Gann Theory can be described as the study of pattern, price and time relationships and how these relationships affect the market. Gann Theory looks at pattern, price and time as the key elements in forecasting the future movement of the market. While each element has its own unique characteristics, each also has a unique, overlapping quality. The study and focus of Gann Theory is to ﬁnd the interlocking relationship between these three primary indicators of changes in trend and market direction. In other words, in certain instances a pattern is having a large inﬂuence on the market while at other times price and time are exerting their dominance on the market.
The history of ﬁnancial astrology is quite fascinating. It is a known fact that some of the greatest market traders and forecasters used ﬁnancial astrology but the method has never been able to gain wide support in the ﬁnancial community. The reason for this lack of acceptance is that ﬁnancial astrology has always been a very discretionary approach to trading and requires a large amount of time just to learn the basics. At the Vibration Research Institute we are working to automate ﬁnancial astrology into what we have named Mechanical Astrology. This term refers to fully mechanical astrology trading systems.
In the last few years most of America has been enjoying a very good economy. Astrologically it is easy to see the reasons for this rising economy. In the early 1900’s, ﬁnancial astrologer, Louise McWhirter, predicted changes in the U.S. economy by using the North Nodes of the Moon. According to her ﬁndings when the North node of the Moon enters the sign of Scorpio the economy goes from ‘below normal’ to ‘normal’. When the node reaches the sign Leo the economy is above ‘normal’. When it enters the sign Taurus the economy starts to go from ‘normal’ to ‘below normal’ until it reaches the sign Aquarius when it hits the bottom. From the time that the Node is in the sign Aquarius to Scorpio the economy goes from ‘below normal’ to ‘normal’ again.
Scaling is a simple, but very useful, technique employed by most professional traders and misused by some with serious consequences). Trading on a scale simply means staggering your purchases or sales instead of doing everything at a single level. Conceptually it is trivial, but hidden in the simplicity is a set of very useful tools. These don’t tell you which way the market will go, but they can do a lot to optimize your existing forecasting tools and can help you cope with a number of human weaknesses.
How would you like a trading methodology that gives you predefined entry levels, reasonably tight stops, and precalculated proﬁt objectives as soon as you enter the move? We’re not through. Add to that a very high percentage of winning trades. This is not only the promise but it can also be the reality of properly mixing high quality leading and lagging indicators in an overall trading methodology.
Eerything in our universe has measurements. We wear shoes of different sizes, different size clothes, different size cars, we have two and four door cars, different horse power motors. Our house is at 44 SO SO street, the house has four bedrooms, three baths, two stories and a two car garage. We measure our height and weight, we count our money and so on… What can you think of that is not a measurement in size, value or price? Of course we all know this, right? We as traders are interested in prices, everything we trade is by price.
Truths about trading, published in the hope you will avoid learning this the hard way:
1. How to save a lot of money and increase your trading capital. (There is no Holy Grail) There is no magical mathematical system that will consistently make money in the markets. All mechanical trading systems experience periods of proﬁt and periods of losses. I’ve seen reports of the best trading systems having winning trades on average only 48% of the time. Winning 60% of the time is considered spectacular for mechanical systems. Most people lose money on trading systems, this is because they quit during a string of losses. If you follow a blind system, you have to stick with it, even during bad times; this can require deep pockets. Most people cannot do that, so trying to buy a “successful system” is futile for most people. For discretionary traders, there are also no magical indicators, which generate good signals all the time. The trader must learn to know when an indicator should be followed, and when it should be ignored.
I thought it would be interesting to take a look at Gann’s actual price chart for May Soybeans 1948-1949 and see what techniques we could see him using on the chart. Top left is the astrological symbol for the planet Jupiter just at the beginning of a Jupiter trend line (1) He started this trend line on the 4th of October 1948 when Jupiter was at 22 degrees Sagittarius. 22 degrees Sagittarius is also 262 degrees of the 360 degree circle. Gann’s ﬁrst price marking was at 262 cents and then he started moving his trend line up by 1 cent every time Jupiter moved by 1 degree. I notice that he also noted the fractions of the degree as well.
During the course of the last several years many articles have appeared in Trader’s World that cover the mysterious topic of “astrology.” Those interested in the subject matter quickly ﬁnd out that astrology is really nothing more than the “ancient study of cycles.” The lunar cycle of new moon to full moon is a 28 day cycle. Mars changing signs is a 45 day astroharmonic cycle. The 41 month stock cycle is the Jupiter-Uranus cycle.
The study of Gann methods leads one down an interesting road, a path that seems neverending. The Gann student is exposed to a great deal of esoteric information. The esoteric side of the Gann material can be confusing and is often passed over or misunderstood. To make use of any of the higher principles one needs to bring such principles to our plane and ground them in our world.
Traders often speak of trends, seasonals, swings and pull backs. On most of their computer screens can be found indicators such as stochastics, RSI, and moving averages. It is easy to lose site of the connection between our plane, the trader’s plane and Gann’s plane, the esoteric plane. To most these two planes are totally unrelated, but to the true Gann student they are totally integrated.