How to Make Money Trading by W D Gann
The Cycle of Years: Seasonality
Watch for significant days in the 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 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 365. In other words, one day is equal to one degree of the circle as the earth makes around the sun. Thus the significance of important divisions of the circle (into geometric angles) on charts. These angles are 45, 90, 120, 135, 180, 225, 240, 270, 315 and 360 degree.
Dividing a line parallel to the 90 degree division of the circle we get a square. Divisions of this square gives important angles on the charts.
There are two kinds of cycles: Time cycle or natural cycles and cycles derived from the significant prices. And these cycles will have important divisions on 1/8, 1/4, 1/3, 3/8, 1/2, 5/8, 2/3, 3/4 and 7/8. Thus the 30 year time cycle will be divided into important probable turning points as follows:
1/8 – 3.75 years
1/4 – 7.5 years
1/3 – 10 years and so on.
The significant time cycle/squares are Square of 52 on weekly charts. Use it on important high/low as well as on those points which start a 90 day cycle. Also two squares or a cycle of two years can be used. Inner squares (squares formed within the square) and outer squares (squares of the same size placed adjacent or diagonal to the square) should also be seen when price moves into the same.
Square of 90 is also important – in the same manner as square of 52 on weekly charts and monthly charts.
Square of 12 is important. Multiples of 9 are also important to watch.
Square of 144 is the most important square for use on monthly charts. These cycles have influence on price in terms of absolute numbers in addition to the time cycles they signify. It means that a movement of 144 point in a stock is important by itself.
The further divisions of time and price are derived from this master chart as follows:
144*144 = 20.736.