SQUARING THE PRICE RANGE WITH TIME

The squaring of price and time was one of the most important and valuable discoveries that Gann ever made. In his trading course he stated “if you stick strictly to the rule, and always watch when price is squared by time, or when time and price come together, you will be able to forecast the important changes in trend with greater accuracy.”

The squaring of price with time means an equal number of points up or down, balancing an equal number of time periods- either days, weeks, or months. Gann suggested traders square the range, low prices, and high prices.

Squaring the Range

When Gann angles are drawn inside a range, the angles provide the trader with a graphical representation of the squaring of the range. For example, if a market has a range of 100 and the scale is 1 point, a Gann angle moving up from the bottom of the range at 1 point per time period will reach the top of the range in 100 time periods. A top, bottom, or change in trend is expected during the time period when this occurs. This cycle repeats as long as the market remains inside the range.

Squaring a Low

Squaring a low means an equal amount of time has passed since the low was formed. This occurs when a Gann angle moving up from a bottom reaches the time period equal to the low.

For example, if the low price is 100 and the scale is 1, then at the end of 100 time periods an uptrending Gann angle will reach the square of itself. Watch for a top, bottom, or change in trend at this point. The market will continue to square the low as long as the low holds.


A graphical representation of squaring a low price can be seen on a chart Gann called a zero-angle chart. This chart starts an uptrending angle from price 0 at the time the low occurred and brings it up at one unit per time period. When this angle reaches the original low price, a top, bottom, or change in trend is expected.

Squaring a High

Squaring a high means an equal amount of time has passed since the high was formed. This occurs when a Gann angle moving down from a top reaches the time period equal to the high. For example, if the high price is 500 and the scale is 5, then at the end of 100 time periods a downtrending Gann angle will reach the square of itself. Watch for a top, bottom, or change in trend at this point. The market will continue to square the high as long as the high holds.

A graphical representation of squaring a high price can be seen on a zero-angle chart. This chart starts an uptrending angle from price 0 at the time the high occurred and brings it up at one unit per time period. When this angle reaches the original high price, a top, bottom, or change in trend is expected.

Time analysis in Gann Theory requires the trader to study market swings, anniversary dates, cycles, and the squaring of price and time to help determine  change in trend points.


Read Michael S. Jenkins masterpiece 'Square The Range Trading System'For Complete understanding of this Method

Jesse Livermore trading Style

Jesse Livermore is known to most as the best market player Wall Street has ever heard about, rivaling perhaps even Gann. Livermore is alleged to have engaged in every single biggest stock and commodities moves from 1910 – 1940. He needed to be doing something right to just have survived monetarily for three decades.

Livermore might be a very good model for today’s computer stock trader. In the Livermore era there was no tv, no computing devices, and no world wide web. Even if were able to afford to pay a staff to chart stocks and futures you would not have had 24×7 immediate access to financial data files to keep those charts up to the minute. Any profitable stock trading system that could stand up to the test of time had to use easy to get data, be clear to understand, and be simple to apply. Contemporary technical analysis tools like stochastics and the elliott wave oscillator were out of the question.
His method was based on a trend following system. Livermore only took positions in the direction of the major trend. He opened his position with a minor stake and added to it as the trend persisted in its expected direction. Jesse Livermore said “Just recognize that the movement is there and take advantage of it by steering your speculative ship along with the tide.”

In or out. Long or short. Regardless of how many gigabytes you might have for your cutting edge, computer-based trading system it all comes down to those two choices. He set objective stop loss levels and bailed out immediately from his entire position whenever a stop was touched. Livermore did not feel pressured to trade each and every single day, neither did he try to catch every jiggle in stock prices. He followed only the major, cyclical trends.

The Livermore System defines the trading ticker in terms of trend and swing. An upswing, for example, is a consecutive series of higher pivot highs and higher pivot lows. An uptrend is a consecutive series of upswings. A downswing is a consecutive series of lower pivot lows and lower pivot highs. A downtrend is a consecutive series of downswings.

Trends and swings are determined by two filters. A larger swing filter and a penetration filter that is one-half the size of the swing filter. A change in trend is a retrace of swing filter size from the last up or down swing. A pivot is the high or low point of each swing. Time is not a thing to consider in the Livermore System or in the making of a swing chart.

Livermore utilized hand drawn swing charts that looked somewhat like a point and figure chart. As a substitute for Xs and Os and box sizes, a Livermore swing chart is a vertical line drawn when prices have moved by a fixed number of points in the opposite direction from the previous high or low pivot.

Livermore utilized penetrations of the pivot points to either add new positions when they occurred in the direction of the trend, or as stop-loss levels when they occurred in a direction opposite to the trend. The Livermore System is somewhat unique because of the role of the penetration filter. Many other swing trading systems use any breakout of a prior pivot high pivot or low pivot as the signal to add positions or as a stop loss level.
All positions were liquidated at the first penetration of a stop-loss level. A second penetration of the next occurring pivot in the direction of the new trend confirmed the new trend. A new trend “failed” when the second confirmation did not occur. In those cases Livermore would reenter in the direction of the prior trend when prices exceeded the size of the swing filter from the failed trend’s highest high or lowest low

Stock Market Prices Create an Optical Illusion In Our Brain

Look at the Below Picture What you See a Floor or a Ceiling - Optical Illusion is also called a Visual illusion is characterized by Visually Perceived images that differ  from objective reality. The Information Gathered by the Eye is process in the Brain to give a perception that does not tally with the physical measurement of the Stimulus Source  

The Same Illusions Are created in the Price By the Market Makers or Market Manipulators - So to understand this first we should understand How our Human Brain is Functions and what are its Limitation - 

Our Human Brain First Collect the Facts and Figures and then its is Processed for analysis - this is how we make the decisions - now the second thing we should understand is that this human brain has some limitations -and everything in this world has its limitation - their is no such things which are unlimited 

IF we take the Example of our Ears it has also some limitation - we can hear the Sound to a particular level of Frequency beyond that frequency if we hear  it will damage our ears - Even our Body has limitation of body temperature- Below 96 degree we will die and above 110 degree we will die - so the limitation of our body temperature is 14 degree -so below or above that temperature our body does not cope with that temperature - 

 Now if we speak about the Human brain it has also some limitation - and in trading it is the only thing which we use so to understand trading or investing first we should understand its function and how it works - so that we can increase our efficiency as a trader or investor  

When we make the Decision we make the Decision Consciously - while making decision consciously our Pre frontal cortex is working this function is activated and helps us to take the decision  - Say for Example you have decided to buy Nifty - Here your Pre frontal Cortex Function is activated 

The Second Function is Sensory Precortex and this part is activated when our focus is Diverted for example if you consciously decide through Your trading system  that you are going to buy nifty  and technically you are convinced that its a good buy Signal - Now here the market Divert your Focus By Volatility by make sharp movements like 100 Points down 50 points up then again 50 Points  down - 40 points up - Now your Focus is Diverted by the Market Through Volatility and your afraid to execute your Buy Position   - Because your focus is diverted 

So as a Trader or investor we should work on The secondary Function that is Sensory Pre cortex and we cannot control the market volatility  but we can work on our selves to improve our decision making process 

Say for Example - You are learning to drive the Bike For the First time in your Life - Here your First Fuction is activated that is Pre frontal cortex - You are very Conscious about your Surroundings and then your secondary function will be activated that is sensory  pre cortex where your   focus will be diverted by traffic - by people - by sound  - and number of things and you will fall couple of times and you will get hurt -  but in this process a time will come where you will learn to ride the bike and balance it effortlessly and this balancing process cannot be thought you have to learn it by yourself and then your brain is set to auto drive - and it will not get distracted or diverted by the traffic or any sound - 

So in stock market to set our brain on auto drive we have to tie ourselves with a trading system which suits our personality - and have to improve it in the process - you will not get the perfect system  initially its an on going process and thus by following a system you will avoid unnecessary noise which are created by market 

Watch this video 

 http://www.youtube.com/watch?v=mf5otGNbkuc

http://www.youtube.com/watch?v=irsTDDaqUlc

http://www.youtube.com/watch?v=C4pHP-pgwlI

The Secret Language Of Market

We Cannot Understand the Stock Market ,if we do not first learn the language and Grasp the Symbol in which it is written -Market is Written in Mathematical Language and its  Symbols  are   Geometrical Patterns - Without this it is Impossible to Comprehend a single word of it and the persons who gains this understanding and wisdom  is more Profitable - This Harmony is expressed by some key Fibonacci Numbers - Each Individual Stock or Commodity Have its Harmony Numbers - Which you will Discover If you Study the Patterns and charts of last 10 -15 years

Watch Marko Rodins Video on Youtube and just try to understand what he is saying .Basically he is found the Math to the real 'God Particle or Particle of Spirit - Known as Brahman in the vedas ,and he has shown -how it can be observed - but not with the Physical Instruments .Thus Mathematics is in fact Surest proof of cosmic mind and Intelligence - If Mathematics is the language of the Market and the Nature - & rather acting on common sense opinion and emotional decision where most Trader get Screwed - That's what happens in the Stock market -Traders make their Decision On Emotion Rather base on  Pure Mathematical Approach   

Ed Seykota the all time great Trend Following Trader Declared that the biggest Secret about success in trading is that there is not any big Secret about it - The more complicated and sophisticated   inidicators you develop it will became more harder to follow it and make money from that indicator -The most Robust Strategies in the Markets are the Simplest Strategies - Which are Base on Simple Mathematics - So in Short Complicated Trading Systems Cant be Profitable in the Long Run - So develop a trading Plan which is More Compatible with your own Nature of trading -because we understand ourselves more better then any other person - So build System According to your Nature and Behavior  and once you Develop the Trading System - Then the Key to Long term Survival and Prosperity has a lot to do with the money management techniques which should be incorporated into Your Trading System 

   

What is a Gann Emblem ?

What is a Gann Emblem ?

Gann Emblem is basically a Forecasting Tool Which Forecast the Future Reversal dates .Gann Said Within a Circle is a square and a Triangle and this aspects are related to Astrology , Where we take Solar Degrees Into Consideration - But as in astrology Specific Zodiac Signs Are Related to individual person ( What we Called the Ruling Planet of the Individual ) - same laws Apply in stock market - For each Specific Stock ,Index or Commodity  they have their Individual Ruling Planet and Zodiac Signs

How do we find our Ruling Planet and Zodiac Signs ?

Base on Our time of Birth and than Longitude and  Latitude same things Apply for Stocks , Index For Example NIfty Was Born on Monday 7 Nov 1994   if i am not wrong ,Whereas
To find Out the Longitude and Latitude we have to take NSE location into consideration
So by taking this things into account we can Find the Ruling Planet and Zodiac Sign Of Nifty
And If u notice the All time High in Nifty Spot was made on 5 November 2010 and it was Friday - So the cycle has completed 2 Days Before - Because 7 Nov was a Sunday .

To Use Gann Emblem Forecasting Technique to its Potential  it is  Mandatory To Know The Financial Astrology  - Which is a whole new Topic in Itself -  and it will take Years to Master .So Just i have Given a Glimpse of What is Gann Emblem Basically .

How to Measure The Scale (Vibration) For Gann Angles

One of the Software that i use to Draw the Gann Angles is Gannlyst - i have also given the link to download this software in the Download section - i feel Ganalyst is the only software which has the Capability to Draw gann Angles in a more Precise way

In  drawing Gann Angles Scaling of the Angle is most important part of drawing Geometric angle - once we understand this it will become more effective

Scaling is nothing but Vibration of the particular Stock  or commodity - As W.D.Gann have Mention that Price and Time are the Same thing - Thus we have to scale the price in Direct correlation toTime

Let See The Types of Gann Angles

W.D.Gann Have Discover nine Different important angles -With 1*1 is the most Important Angle

1*8 = 82.5Degree
1*4 =  75  Degree
1*3 = 71.25 Degree
1*2 =63.75 Degree
1*1 =45 Degree
2*1= 26.25 Degree
3*1= 18.75 Degree
4*1= 15 Degree
8*1= 7.5 Degree

Now let See How to Measure The Scale of a Particular Stock or Index

Method 1)

For Up Trend

( Main Bottom 2 - Main Bottom 1 ) / Time Difference Between (Bottom 2 and Bottom 1 )

For Down Trend

(Main Top 1 - Main Top 2 )  / Time Difference Between (Bottom 2 and Bottom 1 )


Note - Here the Time Difference We can Take Either Trading Days Or Calender Days - By Plotting both the time frames we will come to Know which one will workout more better out of two - and thus we can use that time difference in our further Analysis


Method 2) 

Here we simply Take the Main Top or bottom Which has Formed Recently and Take the Square root of it for 2 time and insert that number in the Price Scale

For Example The

The All time High of Nifty is 6349

√6349

√79.68

  8.93 = Scale Factor for that particular High - is 8.93 

To illustrate i have given you in a Graphically Form by taking the Low of 10 April 2013 Low that is 5477

                                                          Click On the Image To Enlarge

Projecting Price Targets with Head N Shoulder Pattern

In the Head N shoulder pattern the price targets can be projected by measuring the distance between the Head N the Neckline in this case it is 715 points – Than the same range can be projected once the neckline is broken – Thus in this case the neckline is broken at 5620 and the range is 715 points so the probable target may be around 4900-4800 range Approx  – So this method gives us a fair idea of probable Support area – where as also we can cover our short positions and look for the new entry – as the pattern forms .

                            Click on the Image to enlarge 

Predicting (Right) Hand side Top of the Head and Shoulder Pattern

When a possible Head N shoulder pattern is setting up 
You can measure the left hand side (Shoulder) Top to (Head) Top -The time or trading days it has taken to form -   and than the right hand side Shoulder 
Top we can predict with same approximation 

Where as in this case it has turned out excatly the same amount of trading days which is 46 days 

Again we can confirm that trade and initiate short   with some indicator or simple trend line break 



      Click on the Image to Enlarge - to get a better view 

The Market Is designed against the Human Nature

And will bring out   and Test Your Weakest Emotions (Financially and Psychologically ) So that is the reason  we should have a good trading system and Money management rules for decision making . To develop a trading system You should study the charts over a period of at least 20 to 30 years of that particular Stock or commodity that will give you the confidence to act and make profits when you can see and   know for yourself why stocks should go Up or down – If you do this you will prepare yourself to act independently without anyone’s advice – because you will know from your study where the market is headed and thus you will act with confidence and not with the GUESS Work

Money Management is one of the most important aspects of

any trading system and the First defense from loss –And of any Trading system the main weapon to protect you from Disaster losses is STOP LOSS and placing a stop is an art – and explaining it is beyond the scope this article  - For Money Management You should Develop trading system which is tested  at least on  20 years of chart – If you don’t have any trading system or Money management that means you are weak in both the areas and will never have confidence in your Entry price , Exit Price cause you don’t have a plan to execute and thus you will act on your Human emotions (So that is the reason Trading is against the human nature and the Market is design to teach you to fail ) So its very crucial to have money management and trading plan into place Cause it will Remove the Subjectivity of the human condition  .

At last- If your not Ready to dedicate your time and energy in studying the Historical charts - then please don’t trade with your Impulsive emotions and Guess Work .

Have a safe Trading with ( logical Stop Loss) .

Matt Olsen (Gann Method )

I would like to share one very effective method which will help us in taking Positional and Intraday trade - but i prefer we should use it in a positional trade  to avoid less Whipsaw - the method will help us to scale the chart graphically in a more precise way and also help  us to use the trend line in a more accurate way 

The Method is Base on W.D.Gann and further developed by Matt Olsen (Thanks to both of them )

To use this method you should have a Square tool option in your software - I personally use Gannalyst software and it has that tool and i have also given a download link of this software  in my blog  

This Method takes into consideration the Previous swing major high and low points ( not the near ones but little extremes ones so that we can form a square 

First we should select the high and low points in such a way that it should form a square or rectangle 

once we plot the high and low in a chart we will get a square or we may het rectangle according to high and low formation 

Now from the left hand side (bottom) corner  of the square or rectangle draw a diagonal line which will intersect at right hand side (TOP) corner 

Now do the same thing from the left hand side (TOP) corner of the square or rectangle draw a diagonal line which will intersect at right side (bottom) corner 

The geometrical shape will give us two diagonal lines 
1) One upward trending Diagonal line and
2) Second Downward trending Diagonal line 

Once we get this diagonal lines we have to use the option in our software duplicate or copy so that we can get the same degrees of diagonal lines which we can use in the further swings 

For up trending swing use the up trending diagonal by placing the diagonal on the low of the chart once the low is formed (With Stop Loss)

And for down trending swing use the down trending diagonal by placing the diagonal on the high of the chart once  the high is formed (With Stop Loss)

When this diagonal are place we should see how the price behave to this diagonals and take position once the price crosses the diagonals on closing basis with stop loss 

This Method works very fine because its finds the natural harmonic and DNA of the the swing by taking past swing into consideration 


If we  Apply this Method on a daily or Weekly Chart we will get very good Tradable swings 

Please apply this method and let me know whether we can make any more improvements in this method 

Thank You