CHARTING
Belief In The Natural Laws
Gann And The Time Factor
Time is the most important factor when it comes to making trading decisions, so incorporate the time factor into your trading.
W.D. Gann said he believed that time was the most important factor in forecasting market movement. He felt that time would overbalance space and volume but arrest momentum. “The future is a repetition of the past,” he opined, “and each market movement is working out time in relation” to a previous time cycle.
Gann wrote that in a rally cycle, when a price declines under an angle, price will often dip down to the next angle before finding support. In reality, this does not necessarily occur. Quite often, a price may come back to test an angle before continuing a trend. These support and resistance angle lines should never be confused with support and resistance trendlines because the angle lines can be used to indicate time.
Looking back over history, you must establish the Gann square with angles. Once you have identified the Gann angles, the Gann fan can be projected from future highs and lows. Time is the most important factor in market trading analysis. If you are able to enter and exit a trade at the right time, you will be able to take all the profit available in the market. This can be demonstrated in Figures 1 through 6.
In Figure 1, I have established a Gann square. Note the Gann square Abcd on the chart. The 2x1 angle is the angle that has connected the low to the high, so it is this Gann fan that we now watch to determine time.
Figure 1: gann square. Note the Gann square ABCD on the chart. The 2x1 angle is the one that has connected the low to the high. It is a good idea to keep an eye on it to determine time.
Note what happens next. The price started off rising along the 8x1 angle, going up to test the 2x1 angle and falling back to the 4x1 angle. It then continued to rise with the 4x1 angle as a support and the 2x1 angle as a resistance.
Projecting the angles downward now that we have established them, we know the time. From the high, price fell sharply along the 8x1 angle to find support on the 1x1 upward angle. The low established should have occurred on February 6, 2009, but it did not. The angles also suggest time changes on December 30, 2009, November 10, 2010, and September 14, 2011. Can we trust these dates? The answer is no, so Gann the man must have used another strategy to develop time cycles.