From the August 01, 2011 issue of Futures Magazine • Subscribe!

Equities, squared

In December 1909, an article written by the late R.D. Wyckoff appeared in Ticker Magazine, which became known as the magazine of Wall Street. The article described W.D. Gann as "An operator whose science and ability place him in the front rank, his remarkable predictions and trading record." This article was written before 1912. That was when, according to Gann’s own marketing brochures in the 1930s, he successfully publicly predicted the election of Woodrow Wilson and each U.S. president up to that time. He specifically called for the end of the1920s bull market in a September 1929 panic; he recorded this prediction in November 1928.

To accomplish this and other successes in a 50-year track record, Gann used a mixture of geometry, psychology, volume patterns and astrology. He developed specific grids and circles based on cycles of numbers such as 9, 12, 144 and others to forecast everything from stock to cotton prices. He developed a calendar that uses March 21 as the most important date in the financial year. Through everything, he considered his most useful and valuable discovery to be the squaring of price range and time.

But Gann analysis is as mysterious as it is effective. One of the reasons is Gann didn’t want to just hand over the keys to the novice or intermediate trader. He guided his students, but insisted they do their own due diligence. He was a firm believer that students would better appreciate and understand what was learned if they did it on their own. Consequently, many of his methods and theories have been overlooked for nearly 100 years.

In the February 2011 issue of Futures, "Master forecasting methods of W.D. Gann" described how Gann uncovered trends of larger degree. For instance, the Dow 1987 crash range was 1,108 points, and a span of 1,108 weeks bridged the time gap from the August 1987 top to the first Nasdaq bottom in the bear market.

The 21st century Gann analyst often must combine one or more indexes simply because markets are more complex than in Gann’s day, but the concept is the same. Range and time squaring can help the trader understand the overall long-term conditions of the market. But modern Gann analysis also requires an adjustment when it comes to trading individual instruments.

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