in this chapter, you'll see
clearly how Price and Time work in harmony to show
support/resistance and timing for trend change. An in depth study
of this tool would be a book in it self. There are in fact,
several books written on this subject. One I would recommend is
written by Daniel Ferrera Of Sacred Science. His insight is truly
remarkable and eye opening and worth the money he is asking. As we
progress, you'll see some of the capabilities of Market Analyst's
use of this great tool.

Illustration 47

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Basics of the Square of Nine

The Square of 9 is a spiral of numbers starting with number one in

the center or apex of the Great Pyramid with the number two
immediately to the left. The remaining numbers spiral around the
center in a clockwise direction going up to the number 9. This
completes the first cycle of numbers around the center. 10 through
25 completes the 2nd cycle, 26 through 49 completes the 3rd, etc…
This arrangement of numbers creates a very unique square root
relationship with other numbers on the chart (covered later).

Illustration 48

91
One important area to watch are the numbers on the Cardinal Cross
(Illustration 49). Gann referred to these often when talking about
trend change. When major tops and bottoms occur on the cross,
support/resistance for time and price can be found in market
movement months and sometimes years later.

Illustration 49

Gann also pointed out that the 45 degree angles were very
significant when it came to support/resistance and trend change.
Illustration 50 shows these angles with the 90 degree lines
darker.

92
Illustration 50

If we divide 360 degrees by 6 we get 60 degree increments as shown

in Illustration 51. These are important in some commodities like
Gold. Gold is the first commodity I traded. Over the years I
noticed certain patterns and repetitions that are quite reliable.
The Sextile angles are one of them. I have noticed more times than
not that when I draw Gann Angles on the chart, Gold will react to
the 1x3 or 3x1 angles. This may have something to do with the
Natal Date when Gold started trading.

93
Illustration 51

These complete cycles around the Square of 9 are called squares

and they end with an ODD number on the 225 degree angle on the
bottom left of the square progressing outward starting with 9, 25,
49, 81, 121, 169, etc; This same progression is found with the
EVEN numbered squares which is found on the opposition of the
Square starting with the number 4, and progressing out 16, 36, 64,
100, 144 and etc; as shown in Illustration 51A

94
Illustration 51A

The square root of 9 = 3. The square root of 25 = 5. The square

root of 49 = 7, the square root of 81 = 9 and etc; The
significance of these numbers is as follows:

Our numbering system is broken down into nine digits used in

measuring everything and we cannot go beyond 9 without starting
over to repeat and using the 0.

If we divide 360 degrees by 9 (Number of degrees used by the

Square of 9), we get 40, which measures 40 degrees, 40 days, 40
weeks, 40 months and shows why bottoms and tops often come out on

95
these angles measured by 1/9th of the total circle. If we divide
Gann's major cycle of 20 years or 240 months by 9, we get 26 2/3
months, making an important angle of 26 2/3 degrees which can be
translated into days, weeks or months.

Nine times nine = 81 which completes the first square of nine.

Make a note on how these angles run from the main center. The
second square of nine is completed at 162. Note how this is in
opposition to the main center. The third square of nine is
completed at 243, which would equal 243 months or 3 months over
Gann's 20-year period and accounts for the time which often
elapses before the change in cycle, sometimes running 3 months
over or more. The fourth square of 9 ends at 324. Note in
Illustration 52 how the angles of 45 degrees cross at 325,
indicating a change in cycles here.

To complete the 360 degrees requires four squares of nine plus 36

over. This would be 4 x 81 = 324 + 36 = 360. Also note that 361
equals a square of 19 times 19, thus proving the great value of
the square of nine in working out the important angles and the
proving of discrepancies. Once the number 19 has reached its
maximum it can start over again with a zero or 20.

96
Illustration 52

Getting back to the square root relationship. If you want to move

around the coordinates of the Square, you take the number you are
interested in (such as the all time High or Low price), calculate
the square root of the number, then add or subtract 2 from the
root and re-square the result. This will give the adjacent number
in the next cycle out. It helps to round off numbers to a 3 digit
number to make it easier for angle analysis on the Square.

For an example; 609 which is the contract high of July 2001

Soybeans has a square root of 24.677 minus 2 = 22.677 times itself
to re-square it out again and you get 514 which is one full 360

97
degree cycle in toward center. Each time you subtract 2 from the
square root it will be the next adjacent number going into center.
If you add 2 to the square root, it will be the next adjacent
number going away from center. If we use the same number 609 and
subtracted 4 from the root (two complete cycles into center) and
re-square the result (24.677-4= 20.677^2 = 427) we would get 427.
This would be two full 360 degree cycles in toward center. The
seasonal contract low for July 2001 Soybeans was 422.
Incorporating these techniques allows us to calculate coordinates
of Astro cycles that are:

Conjunct (360 = +/- 2 from the root), Opposition (180 = +/- 1 from
root #), Trine (120= +/- .666) (240= +/- 1.333), Square (90 = +/-
.5) (270= +/- 1.5) and Sextile (60 = +/- .333) (300 = +/- 1.666).
This technique is extremely useful for finding coordinate squares
on the square of 9 that are making hard aspects to a previous
position on the wheel. We can also use Fibonacci numbers in
conjunction with the square root number. .236, .382, .618, .764
etc.

Also, Gann believed the numbers that square the base of the
pyramid (the 4 corners of the square) to the “gravity center” and
also the numbers that run straight vertical and horizontal from
the “gravity center” in the form of a cross (cardinal numbers)
were very important in balancing “Price & Time”. He was basically
looking for astronomical longitudes to balance with price on these
key angles. This is a book in itself. Pythagoras said “Units in a
circle or in a square are related to each other in terms of Price
& Time at specific points.” Gann was pointing the reader of his
work to clues that would allow his students to unlock the code of
his writing style.

98
Time and price:
Around the outer perimeter of the Square of 9 is a circle with
months and days, Illustration 53. In Market Analyst, these dates
can be changed to the 24 hour clock for day trading. The circular
calendar starts on the right-hand side of the wheel on the same
horizontal line as the center block. The date is March 21st and
refers to the start of the “natural” year in the season of Spring
with the Sun in Aries . The dates move around the circle
clockwise completing the calendar. This relationship allows you to
quickly identify dates that are Conjunct, Opposite, Square, Trine
or sextile to a past calendar date. Furthermore, we can also use a
first trade chart (Natal Chart), i.e. horoscope to locate
sensitive longitude positions that are being aspected by planets
from the outer circle making them “Live Angles”! Doing planetary
work on the Square of 9 requires a deep understanding of
Astrological symbols and their meaning. This in and of itself is
another book of which many have been written.

Gann wrote about this natal horoscope technique in his Master

Course for Stocks by saying “The dates when companies are
incorporated and the dates when stocks are first traded on their
respective exchange cause them to make tops and bottoms at
slightly different dates than these dates for seasonal changes”
(Reference the Gold). Essentially these "Vibrations in Time" are
nothing more than price and/or time harmonizing on an angle of the
circle of the square of 9. Gann referred to this in his example of
the musical harmony between notes. I will try to simplify the
concept by using my own example.

99
Illustration 53

If a group of instruments are playing the same note and one is out
of tune, then an unpleasant sound can be heard. When they are
brought up to the same vibration, or in tune with each other, they
will harmonize and have a pleasant sound to the ear. Musical notes
and sounds are nothing more than vibrations. Time and price coming
together has a vibration too and is just as powerful.

My Dad used to tune and repair pianos. When I was younger, I went
with him on occasion to see how he did this. At the beginning of
his career, he used tuning forks. Years later and with excelling
technology, he was using an oscilloscope.

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The tuning fork and its concept is one of the most interesting
things I have ever seen and heard. A tuning fork vibrates X amount
of times per second depending on the note it represents. These
vibrations create a vibration wave. Once the fork is tapped on a
solid surface to create this sound, it hummms for quite a while.

Once the tuning fork is tapped and the base placed on the piano,
and the corresponding key on the piano is touched, there should be
a smooth wave of sound if that piano key is in tune. It takes a
keen ear to hear this. If the piano note is off, you can hear a
wavy pulsating sound. The more the note is off, the faster these
waves pulsated. When pulsation subsides, the note is either so far
off tune or it is in harmony with the tuning fork.

This same principle can be applied to markets when time and price
come together. A harmonious rhythm is produced at specific times
in market history. When a market is topping, rapid vibrations are
all over the airwaves and the good news is out for the public to
hear. In the case of a bottom, the news is bad, but it is a slower
collaboration of harmonious vibrations. These vibrations are not
just in the news, but in the cosmos and all through out the
universe. These vibrations are the key to market harmony which is
a coming together of former cycles at one time frame to form a
"Vibration in Time."

Nobody knows for certain exactly how Gann used this Master
Calculator, but if you study this material and apply the
techniques presented I think you'll agree that this is how Gann
probably used the tool, at least in part, to prove the “4th
dimension in working out Time & Price movements”.

101
Illustration 53A

Finding the 1x1 scale on your chart

If we have a low of 257 and do the square root, we get 16.03 or 16
days. Go 16 days out to the right on your chart and mark the point
in time. Look on the square of 9 and find 257. Once we have found
257, go 180 degrees around the square and you get 289. Subtract
257 from 289 = 32 which is the price we add on to our low the 16th
day from the 257 low. So on the 16 day after the 257 low our 1x1
slope will cross the 289 price.

102
To do the calculations without the use of the square of 9 is a
simple task. Using the example; Do the square root of 257 and add
one (if coming off a low), then re-square the result. The square
root of 257 is 16.03 and 1 added = 17.03 (the days out in time),
re-squared = 289 - 257 = 32. This number will be added on to the
low.

Illustration 53B below shows the number 257 on the 45 degree

angle.

Illustration 53B

103
Assuming this 257 low was made on February 4th, we have the first
line of support resistance in time at April 5-6. Also the darkened
box is the number 336. This is the next cycle higher in price on
the 33 degree angle out from the 257 low.

In Illustration 54 we will look at why the price and time

relationship with angles should be examined beyond the obvious.

Illustration 54

As you pursue the relationship of price and time, look at market

price and its relationship to the angles. If price is approaching
one of the significant angles, expect trend to change. This

104
statement can be taken two ways. Look at the previous illustration
and you will see where the price of 876 comes in on the Square of
9. There are two things to look at.

Number 1: The first and most obvious is the number 876 is on the
Nov 19th time frame. And it is the 124 degree angle. The first 1/3
out in time is January 17th which is on the 300 degree angle with
a price of 893. These are the most obvious places to look for
trend change.

Number 2: In Chart 55 we go beyond the obvious. Using the EUR-GBP

currency pair as an example, we have a top of .8769. Taking the
first 3 numbers 876, we find that this number comes in at
approximately the 124 degree angle on the Square of 9. By putting
Market Analyst's "Dynamic Square of 9" tool on the chart, we find
that the first move down off the .8769 high found support at the
124 degree angle (thick horizontal line). This is accomplished by
using the .8769 high as the reference or zero "0" point then
projecting down. The thick horizontal line is 124 degrees down off
the high. You have to continuously search for these kinds of
time/price relationships. Once price is approaching a target area,
the indicators will give first hint that trend may change.

105
Chart 55
Price tested this angle two times and moved much higher before
finally penetrating it to the downside. If I did a follow up on
the chart by going out further in time, we would see that this 124
degree angle offered resistance once it was penetrated.

Chart 56 shows the harmonics of numbers on a Silver chart relating

to the Square of 9. Silver's most recent low was 14.10. Using the
first three numbers of that low we get 141. Chart 56 reveals an
interesting relationship to that 14.10 low and the following top
about a month later.

106
Chart56

As you can see, the 14.10 low is pointed out by the arrow. A month
later price stalled and reversed at around the 141 degree angle
with a price of $18.25 per oz. Now, price is not always going
exactly to a degree of an angle and then stop and turn on a dime.
There's a little thing called Momentum. Gann constantly talked
about this through out his writings. Also if you look at the
indicator, it is in extremely overbought territory when price
approached the 141 degree angle. I have provided the Square of 9
Illustration 57 so you can see this setup.

107
Illustration57

The grid has the 182 square darkened which falls on the 141 degree
angle. The light gray bar is pointing to the 141 degree angle. As
price moved in a clockwise direction around the square, the angles
were declining. The 141 degree angle would most certainly would be
a place to watch for trend change. These harmonic numbers also
exists in another dimension. No, not the Twilight Zone, but the
Square Root.

108
SQUARE ROOT TIMING & Square of 9
Let's move on from price and Angles to using the square root of
price to find support/resistance and timing for forecasting. This
a relatively simple matter once the basics are understood.

One technique is to measure the distance between two major highs

or lows in terms of bar count and do the square root of that
number. Then add the degrees of the circle based on the Square of
9 to the square root then re-square the number. I showed how the
next number on the pyramid can be obtained by doing the square
root and adding 2. The same principle applies here.

Simply get the number and do the square root. You then add the
number associated with one of the degrees of the circle and re-
square the total.

Lets review the degrees as shown earlier in the book:

Conjunct (360 degrees = add 2 from the root#) re-square,
Opposition (180 degrees = add 1 from root #) re-square,
Trine (120 degrees = add .66) (240 degrees = add 1.33) re-square,
Square (90 degrees = add .5) (270 degrees = add 1.5) re-square,
Sextile (60 degrees = add .33) (300 degrees = add 1.66) re-
square.

Once this is calculated, add the result to the first date

(earliest date) of your measuring points. The next Chart 58 shows
two numbers below the lows that I have chosen on the Soybean
Chart. One number is the Trading Day Count TDC, the other is
Calendar Day Count CDC. The square root number for the 124 TDC is
11.13. Lets say I want the Conjunct of 360 degrees. I would then
add 2 to 11.13 and get 13.13. Re-square (multiply it times itself)
13.13 and get 172. Now I've added 172 to the first date. Once this
is finished, I have plotted the date by using an arrow on the

109
chart. This is labeled TDC. Next I'll do the square root of the
CDC of 178 days. Sq. Root of 178 is 13.34 add 2 = 15.34, re-square
= 235 Calendar days out from the first low. I have plotted this on
the chart so you could see the results. This is labeled CDC. It is
interesting to note that both cycles came out on the high of a
most recent move.

Chart 58

Chart 58 shows the dates of the turning points for the future
market based on the two lows referenced. Take note how the first
date labeled CDC is a High. The next date labeled TDC is also a
high. Normally low to low will equal a high. If you are going
from High to High, then expect a low at the time of Conjunct. If
measuring from Low to Low, expect a high at the Conjunct. When

110
measuring from a High to a Low, expect the Conjunct to be a high.
This chart was randomly chosen and could have been most any Stock,
Commodity or Forex chart and produced the same result. One
important factor when doing this type of analysis is there must be
discernable cycles available and not a long trending market which
does not yield the desired results.

A rule of thumb; If you use the date of extreme low as your

beginning point, the "soft angles" will typically come out as
lows. The soft angles are the 30, 60, 120, 240 300 degree angles.
The "hard angles" will typically come out as highs. The hard
angles are 45, 90, 135, 180, 225, 270, 315, 360 degree angles of
the square of nine. Reverse these rules if starting from a high.

The exception is the 270 degree angle. If starting from a low, the
270 degree angle will typically come out as a low. For future
reference the hard angles are harmonics of 45 degrees and the soft
angles are harmonics of 60 degrees. This type of forecasting works
very well on weekly charts. When a time has been targeted for
trend change, move on to the daily charts and apply the harmonic
square which will narrow down the time frame to within a few days.

111
Square of 9 Intervals for Time
In Chart 59, I am utilizing the Square of 9 "Intervals" tool to
find future converging cycles in Time. In this exercise, I am
using the 180 degree time frames (Extended out) from two starting
points. I'll need two charts to show how the converging cycles
come together twice causing change in trend. Chart 55A shows the
two starting points I measured from. The two vertical lines,
marked with an X resulted in a change of trend about six months
later.

Chart 59

112
Chart 60 shows the same daily chart with two cycles converging at
a much later date (1.5 years later) using the same starting
points. These cycles were much closer together and a significant
change in trend occurred which was followed by a very profitable
increase in price.

Chart 60

113
Lets do one more. This time I'll use three different starting
points for the cycles. A Low, High and a low again. Three cycles
converged within one day of the low about six months later. The X
marked the spot where they converged. Market bottomed and price
moved up $13 a barrel.

Chart 61
Another interesting point is the 1,440 or (144) mark of time
(arrow). Market topped exactly at that time frame. This kind of
analysis can be performed on a regular basis with this software.
The Square of Nine Intervals tool can be used going back as many
years as the chart technician's data base allows. These
convergences are very powerful and quite reliable.

114
The Square of 9 TABLE:
My Thanks go out to Daniel Ferrera and Brad Stewart at Sacred
Science for permission to reprint this portion which was taken
from Daniel's book on the Square of Nine (www.SacredScience.com).

Price has a relationship to time on the Square of 9. Once a high

or low has been established, the information for a potential
future turning point is now available. Earlier, we were discussing
the square root relationship of numbers on the Square of 9 by
adding 2 to the square root of any number. By doing this, we
arrived at the next higher number on the same angle. If we
subtract 2, we got the next lower number on the same angle 360
degrees out on the square.

Putting these numbers in collaboration with the Square of 9 Table,

we come up with some very interesting results. All we have to do
is square root the number of the low or high we are working with.
In this case, lets look for the 90 degree angle as calculated by
adding or subtracting 0.50 to the square root of the price and
then re-squaring the result. Next are the instructions for the
Square of 9 Table and after that is an example.

115
 The Square of 9 Table is used in converting a
number to the degree of angle it relates to
on the Sq. of 9. Notice along the top are the
degrees of a circle from 0 to 315. A Cycle is one
revolution around the square of 9 with all
of the eight 45 degree portions being covered.
The number of the cycle is how many times out
from center it takes for the square of 9 to
get to that number. Each one of the numbers
on the table falls on a 45 degree angle in
the square of 9. For example the number 34
is in the 3rd cycle 2nd 45 degree past the 0
degree mark (or the vernal equinox). It is on the
90 degree angle. Now to apply any number to the chart,
simply find the closest number on the table to the
number you are working with. Lets say you have a major
bottom price of 679. The closest number is 677 and 679
is 2 above that number. Simply divide 2 by the Degree
Ratio of .288889 (found in the left column). 2 divided
by .288889 = 6.92. The 677 is in the 135 degree
column. Now add 6.92 to the 135 degrees & you get
141.92 or 142 degrees. So 677 is on the 142
degree angle. To get the next number out on the
same angle of the square of nine, just square root
677 = 26.01, then add 2 = 28.01, then re-square
28.01^ = 785.07. Subtract 2 if you are looking for
the next number down on the same 142 degree angle.

Square of 9 Table

Deg-
Angle Ratio 0 45 90 135 180 225 270 315
Cycle #1 0.02222 2 3 4 5 6 7 8 9
2 0.04444 11 13 15 17 19 21 23 25
3 0.06667 28 31 34 37 40 43 46 49
4 0.88889 53 57 61 65 69 73 77 81
5 0.11111 86 91 96 101 106 111 116 121
6 0.13333 127 133 139 145 151 157 163 169
7 0.15556 176 183 190 197 204 211 218 225
8 0.17778 233 241 249 257 265 273 281 289
9 0.2 298 307 316 325 334 343 352 361
10 0.22222 371 381 391 401 411 421 431 441

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 11 0.24444 452 463 474 485 496 507 518 529
12 0.26667 541 553 565 577 589 601 613 625
13 0.28889 638 651 664 677 690 703 716 729
14 0.31111 743 757 771 785 799 813 827 841
15 0.33333 856 871 886 901 916 931 946 961
16 0.35556 977 993 1009 1025 1041 1057 1073 1089
17 0.37778 1106 1123 1140 1157 1174 1191 1208 1225
18 0.4 1243 1261 1279 1297 1315 1333 1351 1369
19 0.42222 1388 1407 1426 1445 1464 1483 1502 1521
20 0.44444 1541 1561 1581 1601 1621 1641 1661 1681
21 0.46667 1702 1723 1744 1765 1786 1807 1828 1849
22 0.48889 1871 1893 1915 1937 1959 1981 2003 2025
23 0.51111 2048 2071 2094 2117 2140 2163 2186 2209
24 0.53333 2233 2257 2281 2305 2329 2353 2377 2401
25 0.55556 2426 2451 2476 2501 2526 2551 2576 2601
26 0.57778 2627 2653 2679 2705 2731 2757 2783 2809
27 0.6 2836 2863 2890 2917 2944 2971 2998 3025
28 0.62222 3053 3081 3109 3137 3165 3193 3221 3249
29 0.64444 3278 3307 3336 3365 3394 3423 3452 3481
30 0.66667 3511 3541 3571 3601 3631 3661 3691 3721
31 0.68889 3752 3783 3814 3845 3876 3907 3938 3969
32 0.71111 4001 4033 4065 4097 4129 4161 4193 4225
33 0.73333 4258 4291 4324 3557 4390 4423 4456 4489
34 0.75556 4523 4557 4591 4625 4659 4693 4727 4761
35 0.77778 4796 4831 4866 4901 4936 4971 5006 5041
36 0.8 5077 5113 5149 5185 5221 5257 5293 5329
37 0.86667 5366 5403 5440 5477 5514 5551 5588 5625
38 0.84444 5663 5701 5739 5777 5815 5853 5891 5929
39 0.86667 5968 6007 6046 6085 6124 6163 6202 6241
40 0.88889 6281 6321 6361 6401 6441 6481 6521 6561
41 0.91111 6602 6643 6684 6725 6766 6807 6848 6889
42 0.93333 6931 6973 7015 7057 7099 7141 7183 7225
43 0.95556 7268 7311 7354 7397 7440 7483 7526 7569
44 0.97778 7613 7657 7701 7745 7789 7833 7877 7921
45 1 7966 8011 8056 8101 8146 8191 8236 8281
46 1.02222 8327 8373 8419 8465 8511 8557 8603 8649
47 1.04444 8696 8743 8790 8837 8884 8931 8978 9025
48 1.06667 9073 9121 9169 9217 9265 9313 9361 9409
49 1.08889 9458 9507 9556 9605 9654 9703 9752 9801
50 1.11111 9851 9901 9951 10001 10051 10101 10151 10201
Deg-
Angle Ratio 0 45 90 135 180 225 270 315
Cycle 51 1.13333 10252 10303 10354 10405 10456 10507 10558 10609
52 1.15556 10661 10713 10765 10817 10869 10921 10973 11025
53 1.17778 11078 11131 11184 11237 11290 11343 11396 11449
54 1.2 11503 11557 11611 11665 11719 11773 11827 11881
55 1.22222 11936 11991 12046 12101 12156 12211 12266 12321
56 1.24444 12377 12433 12489 12545 12601 12657 12713 12769

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 57 1.26667 12826 12883 12940 12997 13054 13111 13168 13225
58 1.28889 13283 13341 13399 13457 13515 13573 13631 13689
59 1.31111 13748 13807 13866 13925 13984 14043 14102 14161
60 1.33333 14221 14281 14341 14401 14461 14521 14581 14641
61 1.35556 14702 14763 14824 14885 14946 15007 15068 15129
62 1.37778 15191 15253 15315 15377 15439 15501 15563 15625
63 1.4 15688 15751 15814 15877 15940 16003 16066 16129
64 1.42222 16193 16257 16321 16385 16449 16513 16577 16641
65 1.44444 16706 16771 16836 16901 16966 17031 17096 17161
66 1.46667 17227 17293 17359 17425 17491 17557 17623 17689
67 1.48889 17756 17823 17890 17957 18024 18091 18158 18225
68 1.51111 18293 18361 18429 18497 18565 18633 18701 18769
69 1.53333 18838 18907 18976 19045 19114 19183 19252 19321
70 1.55556 19391 19461 19531 19601 19671 19741 19811 19881
71 1.57778 19952 20023 20094 20165 20236 20307 20378 20449
72 1.6 20521 20593 20665 20737 20809 20881 20953 21025
73 1.62222 21098 21171 21244 21317 21390 21463 21536 21609
74 1.64444 21683 21757 21831 21905 21979 22053 22127 22201
75 1.66667 22276 22351 22426 22501 22576 22651 22726 22801
76 1.68889 22877 22953 23029 23105 23181 23257 23333 23409
77 1.71111 23486 23563 23640 23717 23794 23871 23948 24025
78 1.73333 24103 24181 24259 24337 24415 24493 24571 24649
79 1.75556 24728 24807 24886 24965 25044 25123 25202 25281
80 1.77778 25361 25441 25521 25601 25681 25761 25841 25921
81 1.8 26002 26083 26164 26245 26326 26407 26488 26569
82 1.82222 26651 26733 26815 26897 26979 27061 27143 27225
83 1.84444 27308 27391 27474 27557 27640 27723 27806 27889
84 1.86667 27973 28057 28141 28225 28309 28393 28477 28561
85 1.88889 28646 28731 28816 28901 28986 29071 29156 29241
86 1.91111 29327 29413 29499 29585 29671 29757 29843 29929
87 1.93333 30016 30103 30190 30277 30364 30451 30538 30625
88 1.95556 30713 30801 30889 30977 31065 31153 31241 31329
89 1.97778 31418 31507 31596 31685 31774 31863 31952 32041
90 2 32131 32221 32311 32401 32491 32581 32671 32761
91 2.02222 32852 32943 33034 33125 33216 33307 33398 33489
92 2.04444 33581 33673 33765 33857 33949 34041 34133 34225
93 2.06667 34318 34411 34504 34597 34690 34783 34876 34969
94 2.08889 35063 35157 35251 35345 35439 35533 35627 35721
95 2.11111 35816 35911 36006 36101 36196 36291 36386 36481
96 2.13333 36577 36673 36796 36865 36961 37057 37153 37249
97 2.15556 37346 37443 37540 37637 37734 37831 37928 38025
98 2.17778 38123 38221 38319 38417 38515 38613 38711 38809
99 2.2 38908 39007 39106 39205 39304 39403 39502 39601
100 2.22222 39701 39801 39901 40001 40101 40201 40301 40401

118
Let's do an example; A high of 558 is on the 63.75 degree angle
according to the Square of 9 Table. We can get this by breaking
the number down. The 63.75 degree angle is also on the date of May
25th. After doing the calculations of square roots, and adding 2,
we get 656 and the next number out is 763. What we are looking for
are three possible prices on the future date of May 25th. 558,
656, and 763. If one of these numbers comes into play on May 25th
we would be looking for a change in trend based on the 90 degree
relationship of price equaling time. Trend could change with any
of the numbers relating to the angle relationship of 63.75.

The reason I used the 90 degree angle as our example is Gann

talked about the importance of this angle. The next most important
angle is 180 degrees, the next angle of importance is 270 degrees
then the 360 (full circle). Finally the soft angles which are
divisible by 30. Use these angles to correlate the time objective.

Square of 9 Table for Day Trading (very important for day traders)

I have found another technique to be very effective. Use price as

a geometric time progression. Take the price of the major highs
and lows and convert them by using the square of 9 table. We must
look at another mathematical relationship first. The calendar of
numbers on the square of 9 have a very good relationship of 1 to 1
on the 24 hour clock. The Earth goes around the Sun in 360 degrees
completing the calendar year and each number inside the square
represents a day. The 24 hour clock does not have this same
relationship. So when day trading, we must get the degrees per
minute. Illustrations 62 & 62A are that of the Square of 9 with
the 24 hour clock around the outside perimeter.

119
Illustration 62

120
Illustration 62A

We first need to transform minutes into degrees. If 24 hours is

360 degrees, then to get the minutes, we multiply 24 (hours) x 60
(minutes) = 1440. We then divide 1440 by 360 degrees and we get 4.
Therefore, 1 degree equals 4 minutes of time and 1 hour would be
15 degrees and 2 hours is 30 degrees. The zodiac signs are 30
degrees each. If you do not have a Square of 9, convert the highs
and lows into angles by using the square of 9 table. Once the
angle has been established, use the 4 minutes per degree as your
time calculator. Start from that angle (converted to time) and do
your time counts of 90 degrees, 180 degrees etc; from there.

121
When time comes around to the point of price, expect change
in trend. Example; If we have a price that equals 135 degrees on
the Square of 9 table and we want to find the first 90 degree
resistance of time, we simply add 90 to the 135 degrees and we get
225 degrees. Expect some change of trend on the 225 degree angle.
If we you have a price that is on the 315 degree angle, then we
have to convert that back so it fits on the 360 degree circle. So
90 x 4 = 360 minutes which equals 6 hours. And 180 degrees = 12
hours. 270 degrees is 18 hours. Therefore 90 degrees plus 315
degrees = 405 degrees. If we divide 405 by 4, we get 101.25 or the
101 degree angle. Look for some change in trend at 101 degrees.
Also look at the time (24 hour) clock and see where 315 degrees is
in relationship to the numbers on the square and watch for change
in trend at that point in price.

Furthermore, if each degree is 4 minutes and there are 1440

minutes in a 24 hour time frame, then 315 x 4 =1260 minutes
divided by 60 = 21 hours. And 6 AM is 0 degrees starting point, 21
hours will be 3 AM the next day.

It is very important that you have more than one confirmation of

this technique. Use several previous highs and lows to find future
turning points in time and look for those that merge. So if one
previous high is 90 degrees and another previous high or low is
180 degrees, there is a convergence. Confirmations like this will
help your account equity.

Techniques like these are some of Gann's first rate mathematics.

Gann took this to the next level by using the WHEEL OF 24 and
incorporating Astrology. This is a Science and study all in
itself. What I have shown you here are the fundamentals of his
work.

122
 CHAPTER 10
Market Science & Behavior

When I first started trading in 1980, I had a hard time

understanding some of the mechanics on how the Stock and Commodity
markets move up and down and who buys all the sellers contracts
and who sells all the buyers contracts until I became a licensed
Commodity Associate Broker in 1989. After extensive study and
talking to Floor Traders, I came to an understanding of how it all
works. I will try to sum up what I learned over the years in a few
short pages.

These basics can be applied to all markets because all markets

follow the same laws of buy/sell pressure. When a market is
approaching a bottom, we have several forces pushing it lower.
First, we have the overall lack of buying. It is most notable
when the big firms are not active buyers. ("It takes a tremendous
amount of buying to push a market higher; but it takes a mere lack
of it for it to go lower"). Along with this, we have the selling
pressure by large firms which is known as Hedge Pressure. We then
have selling by smaller hedgers of the product being traded. This
could be banks selling mortgage rates, governments selling
Treasury Bonds, grain elevators selling Soybeans etc; Finally
there are those weak long positions who just can not stay with
their position any more and they have to “Bail Out”. This causes
high volume and many times you see a market bottom with a large
volume day and dramatic price drops fueled by the worst news one
could hear (Bottoms have a tendency to be less volatile than
tops). If weak traders are in a long position, panic may set in at
this time and mass liquidation could take place. Finally these

123
weak longs throw in the towel. Most always we will see the worst
news at market bottoms and very good news at market Tops.

At this time, the shorts cover their positions by buying back

their short positions. These are the profit takers. Now the
speculators, "Bottom Pickers" (the Fred's), come in and start to
buy. Then the hedgers have found themselves short of product so
they must buy to maintain an inventory level; When it is all said
and done and the dust has settled, the market commentators call it
a "Short Covering Rally".

In some cases this is true. However, there is a way to tell the

short covering rally from a true market bottom. Watch the volume
on these rally's off major lows and do a count of the number of
days up to see if the most recent move up has lasted longer in
time than any of the short covering rally’s from the most recent
down trend. Look to see if the volume of the most recent move up
is greater than that of the last down move. If it is, then there
may be reason to believe the market is reaching bottom.

Before I begin to look for a place to enter the market on the long
side, I want to see if there is a cluster of cycles that fall
together on one or two consecutive dates. If so, I will use one or
more of my systems to put me long the market. Some people use
indicators to judge if the market’s selling has been exhausted. We
covered indicators.

Unlike most market bottoms, a market top will experience extreme

volatility, wide price ranges and high volume. Indicators will
often stay in an over bought state for an extended period of time,
giving the trader false signals time and again. When a market is
approaching a bottom, the indicator will be at the bottom after
the market has already bottomed and on the way up for a

124
retracement. Gann teaches that the Public enters the market at
these tops and sells at these bottoms.

Gann said market price will be working between the 45 degree

angles of the 360 degree chart (square of 9) in price and time. If
you take a circle and divide it into 8 different parts, we have 8
45 degree angles. These lines drawn from the center of the circle
outward get further apart as price gets higher. The further out in
price, the more volatility there will be. Price fluctuates freely
between these angles because they are widening as price goes
higher.

The News

If a trader gets caught up in the news, it can be a major

financial disaster. One good example is the 1980 Gold and Silver
extreme price rise. People blamed the Hunts for causing it, but it
took the participation of the whole world for a market like this
to happen. The hunts were not buying Gold, just silver. I remember
very clearly when Gold was $800 and on its way to a high of around
$850, people were talking $1000 Gold and $100 Silver. Well Silver
went to $52.00 and Gold Reached $850. The greedy hung on for the
ultimate $1000 mark and went down with the ship. The smart ones
were selling all the way up. I was very fortunate to have been on
the right side of the Silver market both on the way up and on the
way down. At the time I was in the Silver and Gold business
hedging my product.

I have come to the conclusion that there are very powerful and
influential people who have the news media at their control and
they use this to their advantage. I am therefore very cautious
when major news comes out (good or bad) especially when we have

125
seen a significant price move, prior to the news, in the direction
of the news.

Gold had a tremendous move up in price from October 1979 to

January 1980. Near the top the producers started spoon feeding the
public of the (so called) shortages of Gold, and how the mines
were drying up and their inability to supply the demand was ever
increasing. At that time, the producers were hedging the product
they hadn't even mined yet. This was done on "Forward Contracts"
(the Futures Market). The result was the public bought everything
the mining company's could dish out. Gann strongly emphasizes to
stay far from the news and the ticker. You won't be able to see
the forest through the trees.

Let me conclude by saying that in my earlier days of trading and

as an Associate Broker for a Grain Firm, I got suckered into these
reports and found myself usually on the wrong side of the market
after they come out. If there is a major report due out, I suggest
stay with your technical analysis and work even harder during the
time preceding the report.

126
 CHAPTER 11

Gann's Rules for trading Stocks,

Commodities, Forex

1.) BUY AT NEW HIGH PRICES OR OLD TOP LEVELS

When using weekly charts the number of bars can be less than that
of the daily bars. This example shows 22 weeks. If we use 22 days
on the daily chart, the break out may not be as significant and a
false signal may occur.

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Here is another example of buying above old tops. This is a Weekly
"LINE" Chart of the S&P 500 that shows the old top of 2007 broken
a little over 5 years later in April 2013. An interesting point
here is how price came down to the level of the price breakout
about 2 months after April 2013 and found support.

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2.) SELL WHEN PRICES DECLINE BELOW OLD TOP LEVELS

The significance of this chart is how the price of Corn had fallen
so much and here is price looking like it has found some support
when Gann says we have a SELL SIGNAL.

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3.) SELL AT NEW LOW PRICE LEVELS

As a general rule it is safer to wait until prices advance at least a

few points above high levels and still more important to wait until
they close above these levels before buying and at the same time it is
safer to wait until prices decline a few points below old low levels
and still safer to wait until they close below these old levels before
making a trade.

This US Dollar weekly chart shows that it sometimes takes a few years
for a trade to culminate. But when it does, you will be ready with
these rules.

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4.) CLOSING PRICES

Wait to buy or sell when prices close above old highs or below old
lows on the daily or weekly charts. This rule should be exercised
when markets are very active and moving fast. This is most
effective when using the daily chart. A general rule is the longer
the time period in days, weeks, months or years when prices exceed
old highs or break old lows, the greater the importance of the
change in trend and the move up or down. Prices will most often
react back to the old tops or bottoms, which is a safe place to
buy or sell. Always use stop loss orders.

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5.)The 50% RULE

A.) The strongest buying point is when prices decline to 50% of

the highest selling level. You can buy with a stop loss order a
few points below the lowest low of the most recent move down. This
setup in Microsoft presented an excellent trade opportunity.

B.) Next strongest buying point is 50% of lowest low and the
highest high.

C.) The strongest selling point when prices advance after being
below the 50% point and reach it for the first time. Protect this
trade with a stop loss order a few points above the 50% level.

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Note: All these trades would be enhanced with the use of a timing
technique and a market entry system.

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The Fourth Time Rule

Gann said to sell if market price moves to a resistance area a

fourth time. Sell/Buy on a close below/above the resistance area.
Much lower/higher prices should follow.

The above chart shows this on the left side. When price approached
a 1x1 angle for the third time, if found support. On the fourth,
it fell through.

6. STOP LOSS ORDERS

Always use stop loss orders. Protect your capital at all times.
Place these orders when you make a trade. You should know in
advance what risk you are going to take. A general rule is do not
risk more than 10% of your capital.

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 Chapter 12
MONEY MANAGEMENT
(FOREX - PRECIOUS METALS)

This chapter addresses what I believe to be the most important

aspect of Successful trading. Money Management is understood by
some people and practiced by few. Let me put into words exactly
what I mean by Money Management or Risk Management as it pertains
to trading. Money Management is the incorporation of established
rules and guidelines which help prevent the excessive loss of
capital in a trading account. In this book I have established a
very good set of guidelines which I believe will help you with
your money management in the Forex, and precious metals markets.
Other markets like the S&P, Bonds, Grains etc; can benefit from
this by just using a little common sense and a calculator.

The initial deposit to open most Forex accounts can be as little

as $500. Some firms allow $250. I suggest a bare minimum of
$2500. It is better to have a higher starting balance ($5000 or
more) so you can have some breathing room when putting on a trade.
If you are planning on making this your full time profession, I
suggest at least $50,000.00. The reason for this is as follows:

Currency Pairs are traded in mini lots of $10,000 face value.

These Mini Lots or 1/10th of a full contract ($100,000) are
starting points for money management. Knowing contract size,
margin requirements and account equity is a must for every trader.
All Forex Pairs will have these contract sizes. Margin (or earnest
money) for a 1 lot or $100,000 varies depending on the Forex Firm.

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The firm I have my account with requires $3000.00 for a full
contract. The following suggestions are intended to be a guideline
of Risk Management for the Forex Trader. I hold no responsibility
for loss due to market fluctuation or volatility of any kind or
other unexpected circumstances.

Money Management Rules

1) FOR EVERY 1/10th LOT YOU TRADE, there should be a minimum of

$500 equity in the account. If you are putting on 5/10ths of a
full contract or 5 mini lots, you must have at least $2,500
equity in the account. If a full 1 lot (10 mini's) or $100,000
face value is traded, you should have no less than $5,000
equity. Another example is if an account has a balance of
$25,000 5 full contracts can be traded and still be within the
guidelines of Good Money Management. If you put on a position of
5 minis and only have $1500 in your account and you use a 30 pip
stop, that's $150 risk which is 10% of your equity. If you loose
3 trades in a row, you have just blown almost 1/3rd of your
account equity. This is not a smart thing to do. By staying
within the parameters put in place here, rule number 5 will be
your best friend.

WHEN TRADING GOLD on the international markets, the rules apply

even more. With the volatility the metals have experienced these
past few years, money management will be a life preserver in
deep water. For every 10 ounces of gold you trade, make sure
there is a minimum of $500 in your account. Use the 30 point or
1/10th equity stop rule...or in this case, $3 to $5 dollars.

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2) STOPS MUST BE USED at all times. The place where you are going
to put a stop should be considered before executing a trade.
Before you enter a trade, evaluate your profit to loss
potential. The program I use has the capability to put stops in
for me when I am absent from my computer and get filled on an
open order. It is recommended to use no more than a 30 pip stop
loss but this can vary at times. Larry Williams writes in his
books that he always figures he will lose when he executes a
trade in the markets. Think about that for a minute! If we all
plan on losing when we trade, then we are going to make sure our
stop is not going to be 15 miles away risking a wad of cash. If
the risk is too great, then skip the trade. There is always
another time or day to trade.

3) NEVER RISK MORE than 1/10th of your equity on any one trade.
Always give yourself the advantage before entering. If you enter
a market with a stop that is 100 pips away, you are already in a
loosing position. You should be in a position where your stop is
no more than 30 pips on the average. This will give you a risk
of about 1/18th of your account equity on any one trade.

4) MARKET ENTRY IS VITAL This is one of the hardest things to do. It

requires discipline, premeditated planning and an awareness of
market position. In this book, I will give you the tools how to
tell Market strength and weakness. Wait for the trade to line
up and be there to pull the trigger when all signs show a green
light. Examples of this will be shown in the following chapters.

5) THE COMFORT ZONE This is probably the least talked about of all
the things associated with trading. I have read many books on
trading and few even mention this very important subject. Do not

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 underestimate its value to you as a trader. When you enter a
trade and over extend your account equity, your comfort zone
narrows and you are more prone to exit a trade with a loss or a
minimal profit. Do not feel that you are required to use up your
Maximum Equity on Margin each time a trade is put on. Trade
conservatively and build confidence in your trading technique.
Stay away from the greed factor. The temptation is always there
to make that "KILLER PROFIT" to make up for the big losses you
have sustained in the past. Submitting to this temptation is the
"KISS OF DEATH"! Some say not to risk more than 10% of your
account equity on any one trade. I'm not willing to risk that
much on any one trade. I feel comfortable to risk no more than
5%. Recently I took a profit on a trade. I was only willing to
risk 1/3 of the profit on my next trade. I like to keep my
balance moving up in my account and have the checks coming in,
rather than me sending them out.

6) PAY YOURSELF when the profits start rolling in. Some investment
counselors call the money in your trading account risk capital.
This is money that you will not miss. To heck with that
thinking. I will miss it if it leaves me and goes into another
account. I consider the money in my trading account part of my
family and I want my family to grow and prosper. I am not
willing to throw them out the window. Try to set some time frame
or money goal to where you can draw a payment or check from your
account. It is nice to have these checks coming your way instead
of you sending them out. The bottom line is making money! This
way you can use it to help others or attend to your own needs or
turn it over to your wife, girlfriend or boyfriend so they can
put it in the retailers account and help the economy along.
Greatness starts and ends with money management.

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 Chapter 13

The Fibonacci Spiral & the

Golden Ratio

This is another subject that could be a book in it self. And

because of that fact, I will briefly cover the basic principle's
of this all important form and it's applications on how the trader
can apply the form to charts. Meet the Fibonacci Spiral or as some
call it the Logarithmic Spiral.

Call it what you want, but know this; it is a perfect shape which
is found in most all of nature. You will see this pattern when
looking at a Sunflower or when draining water in a tub. It is the
shape of the Spiral Galaxy. It can be seen in numerous plants and
seen in sea shells. It's form is on the Human Body and is found in
ancient Greek Architecture. And the list goes on. Because it
follows the natural law of expansion, it can be applied to any
chart for analysis.
The Fibonacci sequence of numbers when applied to the spiral

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shows a very interesting pattern. The numbers are in cubes or in
Gann terms (Squares), 1+1=2, 2+1=3, 3+2=5, 5+3=8, and so forth and
so on. This configuration can be carried out to infinity. Each
progressively higher square is 1.618 larger than the previous one.
By having the knowledge of previous squares, we can project out
into the future the expansion of the next square. This is done
with simple mathematics. Just multiply the previous square by
1.618 and you have the next progression. The key is to know where
to place the beginning of the next square so you can have an idea
of the next time and price target zone. Now let's apply it to
charts.

Let's do an exercise in time not price. Silver Chart 68 shows the

spiral measuring the time of a swing. The beginning of our swing
is a low and the center of the spiral is placed on the exact low.
The outside ring will be the measuring point of the
square/rectangle as the rings of the spiral graduate out in time.
Once the time of a swing is determined by measurement of the
spiral, we can then move the spiral to the right of the
square/rectangle and begin a new set of progressively larger
squares or time frames. When the spiral is moved to the right of
the beginning square, future time can be measured. This time is

140
used to determine trend change time zones. The second of these
charts illustrates this.

Chart 68

As you can see in Chart 69, I have moved the same spiral to the
right and placed the center on the high of the move. The next
observation shows the end of the spiral to the right showing a
high and a trend change time zone. In Chart 70, I have moved the
spiral to the right once again and by placing the center on the
high, we can see another of these trend change time zones coming
in at the end of the spiral. This time it's a low rather than a
high.

141
Chart 69

The third Chart 70 of this series shows the spiral moved to the
right again and having the center placed on the high we can see
that a low came in right at the end of the spiral time frame.

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Chart 70

Next, Chart 71 shows the use of squares and their progression in

size using the 1.618 ratio. The squares are placed in strategic
locations to show the significant Time/Price points at the end of
each.

At the beginning we need reference points to begin the square

progressions. This is derived from Gann's writings pointing out
that the first wave up off a significant low is the measuring
point for the remainder of the move.

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Chart 71
As you can see, I used this first cycle from low to low as the
measuring point for my first square. The next 1.618 square shows a
significant low at the end of the cycle. The third square shows a
high at the top of the square. The fourth one shows a significant
low at the bottom of the square. This price action is from a daily
chart. However any time frame can be used with this technique.

An interesting observation on this chart is how the larger square

showed not only timing, but price. It's expansion using the 1.618
ration coming off the previous square caught the bottom of the
move down. Because the low of the third square was taken out, I
moved the next square to the downside. This is due mostly in part
to volatility and momentum. Price failed to continue up. Remember
I wrote in an earlier chapter about Gann's example of the 50%
level and dropping a ball through the center of the earth?

144
Remember the ball will travel through the middle before it settles
at the center because of momentum? How and when this momentum is
measured can be a study in itself.

As you can see, this technique is quite different from the

traditional Fibonacci expansion lines and price structure most
software trading platforms use. As a matter of fact, I believe
there is not a software program on the market today that has the
capability to do this type of analysis. I sure would like to see
someone take the initiative to program these techniques. I hope
this little bit of information has given you some insight to the
advanced techniques of Fibonacci's Math and Gann's Squares.

145
 Entering a trade Larry Williams Way
In Larry Williams' (www.ireallytrade.com) book "DAY TRADE FUTURES
ONLINE" he gives a formula that he uses when markets are trending
either down or up. It is called "Greatest Swing Value". The
formula is found in his book on pages 133 thru 135. Here is
Larry's Formula for market entry on a down trending market.

(GSV)= "The first part of the set up is to have today's close

lower than the close 5 days ago, suggesting Yin may turn into
Yang. I also want to limit my buying to only one of 3 days of the
week; they are Tuesday, Wednesday, and Friday. Once that part of
the setup exists, I will take the difference from open to the high
for each of the past 4 days and divide that by 4 to get the
average "buy swing." I want real proof the market is tracking in
fresh ground, new territory, so I will be a buyer above the
opening at an amount equal to 180 percent of the 4 day swing value
average. The sell is a mirror image in that I take the distance
from the open to the low for each of the last 4 days and divide by
4 to get the average. This is also multiplied by 180 percent and
subtracted from the opening if the sell setup exists.

I have put the GSV formula on a spread sheet and it is a

tool I use multiple times in my day trading. You can go
to my website and download it for free. www.gannline.com

Here is another of Larry's formulas based on "VOLITILITY

BREAKOUT". It works well! Nothing is 100%, but with good timing
and this formula, you are going to raise your percent accuracy
considerably higher. With the proper money management, you will
have as Larry would say, the "KEYS TO THE KINGDOM".

Momentum is one of the concepts that can bring us short-term

profits. I say short-term because most of the profits are taken
within the first three days. For many decades, money managers of
stocks and funds have been issuing their annual forecasts. After
careful study by an observant market analyst like Jake Bernstein,
he found that most of these forecasts were not even close to being

146
accurate. According to Larry, the truth of the markets is this; It
is easier to predict price action over the next three days than it
is to forecast an entire year of market action. This is why Larry
Williams sticks to his three day trading. He is usually in and out
of a trade within three days.

So here it is. Measure the amount of price movement from

the high 3 days ago to today's low. That is step 1. Step
2 is to take the swing distance from the high 1 day ago
minus the low 3 days ago. Finally we will use the largest of
these values as our basic volatility measurement to begin the
process of designing a filter or price cushion to add to
tomorrow's opening for buying or subtract for selling.

The rules are to buy at 80 percent of the swing value above the
opening and sell at 120 percent of the swing value below the
opening. Use a stop 180 percent of the swing from the open in the
opposite direction of your trade. You can use 225 percent if you
feel comfortable and are willing to risk more money. This may
allow for the "stop runners" and the big institutional traders
like banks doing business for their equity.

So, there it is, Larry's system. He has proven results as shown in

his book, but he also has one more scenario that he puts into the
equation. This is the Trading Day of the Week (TDW). For what ever
market you trade you may want to do a bit of research as to which
days have a higher percent bullish and bearish pattern. I highly
recommend Larry's book "DAY TRADE FUTURES ON LINE". Especially
focus on the last chapter. Money Management.

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 TRADING WISDOM

The following list of scriptures are taken from the Good Book. I have written

them down word for word and applied God’s wisdom to everyday trading and Life.

ONE
“ MAN GIVES FREELY, YET GAINS EVEN MORE; ANOTHER WITHOLDS UNDULY, BUT COMES

TO POVERTY.” (Charity)

HE
“ WHO IGNORS DISCIPLINE COMES TO POVERTY AND SHAME, BUT HE WHO HEEDS

CORRECTION IS HONORED.” (Learn from your mistakes)

ALL
“ HARD WORK BRINGS A PROFIT, BUT MERE TALK LEADS TO POVERTY.” (Do your

homework)

THE
“ PLANS OF THE DILIGENT LEAD TO PROFIT AS SURELY AS HASTE LEADS TO POVERTY.”

(Always have a plan of action)

THE
“ PRUDENT SEE DANGER AND TAKE REFUGE, BUT THE SIMPLE KEEP GOING AND SUFFER

FOR IT.” (Use stops)

AS
“ IRON SHARPENS IRON, SO ONE MAN SHARPENS ANOTHER”

(Find a trading pal)

A
“ MAN’S PRIDE BRINGS HIM LOW, BUT A MAN OF LOWLY SPIRIT GAINS HONOR.” (Do not

boast about your winnings)

WHEN
“ PRIDE COMES, THEN COMES DISGRACE, BUT WITH HUMILITY COMES WISDOM.” (Stay

reserved when talking about your trading)

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Author's Notes: The world of technical analysis has come a long
way since the early days of speculative markets. In the early 20th
century, most stock and commodity traders scoffed at the idea that
any market could be predicted in terms of price and time. It is
human nature to be critical when a lack of understanding is
present. When Edison’s first phonograph was pronounced, it was
mocked as a hoax and a product of ventriloquism. The average
individual fears that which he or she does not understand.

Even in today’s high tech world and the age of the super computer,
I still hear people ask with a cynical tone, how can a chart
predict unforeseen events such as floods or drought? My answer to
them is to quote Gann’s famous words. He said, "My answer is that
the coming events cast their shadows before, and the market is
nearly always prepared for these events and gives some indication
of change of trend before these events take place." That’s a
powerful statement, but a true one.

When reports or news come out that could affect a market’s price,
I greet them with caution and look at the over all trend and where
it is in relationship to price and time. The charts will tell what
the news will be. The human element of emotions is our greatest
weakness in this massive financial climate we live in today.

Markets move up with a tremendous amount of buying and go down

with a mere lack of it. When a market is approaching a bottom,
there will always be the "bottom pickers".

I once knew a guy who I call "life of contract low Fred". Fred was
the guy who came across as being smarter than anyone else. He
would look for those markets that were making new life of contract
lows then buy in. It worked some of the time, but ultimately he
lost every single penny he made and a whole lot more on top of

149
that. I never saw Fred trying to improve his trading style or
educate himself regarding Stocks and Commodities. Fred was just
the guy who had this vision of himself on the sandy white beaches
with a cool one in his hand, while his servants waited on him as
he used his cell phone to call in orders.

To grow and continue learning is life itself. Einstein stated that

the Universe is expanding. We are part of this growth because we
are part of the Universe. Study these pages carefully and continue
to go over them and apply the techniques, rules and systems. If
you study the material carefully, you will have the ability to
forecast price and time effectively.

With this forecasting your confidence will build each day as you
make market predictions. These predictions are nothing more than a
high probability of repetitiveness.

Fellows like Larry Williams and Jake Bernstein have built

themselves stellar careers on certain chart patterns. They watch
for a reoccurrence on certain dates and certain days of the week
at certain times etc. The patterns they use have been narrowed
down to the high probability trades like 90% or better. Along with
this 90% probability, they use strict money management and a
psychological approach to their trading. The age of the computer
has provided them with a near lifetime of study in just a few
short days of research.

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 Disclaimer

I make no guarantees that the studies in this book are either a complete
guide or a standard by which to follow. Such a work would have to include a
great deal of historical data plus volumes of charts to show most every
setup possible relating to angles and their relationship to price and time.
This is however an outgrowth of a need for a reference book for the trader
of today’s and tomorrow’s markets to use as a study guide. Most of the
methods used have been proven by the master himself, W.D. Gann. Trading is
risky and can be a stressful business and the facts are that more people
lose money trading than make money. Therefore you must be cautious in your
decision making and take full responsibility for your actions and not look
to blame anyone or any market for your losses.

www.gannline.com

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