And neither do the markets, so it seems. One of the best things I have done is taken the time to research the work of W.D.Gann.

Gann had many obstacles to overcome that today we simply would struggle to comprehend. Imagine trading without a computer or the internet.  Imagine hand drawing all of your charts, let alone studying and analysing market movements. On top of this, how would you react if your broker went bust taking your money with him (some traders connected with Sonray in Australia could give you some idea of this), then your Bank collapses and again, through no fault of your own, you are back to square one.

It’s a reflection of the attitude and drive of any individual who can dust themselves off and start again from scratch after one of the above events, let alone both of them.

Gann really impressed me with his absolute and resolute belief in his own discoveries and techniques. He never wavered from his trading plan and never feared placing a trade with a stop loss in case it didn’t go as expected. There are few traders today who will not second guess a market or miss a profitable set up due to a ‘gut instinct’ which invariably leads to indigestion!

Gann may not be as widely known or appear as relevant in today’s modern electronic trading, but I can assure you his discoveries are just as relevant today as they were last century and indeed the next century to come. The way we trade may have changed, markets will come and go and evolve, but human greed, fear and panic is destined to always have a place in the field of speculating for profit.

Gann made one important discovery, and that was that markets react in “Time” as well as price. The Time factor was deemed to be more important than price, as Gann in his own words gave us this gem of a clue:

“Markets will make the biggest moves when the time is right to do so”

Okay, so what does he mean by that?

In this article I will give you a brief but valid example of Time in the markets.  At this point it is important to stress that this example is only a small part of the Timing theory, but this will give you some idea of Gann’s techniques in this area.

On the following chart I have a daily bar chart of the S&P 500. Surely the most closely watched index in the world of trading today, this market is a leading indicator of the strength and mood of the world’s largest economy.

Look carefully at the daily bar chart and you will see a top has formed Friday November 5, high price 1227. This top is significant for a major reason, namely that the retreat from this top is greater in time and price than any of the other retracements since the low end August.

Wouldn’t it be nice to be able to predict that November 5 has the potential to be a major top prior to the event?  How much profit is possible had we known that November 5 is potentially a major top and gone short at the break of the low November 5 with a stop marginally above the high of the day?

I have made good use of the Fibonacci series in my trading.  This natural phenomenon is present everywhere we look, in nature and in manmade creations. The numeric sequence is created by adding two numbers together to form the next number: 0,1,1,2,3,5,8,13,21,34,55,89,144 and so on.

I never cease to be amazed by traders who don’t believe Fibonacci exists and discount it.

I shake their hand and wish them well, and in doing so they extend their Fibonacci crafted hand bone structure…how apt that they do not believe yet require Fibonacci every day!

Take a look carefully at the following Xray of the human hand, note that the bone measurement has been marked…the bones progressively from fingertip to wrist measure 2, 3, 5, and 8.

Now revisit the Fibonacci series of numbers mentioned before and you will see the same sequence…2, 3, 5, 8.

Using Market Analyst, I have now added Gann’s theory by way of the Time Price label tool.

Gann used to maintain numeric counts from major highs and lows.  Using the major low July 1, 2010 on the S&P we can see that the important top on November 5 is 89 trading days after the July 1 low.

89 is a Fibonacci number and Gann found many hundreds of instances of 89 or 90 creating major turns in markets, sufficiently reliable enough that he marked these time counts on all of his trading charts.

For another example, take a look below at the Australian index for the top 200 stocks. A major high formed April 15, price 5025 and had we repeated Gann’s technique of counting  from major highs and lows you would see that the most recent top on November 5 is 144 Trading days between high and high, again another direct hit on a Fibonacci number proving Gann’s timing theory.

So there we have it…surely now any non believer must be admitting they have more work to do.

“Ah what fools these mortals be, that numbers in front of them they cannot see…” Alan Oliver 2010

…and with that, I wish you well and good trading.

Alan Oliver.

More articles by this author

Timing is the Essence19 May 2012

Anyone who has read some of my articles will know...

Read More >>

Gann Swings19 May 2012

Simplicity in its natural form… All markets do the same thing,...

Read More >>