W.D Gann placed the geometric angles on important tops, bottoms to indicate the trend of the market. These geometric angles accurately measure space, time, volume and price. The angles to draw on these tops and bottoms are the 1×8, 1×4, 1×3, 1×2, 3×4, 2/3, 1×1, 4×3, 3×2, 2×1, 3×1, 4×1 and 8×1. See Exhibit 20.1. These angles determine all important tops and bottoms. These angles drawn on a chart divide time and price into proportionate parts.
The angles should be drawn off of the 0 point – 1 square up, 1, 2(C), 2(C) one square up 3(5), and 4(C), 4(C) one square up. See Exhibit 20.2.To deter-mine the angle you should draw you should look at the price it is moving off of. If the price is, for example, at a bottom of 72, then the market will move up 72 hours, days, weeks or months. Look first at those angles. They will be one of the angles in Exhibit 20.1. You may just want to use the best angle that fits initial price move best.
What I mean by one square up are the squares that are on the Gann over-lays. For example the squares on the 144 overlay are 144/8 = 18 or multiples thereof. That is they are 2.25, 4.5, 9, 18, 36, 72. The square of 120/8 = 15 or multiples thereof. That is they are 7.5, 15, 30, 60. The square of 90/8 = 11.25. Those multiples are 5.625, 11.25, 22.50, 45, 90. The square of 52/8 = 6.5. Multiples are 13, 23, and 46. You must know the square overlay that the market is working in. Once the height of the channel is determined, prices will usually remain in the channel height until the market accelerates or direc-tion the market changes trend. In Exhibit 20.3 you can see one point where the market accellerated and then it finally changed trend. If the volume of the market picks up the height of the channel may increase to the next multiple in the overlay. Where an angle starts off you can draw a square which is the same measurement high and wide. Timing and price projection should be based on this square.
Using a fast MACD and a slow stochastic on your charts you can deter-mine where to buy the bottom of 2(C) and 4(C). In most cases the MACD will get above the center point, putting the market in a strong position and the stochastic will drop down to the 20% line and give a double bottom with divergence. In buying watch the stochastic and the bars on the chart. When the market moves up and makes a new daily high after the turn up of stochas-tic, you should buy the market. It is also possible to use the stochastic to take profits when price gets to the top of the channel and divergence is occurring. Remember never go short the market based on stochastics in an up trend as the market can continue to advance.
After the 5th wave top is made and MACD gets under the center point, you can sell the first stochastic high B wave and go short the market. The procedure is just the reverse of buying the bottom. Watch the down wave C very carefully to determine in this is in fact a down wave beginning to start or just and ABC and resumption of the main trend up again.
- Part of book: Gann Masters Course By Larry Jacobs