Anyone who has read some of my articles will know that I have a deep interest and passion for the works of W.D.Gann. He was the first trader who recognized that markets work to a timing factor.  Prior to this everyone worked in price movement only.

As he so eloquently put it, “Time is more important than Price”, and on this aspect I could not agree more. I have seen literally hundreds of examples where valid Price support and resistance has been muted or even overruled by Time factors.

Some of Gann’s work has been described as geometric trading.  He understood the importance of the three major shapes that are the basis of all others: The Square, The Circle and the Triangle.  In this article, we will concentrate on the Square.

One of the great mysteries surrounds us everyday…Why are there 360 degrees in a circle? Wouldn’t 400 degrees be so much easier to work with? We could then use the decimal as a basis for calculations; every 100 degrees would be a quarter.

But the actuality of it is that 360 degrees represents a full circle or cycle, and inside a square we have 90 degrees in every corner. Perhaps ancient numerology can help here.  The number 90 represents change, obstacle or redirection and this is clearly reflected in the shape of a square.  Every 90 degrees we change or redirect the line to complete the shape.

Now we focus on any market, the example I have chosen today is the currency market for the Australian dollar against the US dollar. This is so important for our exporters and indeed importers of products, the variations in the exchange rate can have a huge impact on the profitability of businesses.

The next chart is the daily movement in the valuation of the Australian dollar against the US dollar.

To the uninitiated, it seems to be a complete mess…prices fluctuate all over the place with wild, random movements that are impossible to predict or quantify.

Now, with Gann’s study and writings we have a much better way of confirming not only potential turning points, we can be prepared in advance for expected reversals.

On the left of the chart we see a major top occurred Friday August 6, 2010. This date is significant for Gann traders for a variety of reasons, which would require more in depth explanation than we have time for here, but nonetheless it is a major and significant turning point on its own.

Starting from this date, I have used the Time Price label tool in Market Analyst to show the details between the top August 6 and subsequent highs afterwards. You can see quite clearly from the details that every 90 calendar days, give or take a day or two, provides another major and significant turning point.

The major tops are listed here, with the time count in between each high:

August 6, 2010 Top
November 5, 2010; 91 Calendar days from August top.
February 4, 2011; 91 Calendar days from November top.
May 2, 2011; 87 Calendar days from February top.
July 27, 2011; 86 Calendar days from May top.
October 27, 2011; 92 Calendar days from July top.

This pattern in market timing is exemplary and such a fabulous opportunity for educated traders to make significant income. It requires a dedicated trading plan based on discipline and patience, and of course some other qualifying criteria, but the essence of timing is very clear. What is even more remarkable is that currency trading did not even commence until at least 20 years after Gann died, yet his proven market formula is clearly shown here. Surely this must silence the critics of this great volume of work.

Finally, what this means to us is that we have a goal post to watch for a potential turning point, most likely a high, somewhere around January 26, 2012, which is 90 calendar days from the last top October 27 2011.

I know I will be looking for confirming signals around this time.

Best wishes to all,

Alan Oliver.

More articles by this author

Gann Swings23 February 2012

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

Read More >>

My Best Trading Partners23 February 2012

...are without doubt the fabulous innovators of the past, Fibonacci...

Read More >>