In Continuation with Previous Article W.D. Gann Trading Techniques – I
Trend and trend following techniques: In fast advancing markets, in the last stage of the campaign, reactions get smaller as stocks work to higher level, until the final run has ended. Then comes a sharp reaction and a reversal in the trend. Same happens in the bear market. Once you are convinced that a trend is in force, do not wait too long to go with the trade. Early in the trend buy/sell a stock which is already strong/weak.
- Fast moves generally come from bear market bottoms.
- These moves usually run three weeks up, then move sideways three to five more weeks, and then accelerate followed by another sideways movement.
- Under fast moves the first signal to trend change is overbalance i.e. reaction gets larger compared to the earlier ones, specially in the fifth wave. Watch the changes in momentum of price – is the market/stock gaining less points in more time? If the market is trending up, then it should go up more time than it goes down. And vice versa.
Any reversal pattern should be seen in conjunction with the time cycles. Do not pay attention to the financial press.
Use simple trading filter of not entering the market on the third day of the move.
The Cycle of years : Seasonality
Watch for significant days in solar year – Dec. 22, March 21, June 22, Sep 21/23 etc. and days on important angles from these days e.g. 15 days from Dec. 22 i.e. Jan 5-6, Feb 5, May 6, July 7, August 8 etc.
Important count of days: Significant changes in trend may take place on the following days from the significant highs/ lows – 30, 45, 60, 90, 135, 150, 180, 210, 225, 315, 330 and 360.
These are calendar day counts: Trading day counts are 11, 22, 33, 45, 56, 67, 78, 90, 101, 112, 123, 135, 146, 157, 168 and 180. True understanding of cycles are obtained from the calendar days.
Important count of weeks: 13, 26, 39, 45, 52, 78. 7 week period is considered as death zone.
Important count of months – 6, 12, 144.
In the short term, watch 3.5 day i.e. the 3rd / 4th day from the important top / bottom for change in minor trend. It may become a beginning of a major trend.
Reactions will often last for two or three weeks. Therefore watch 14th day and 21st day along with the 7th day from the important top/ bottom. Out of these 14th is the most significant and 21 the next. (Note that 14 is very close to 13 and 21 is Fibonacci number itself).
1/16 of the year is 23 days. Watch for this too.
Square of 7, 49 is very important for change in trend.
Watch for a change after 42 days (2×21), but the change may not occur until 45th-46th day. (I have noticed that on many charts of A group stocks 42 day or near about fixed time cycles are important. These numbers, very close to each other, gives some flexibility in analysis, Fibonacci numbers plus minus a few days).
On yearly charts, 90 year, 60 year, 30 year, 20 year, 10 year, 7 years and their multiples and 5 year cycles are important to watch especially the simultaneous end/ beginning of these cycles.
1/3 years from any top/bottom when combines with 1/2 or 1/4 years from any other top/bottom becomes very important. 1/2 of the year is the very important – same as the half of the range/high. Anniversaries, however are the most important. 39 weeks and 17 weeks and 35 weeks are also important.