GANN PART-04

For such people, Gann offers an alternative method to apply the Square, which I’ll describe below. Before we
start, I want to say that many elements of this method are the same as the steps, I’ve already described. That is
why I won’t repeat myself and write about them again. So, if you haven't yet read the previous posts, I
recommend you to get familiar with the last three articles to understand the present material.

As an introduction, I’d like to add that the alternative method is neither better nor worse than the previously
described one; it is just a little different. Nevertheless, as Gann, himself, recommended, and the experience
shows, the best way is to apply all Gann’s tools when you analyze the market and pay special attention to the
levels that are identified by both methods.

First, I’ll describe the alternative way to identify key dates by means of Chronometer, the circle that surrounds
Square of 9.

How to identify key dates, using Chronometer

How to identify key dates, using Chronometer.

In the first part of this educational block, I’ve already mentioned a similar method that identified global pivot
points in long-term analysis of time periods.

I’ll remind you that the points were identified when I chose the figure that would cross by its diagonal lines the
maximum number of the key levels, suggested by Square of 9, marked at the square itself.

To apply the present method, I’ll look for key dates, regardless of the periods of equinoxes and solstices, taking
only historical values into account.

First, I should identify the historical high in the price chart of the analyzed instrument. In my case, it is Bitcoin
price chart.

As you see from BTCUSD price chart above, Bitcoin all-time high 19666 USD was recorded on December, 2017.
I also mark the price low, nearest to that date; it is 5920 USD on February 6, 2018.
Next, I configure Gannzilla settings as I described in the first part.
I use the date of the high as a reference point. Then, I select the figure so that one of its angles must point to
this date (see the example in the chart above). Furthermore, the perfect figure will be the one, whose next
angle in a clockwise direction coincides with the low marked below, with the deviation of not more than 2-3
days. If there isn’t such a figure, then you need to take the next low and choose the figure, based on it.
You try all the figures, from a decagon to a triangle.
Choose the appropriate figure. In my example, it is a heptagon.
As it is clear from the picture above, the figure exactly matches to the low of February 6, and so, that is what I
need.

Next, I attach all the levels to the dates in the chart, which are marked by the rest of the figure angles on the
Chronograph.

As you see from the chart above, all points are quite close to the chart extremes. If the historical high was later
than a year ago, all the levels you’ve marked will completely coincide with the chart history. To figure out the
historical points for the forecast, I need to mark these points in the future.

To do it, I repeat the circle and mark the same values in the future.

So, I extend the market cycles into the future. This cycle is relevant until there is a new all-time high. In this
case, the cycle will start from the new high. I want to emphasize that, according to this method, there are no
concepts like long-term or short-term forecasts. You operate only with historical data in the daily timeframe.

The next big stage is identifying the historical price levels. This step is similar to that, described in the second
article of the block, devoted to Gann model. So, I need to go back to the chart, where I have already marked the
historical values.
As the price favorite level, I mark the one that coincides with date, nearest to today; it must match to the
market reversal as accurately as possible. As you see from the chart above, this line is the red line on
September 4. At the next step, I need to identify the increment; the price unit when it moves from one cell into
another in the Gann square. With this regard, Gann offers an alternative way by trial and error

I take the historical low as a reference point, and then, I select the increment so that one of the few nearest
values in the cell, which is crossed by the price favourite level, was at the extreme that matches to the chosen
key date. To explain it more clearly, I'll give an example.

As you see from the chart above, the BTC high in the studied period is at 7411.85 USD. Bitcoin all-time low was
0.003 USD for 1000 BTC in 2009; so, first, I take a possible tick value in chart as 0.01 USD. Next, I need to build
price levels from this point with the increment so that one of the cells at the favourite angle is as close to the
high at 7411.85 USD as possible.

Gann, as an alternative method to select the starting value of the increment, offers to use the increment of 5
USD and more for the prices higher than 1000 USD; 0.5 USD and more – for the prices exceeding 100 USD. I
suggest we make it a little simpler and divide the price of the high into 1000. Experience proves it is one of the
most relevant ways.

Therefore, the settings will look like this:

By trial and error, I got the increment value at around 7.633 USD. Having found the increment, I can figure out
the Square of 9. Besides, I want to emphasize that the square size must be increased so that the last value,
matching to the favourite angle, will be higher than the high (in the given example it is 19666 USD). In my
example, the square size was increased from 10 cells to 33 cells. You may already know what to do next. You
are right; I just mark the crossed price levels at the favourite angle that points to Sep. 4.
Finally, if you’ve correctly followed my recommendations, you’ll have a similar big square and the diagonal line
along the green cells. I marked the high of 7411, which was crossed, by yellow.

Now, I’m about to start one of the most tedious stages of analysis, when you need to mark all the identified
levels in the chart. Fortunately, the historical highs are not updated very often, and so, I won’t have to make
these calculations very frequently.

Finally, I have the following picture. You can choose the color and the thickness of the lines as you like. As you
see from the chart above, almost all price key levels match to the key points and, in the chart history, they are
the zones of reversal, consolidation, or correction in the trend. So, now, there is the most interesting moment.
All Gann’s trading models are based on the analysis of cycles. And this method is not an exception. If you want
to better understand what I’m writing about, I recommend you to read about fractal analysis. I devoted a whole
educational block to fractal models a long time ago (the last article is here)
For ease of the analysis, I marked each level with a number. You may have a different number of levels in your
chart. It depends on what level you start from to construct the grid. I take the base level of 1320 USD, as I don’t
think Bitcoin will go deeper. Nevertheless, the order number of the level doesn’t matter, as I will be calculating
the difference.

As I apply a heptagon to figure out the cycle, the cycle will include seven columns, seven stages that I ranked by
using the letters from A to G.

Then, I count the cells, closed during the time of each stage. If the BTCUSD ticker broke through the cell’s line
but didn’t cross the block completely, I don’t count this square. There also matters the mathematical sign. It is
whether you have the number with the plus sign or the minus. It will further help you identify if the price will go
up or down.

It should be also noted that the forecast basically works out only if there is a complete cycle. If the starting
point of the new cycle is based on a completely new historical high, for your analysis, you can use the
regularities, emerging between the stages; but, if you extend the old cycle into the future for your forecast, you
can make a lot of errors.
It is clear from the chart above that during the first stage, it is A, the price went 10 cells down, during the B
stage, all the rise finished by the rollback, and the column closed with zero increment. During the next C stage,
the growth, adjusted for the loss, covered 2 cells. During the D stage, Bitcoin was two cells down.

At the E stage, it was 1 cell up.

At F stage it was one more cell down.

At G stage, the fall covered four cells.

What'snext?

Next, I draw the cycle projection in the chart. The moves are identified according to how the previous cycle
stage finished; therefore, after each of the stages finishes, I correct the expectations for the next one.
Nevertheless, the direction of the movement inside the stage can be anticipated quite accurately.

As you see, a particular increase or reduction in the cells’ number for the projection into the future can’t be
taken literally. It is about a relative change. That is, if the previous cycle featured the fall by 1 cell, and the next
one was 2 cells down; therefore, next year, if the price goes down by two cells in the same stage, it should rise
by four cells in the next stage; that is proportion is the same for the number of cells between the stages and
the direction of the movement. In addition, there are no strict constraints, it rather about the price movement
direction and the minimum potential for the movement inside the stage.

For example, I’ll make a forecast for the Bitcoin current situation. Assume that the last G stage of the cycle
finished with a fall by four blocks. Taking into account that in the past, the A stage featured a fall by 10 cells,
following the rise by 11 cells, then I don’t expect that the price will go up in the future A stage higher than
movement length in the previous G stage, which is most likely to close by adding three cells up. It doesn’t mean
that the price can’t at all add 6 cells up. I just understand that this stage is highly likely to feature a rollback and
see the minimum target for it.
At the next B stage, the increment is equal to zero, and so, there can be both the rise and the fall, it is only
important that it is likely to finish at breaking even. As an example, I displayed different possible scenarios by
the dotted lines in the chart above.

Next, at the C stage, Bitcoin is likely to draw down a little, based on the idea that I mirror the previous cycle.

If the next stage closes with the price increase, the mirror effect will disappear, as the cycle may enter the
bearish phase and the price will start a new fall, despite that it was growing before. Before I finish the post, I
want to again emphasize that the above chart doesn’t display my forecast for Bitcoin future price; it is just an
example of how you can apply the Square of 9 to forecast the price moves in each stage of the cycle. Here, it is
very important to pay attention to how the previous stage finished. What is the final price change, compared to
the previous stage? What is the price change, compared to the same stage in the previous cycle?

To exploit this method most efficiently, I recommend combining it with other Gann’s trading methods,
including those, described in the previous articles. In the next post, I’ll move away from mathematics and write
about the stars. I’ll describe how Gann used astrology in his studies and try to apply it in practice.