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Summary of WD Gann trading approach (9 Mathematical proofs of any points…
Summary of WD Gann trading approach
Master yourself
do not overtrade
see if your trade is based on hope or on logic coupled with systems you have developed
Trading Strategies
--> Have trading strategies for each of these market conditions
Bull Market
Bull market top
Bear Market
Bear market bottom
Importance of the number 3
Everything occurs in the number 3
Majority moves occur in the time period of 3
Never trade in the direction of a trend on its third day
Tops | Bottoms | Consolidation
Tops usually take time to form
Spike tops are less common compared to spike bottoms
Tops are marked by extreme movements in medium and small stocks
Called blow offs
Risky to short sell on an extreme top
Divergences will appear at the top but cannot be used for the timing of the trade
Time cycles will indicate when the actual reversal will begin
In bull market watch for a correction which is greater in both price and time than the previous corrections in the move up. (Opposite in the downmoves)
Highest probability of support is that the corrections in the uptrend will all be very close to equal
Swing objectives – add the range to move to the top of that move to find out the target for the next upmove or reverse in the bear marke
Square of numbers and 50% of the difference between those squares are significant support and resistance, but cannot be traded by themselves
9 Mathematical proofs of any points of resistance
Angles from top and bottoms
Angles running horizontally i.e. the previous tops and bottoms
Time cycles (vertical angles) (Press a short sale if there are three or four days of sideways movement after a high day and this is followed by a down day with high volume where low is lower than the low of the sideways movement and when this coincides with expiry of time cycles)
Crossing of important angles originating at zero
Crossing or coming together of angles from double or triple tops or bottoms
Crossing of double or triple tops or bottoms
Past resistance/ support
Volume of sales
Squaring of time and price
General Notes
--> Weak stocks will generally not rally until either a test of the first bottom or a higher bottom is made by the market
--> The third move trying to break the consolidation top/bottom is the most important. If it fails, a fast move in the other direction may be expected
--> False breakouts from consolidation result in very fast moves.
-->False breakout occurs when a move outside the consolidation zone fails to sustain in the following week and where the price has not gone beyond three points above the top.
-->These false moves start with high momentum.
A breakout from a three-four day consolidation in a very narrow range results in sharp three day move.
Faster moves start from third of fourth higher bottom. It will be strong move if there is space between the third or fourth bottom and the previous top.
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 pres
--> 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.
Geometric Charts, angles and price squares
365 days is an important cycle of one year. In a circle there are 360 degrees which very nearly correspond to this cycle. In other words, one day is equal to one degree of the circle that the earth makes around the sun.
Hence the significance of the important divisions of the circle (into angles) on the chart. These angles are 45, 90, 120, 135, 180, 225, 240, 270, 315 and 360