Turning Point Analysis

In Price And Time

16 Precise Methods Anticipate

Market Turns And Pinpoint
Highs And Lows

written by
Joseph T.Duffy
 PREFACE
This manual is a follow up to its predecessor T h e Trading Aduuntage." The Turning
Point Analysis manual cantains what I have found in m y own trading to be the most
powerful techniques for forecasting trend changes in price and time.

The material contained in these two manuals contain all of the G m , Fibonacci, and
charting techniques I use in my own trading to forecastmarket movements and turning
points. While the learning pmess never stops, nothing is being held back in thisbook,
including some completely new material in the literature of technical analysis.

The combination of techniquesdetailed in these manuals has proven ta work for me in

actual trading. This includes three real time, real money trading contests, not
hypothetical or paper trading. In addition to trading, I also use these techniques in
pmviding technical commentary and proprietary trading recommendations to an
international trading institution.

Overall, this is an approach that I believe anyone can learn. Any trader should be able
to integrate at least a few of the techniques into their own trading.

Lastly, remember that wanting to win at trading is the easy part, preparing to win is
the d i f h ~ lpart.
t Only if you are willing to do the homework, can you be successful.
Good luck, and g o d trading.

Joe D u e
1994
I Contents

I. Advanced Fibonacci Analysis Techniques

Introduction ................................................................................................................ 1
Fibonacci Spatial Relationships of Price ................................................................... 1
Using the Analysis .................................................................................................. 27
Fibonacci & Elliott Wave .......................................................................................... 27
Calculating The Projected Target Prices .................................................................. 29
Examples .................... . . ....................................................................................... 31
When To Use Each Fibonacci Technique ............................................................... 41
The 3 Point Set Up ................................................................................................... 41
Fibonacci Number Targets .......................................................................................41
Review and Summary .............................................................................................. 50
Fibonacci Time Relationships ..................................................................................51
Fibonacci Number Count ......................................................................................... 51
How To Do The Time Counts ............................................................................... 53
Summary and Review .............................................................................................. 54

II. Advanced Gann Analysis Techniques

W. D. Gann ............................................................................................................. 68
Master Time and Price Calculator: Square Of Nine ................................................68
History Of The Square Of Nine ........................................................................... 69
Construction Of The Square of Nine ........................................................................69
Technique I: Using Price To Forecast Price Targets .............................................. 71
Helpful Hints For Using The Square Of Nine ...................... . . .......................... 72
Technique II: Using Time To Forecast Time Targets .............................................. 80
Technique Ill: Using Time To Forecast Price Targets ............................................. 85
Technique IV: Using Price To Forecast Time Targets ............................................91
Technique V: How To Predict The High And Low For Each Day ............................ 97
Technique VI: The Importance Of Natural Squares .................... . ........................ 100
Technique VII: Cardinals And Corners .......................... . ..................................... 102
The Two Master Time And Price Calculators ......................................................... 104
Summary: Square Of Nine .................................................................................... 105
Primary Nurnbers, Ratios, And Cycles ................................................................. 107
Secondary Numbers, Ratios, And Cycles .............................................................. 107

Ill. Advanced Short Term Analysis Techniques

Introduction ........................................................................................................... 112
Pivot Points ............................................................................................................ 112
Hig h/Low tines .................................................................................................. 115
How To Use High/Low Lines .................................................................................. 116
Conclusion ............................................................................................................. 121
ADVANCED FIBONACCI
ANALYSIS TECHNIQUES
never been revealed in this manner anywhere else in the literature of technical
analysis. They are the fruits of many years of research and experimentation with the
natural and recurring principles of Fibonacci, In my own trading, I have found these
methodologies to be extremely powerful in forecasting price highs and lows in virtually
all markets.

There are five Fibonacci techniques introduced here for forecasting market tops and
bottoms. These will be referred to as the Fibonacci Spatial Relationship techniques. In
this section you will learn how to apply the basic techniques. In the next section you
will learn when to use each technique.

FIBONACCI SPATIAL RELATIONSHIPS OF PRICE

In 'The Trading Advantage"manual the history and concept of Fibonacci numbers and
the related Golden Section ratios were detailed. A knowledge of these basic concepts
is needed for the discussion of the more advanced relationships detailed in this section.
For reference, a brief summary of the important Fibonacci relationships follows:

Fibonacci Number Series

1, 2, 3, 5, 8, 13,21,34,55, 89,144,233,377,610, 987 ...

Ratios of adjacent numbers in the series (Golden Section Ratio)

,618and 1.618

Ratios of alternate numbers in the series

.382and 2.618

Ratios of 2nd alternate numbers in the series

.236and 4.236

The Fibonacci Spatial Relationships (FSR's) of price movements are very easy both to
learn and to apply in everyday trading situations. The key factor is to at all times
remember the principle of the Golden Section in its original form. This form is defined
quite simply as the division of space between any 2 fixed points. It really is a s simple
and straight forward as that!
When applying the Fibonacci/Golden Section methodologies to the price scale, the two
fixed points required may consist of any of the following:

(i) high to high

(ii) low to low
(iii) high to low
(iv) low to high

The only other requirement is that these high and low price reference points should be
significant enough to be readily discernible in a quick perusal of the chart under study.
These techniques are applicable to charts of all time frames.

The Golden Section divisions of .382 and .618and the associated expansions of 1.618
and 2.618 are the most important in the relationship of price movements in the financial
markets. The .50 and 1.00 ratios and the 2nd alternate Fibonacci ratios of .236 and
4.236 are also significant, although secondary to the Golden Section ratios.

The charts included in this section are from four markets, the S&P 500, T-Bonds, D-
Marks,and Soybeans. These exact same markets over the exact same time periods are
used to illustrate each technique. Using the same markets over the same time periods
eliminates the possibility that the techniques were "curve fitted" to the data after the
fact. What you will see is that virtually every turning point in these markets can be '

explained by one of the Fibonacci Spatial Relationship techniques described. For my

money, and I mean that literally, there can be no greater testament to the significance
and power of these methodologies than this observation.
 Conventional analysis d i c t a t e s that these
p o i n t s are retracements from h i g h s or lows,
However, these p o i n t s should be correctly seen
as J&g p o i n t s of potential support and/or
resistance as long as the market trades between the i n i t i a l
2 points,
I
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4

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OCT NOV DEC JClN FEB M M CIPR NAY JUN Jln AUG SEP
TECHNIQUE I1
Measure l o w to high or
high to low,
Expand i n the direction of t h e p r i c e
move according t o Fibonacci ratios.
 I 1 -- - - --- -- -- a - - - - - - - - - -
,. . .. .. .... .. ..
1.- -- - - - - -1

OCT NOU DEC JClN FEB HCIX JUN JUL

TECHNIQUE 11
Measure l o w to h i g h or
h i g h t o low,
Expand in the same d i r e c t i o n as the price
move according to t h e Fibonacci ratios.

QCT DEC JAN FE8 WfiR OPR MAY JUH JLB, RUG 8EP
 dnu2 89W2 1 # 2-22-91 id: 33
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TECHNIQUE If o
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Measure low to high 01- f:
h i g h to low. , BLU
Expand in t h e same d i r e c t i o n as t h e p r i c e 11
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move according to the Fibonacci ratios, •
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RUG SEP OCT NUV DEC J flN FE6 Nnf? APR MCIY JUN JUL
Technique 111

Measure low to high, or

Measure high to low.
Expand this movement in the oppositedirection of the original price move according to
the Fibonacci ratios.
See example below.

In this example the distance from A to B may represent either ,382 or .618of the
distance from B to C. Point A w i l l therefore mark the golden section division of price
between B and C. In fewer instmcasA may also mark the .SO or .236 division of the
d k b n c e between B and C.
 TECHNIQUE I11
Measure h i g h t o Pow o r
low t o h i g h .
Expand in t h e opposite d i r e c t i o n as t h e p r i c e
move according t o t h e Fibonacci ratios,

- v n n . l - r l l r n n , r - T ~ - - ~ 1
OCJ NO19 DEC JIFlN SEE MRE flP2 MAY JUN JUL fiUG SEP
TECHNIQUE 111

Measure l o w t o h i g h o r
h i g h to low.
Expand in t h e opposite direction
as the p r i c e move according to
the Fibonacci ratios.
In this example the distance from A to B may represent either .382or .618 of the
distance from A to C. Point B will therefore mark the golden section division of price
between A and C. In fewer instances B may also mark the -50 or .236division of the
distance between A and C .
TECHNIQUE IV
Measure low t o l o w o r
high to high.
Expand in the same direction as
the p r i c e move according t o t h e
Fibonacci ratios.
TECHNIQUE IV
Measure low t o low o r
high t o h i g h .
Expand i n t h e same d r e c t i o n a s t h e p r i c e
move according t o t h e Fibonacci ratios.
TECHNIQUE IV

Measure low to low or

high to high,
Expand in the same direction as the price
move according to the Fibonacci ratios.
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Apply the Fibonacci division and expansion multiples to the next consecutive move-
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TECHNIQUE V A
Measure l o w t o h i g h o r
high t o l o w . 1 i

Expand i n t h e same d i r e c t i o n f r o m t h e next i n t e r v e n i n g

p o i n t according t o t h e F i b o n a c c i r a t i o s .

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OC'I M! OZJ DEC J'QW FEE MQR M'W HAY ,JUN .,1'1311. A! 1Fi
TECHNIQUE V
Measure low t o h i g h o r
high t o low.
Expand i n t h e d i r e c t i o n o f t h e p r i c e
a c c o r d i n g t o t h e Fibonacci r a t i o s .
In practice many price points established by the Fibonacci division and expansion levels
will sometimes provide at least temporary support or resistance to the market.
Therefore, while any Fibonacci level may at some point be eclipsed by price, these levels
can often represent a t least short term support or resistance points. However, be aware
that in a strong trend, any potential resistance point can be eclipsed easily and quickly.

The only other caveat that I will add is that no single method of analysis should be used
alone. (I do not include mechanical trading systems in this statement, although these
almost always have several components anyway.) Much better results will be obtained
if the trader concentrates on looking for a convergence of several indicators and
techniques, all giving like signals at a particular point in price and time. As you are
probably aware, this concept of converging evidence was emphasized repeatedly in
'The Trading Advantage" manual.

FIBONACCI & ELLIOTT WAVE

The concept and connection between Fibonacci and Elliott Wave was discussed
somewhat in "The Trading Advantage." Briefly, Elliott Wave holds that markets move
in waves of 5 in the direction of a trend, and waves of 3 during corrections to the trend.
While it has been generally assumed and accepted that Fibonacci is an adjunct to Elliott
Wave, that is not actually the case. The reality is that Elliott Wave is really an adjunct
to,or subset, of Fibonacci. Not the other way around!

Elliott Wave is based on the principles of Fibonacci, as its developer R. N. Elliott clearly
stated. However, it has become generally accepted that Elliott Wave is more important
than any other Fibonacci relationship. To accept this, is to put the proverbial cart before
the horse.

In fairness, Elliott Wave has in the past proven to be a very useful trading tool. In my
experience, it is just much less usehl today than it was in the early to mid-1980's,
particularly in the stock market. For instance, throughout most of the 1980's there
were absolutely no better forecasting tools, using Dow hourly charts, than a wave 2
"running a-b-c," or a wave 4 "a-b-c-d-e triangle." This is simply no longer the case.
Elliott Wave can still be very useful, particularly if the wave count confirms one of the
Fibonacci Spatial Relationships described herein. When using Elliott in this way, it is
best to avoid placing too much emphasis on what you may perceive to be the correct
Elliott Wave count. This may actually be counter productive. In such an instance, you
risk the danger of placing a possibly misinterpreted Elliott forecast ahead of an
objective, clear cut, and more significant Fibonacci Spatial Relationship. In other
words, do not put the cart before the horse.

Elliott Wave counts may not be as easily recognizable as they once were, but the natural
laws of Fibonacci are still at work, albeit in different forms. One major way in which
this work occurs, is illustrated by the Fibonacci Spatial Relationships detailed here.
CALCULATING THE PROJECTED TARGET PRICES

FIBONACCI MULTIPLIERS

To use the multiplier approach it is necessary to understand the relationship between

the Fibonacci divisions and the Fibonacci expansion ratios. This concept is quite
straight forward. Fibonacci divisions are divisions of 1.0. A Fibonacci expansion ratio
is simply the number that when multiplied times the Fibonacci division will equal 1.0.
A summary of these relationships follows:

For example, let's assume the distance between two reference points A and B is 89
points, as shown in the accompanying diagram. Let's also assume this distance from
A to B is projected to represent a .382division of the total spatial relationship. Note that
this will mean that the distance between B and C will be a .618 division (.382 + ,618=
1.0).

To calculate the distance to any price projection, the calculations are:

(i) Find the distance in price units between the two points being used for the forecast.
In this example the distance between Point A and Point B is 89 units.

(ii) Multiply this distance by the Fibonacciexpansion multiple(s). In this example that
will be 89 x 2.618 = 233.

(iii) Add the product(s) calculated above to the reference point to arrive at the price
forecast. In this example add 233 points to the level of point A to arrive at point C.

Note that if in the above example the A to B distance were assumed to be .236 of the
entire spatial relationship, then the 4.236 multiplier should be used to find the price
projection to point C. If the distance were .618 then the 1.618multiplier would be used,
etc.
 .&.

AtoBX2.618=C
89 X 2.618 = 233 Units
From A
A

MULTIPLIERS FOR EACH TECHNIQUE

The multipliers which will be used most often are listed below under primary
multipliers. The multipliers that will be used less often are listed under secondary
multipliers. The distance between the two original reference points is referred to as "n".

Techniques (11) (111) (IV) Technique (V)

PRIMARY RATIOS PRIMARY RATIOS

n x 1.618 n x .618
n x 2.618 n x 1.0
n x 1.618

SECONDARY RATIOS SECONDARY RATIOS

n x 1.309 n x ,382
n x 2.0 n x -50
n x 4.236 n x 2.618
n x 4.236

Add the product calculated above the reference point used in the original measurement
for each technique. The Fibonacci multiplier procedure will become quite simple with
a minimum of practice. For review, the steps may be summarized as:

(i) measure distance between 2 points

(ii) multiply times the Fibonacci ratios.
(iii) project to find the price target.
EXAMPLES

Several chart examples are given on the next few pages along with the calculations
necessary to arrive at the forecast. Note the relationship between the divisions and the
expansion ratioslmultiples. It is best to use constant month contracts. (i.e.always use
the Sept. T-Bond contract to forecast tops or bottoms in the Sept. T-Bond contract). Do
not use spot month contracts where there is a rollover difference in between the points
used for the measurement (although contracts adjusted for the rollover should be okay).
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Technique IV
(i) Measure low to L o w AB.
(ii) P r o j e c t up f r o m l o w A .
( i i i )Forecast t o p at C .

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 Distance AB is 55 t i c k s , a Fibonacci number,

Since a low t o l o w measure y i e l d e d t h e F i b o n a c c i count

FSR Technique IV was the o b v i o u s c h o i c e t o project t h e t o p .
Note : FSR is Fibonacci Spatial R e l a t i o n s h i p .

I I I I I I I I

OCT NOW DEC JUN FEB NbR nPR WAY JUN JUL nUG
~ n w ~ n r unr AU~J ~ d u UWW 534 r 33a OM 130 rn
 Distance A B is approximately 34 c e n t s .
Distance CD is approximately 89 c e n t s .

T h i s c o u l d b e e i t h e r FSR Technique I1 o r V , In c a s e s s u c h 2 s t h i s it is h a r d
to determine in advance which is m o s t likely. T h i s is w h e r e t h e u s e o f
o t h e r t e c h n i c a l t o o l s can h e l p t o i s o l a t e t h e most l i k e l y target p r i c e .
In this c a s e Technique V turned out to b e t h e o n e used.

QCT NOV K C JAN FEE MRR APE MClY JUN JUL RUG SEP
8 dnu2 8 W W # 6-17-71 10:33
1 l r 1 1 1

...................... ...................,..
ll.l

Distance A 3 is 376 ticks, 1 t i c k

o f f an e x a c t 377 F i b o n a c c i number.

The Low t o h i g h measure f o r the

F i b o n a c c i c o u n t , suggested FSR
Technique IT.

I I I I 1

RUG SEP OCT NOW DEC JON FEB MUR RPR MClY JUN
 I I 1

OCT HOW DEC JAN FEB IWR RPR MqY JUN JUL fiUG SE?
m UPTRENDS TO IN DOWNTRENDSTO
FORECAST TOPS FORECAST BOTTOMS

Technique I Technique I
Fib divisions between high Fib divisions between high
and law paints. and low points.

Technique 11 Technique I1
Measure low to high. Measure high to low.
Project up from low. Project down from high.
Forecast top. Forecast bottom,

Technique 111 Technique I11

Measure high to low Measure low to high.
Project up from Iow. Projeet down from high.
Forecast top. Foreeast bottom.

Technique IV Technique IV
Measure low to low. Measure high to high.
Project up from 1st low. Project down from 1st high.
Forecast top. Forecast bottom.

IF FIBONACCI RATIO OF THEN FORECAST USING

DISTANCE BElWEEN 2 MULTIPLIER:
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METHOD I

26 DAY HIGHLOW FIBONACCI RATIO COUNT

As the name implies,you will use this techniqueonly if the chart under study has made
a 25 day bigh or a 26 day low. (i-e.the days high is above the highs of the previous 25
dap, or the day's low is below the lows of the last 25 day^). The Fibonacci Ratio Count
is quite simple to apply. To use this methodology, employ the steps as follows:

(i) Determine if a high or a low is anticipated. If the market is going up and a 25 day
high is made, a top will be anticipated at some point. If the market is going down and
a 26 day low is made, a bottom will be anticipated at some point.

(ii) If you are using a daily chart and a top is anticipated, count the number of days
between the current day and the last significant high and low. These will usually be
the most recent 25 day highs and lows.

(iii) Divide the distance in time between the current day and the last high, and the
current day and the last low, according to the Fibonacci divisions of .382and ,618,

(iv) Expand the distance in time between the current day and the last high, and the
current day and the Iast Iow, backwards in time according to the Fibonacci expansion
ratios of 1.618 and 2.618.

Iv) At least one of the .382or -618divisions must correspond to a minor high or low. At
least one of the 1.618 or 2.618 expansions must correspond t o a more significant high
or low.
(vi) If these points do coincide with highs or lows, then there is a good possibility that
the current day is a trend change day.

METHOD I1

HOW TO DO THE TIME COUNTS

There are two important considerationsin employing the Fibonacci Time Relationship
methodologies. The first is that you haveto be somewhat more flexible in working with
time than with price. In using price on a daily chart, the absolutehigh and the absolute
low are always known and employed in the calculations. However, in using time on
daily charts, we will not usually know the exact time of day a high or low was made. In
order to accommodate this fact, an adjustment will be made in doing the time counts.

This adjustment will be to allow a margin for error of + or - one day in doing the counts,
This is particularly important when using the expansion ratios.

The second considerationin employing the FibonacciTime Relationshipmethodologies

is that they should be done every day. By doing them every day, any F'ibonacci pattern
that may be unfolding can usually be observed a few days in advance.
SUMMARY AND mVIm

25 DAY FIBONACCI RATIO COUNTS

I. Measure from potential high or low to hoth of the previous highs and lows,
2. Divide time distance from last high or low into Fibonacci divisions, and expand the
distance backwards in time according to Fibonacci expamion multiples.

3. If at least 1 division and 1 expansionpoint correspondto a previous high or low, then

a trend change may be expectd.

This is a good technique!

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s u o r s r h r p a y q j o auo TsFaT: TE JI ( A T )
 F i b o n a c c i Number Count

(i) Count backwards from t h e c u r r e n t day.

(ii) H i g h l i g h t t h e F i b o n a c c i numbers in t h e c o u n t .
( i i i )If at l e a s t 3 p o i n t s correspond t o previous
h i g h s o r l o w s , t h e n a t r e n d change is due.

OCT HOW DEC JhN FEZ MfiR fiPR HnY JUN Jut AUG SEP
onu snr ~nr AWW ww YWW 833 N W ~ 33a (ION 130
W. D. GANN

W. D. Gann was a stock and commodity trader in the first half of the 1900's. Gann
enjoyed a reputation as an expert trader, and his tradingprowess has given rise to much
research and speculation on the methods Gann actually used to make his market calls
and trading decisions. The complete truth on how Gann actually traded will probably
never be known for certain. In my opinion, it is a certainty that Gann never fully
revealed his actual trading techniques. However, in my research I have found that by
combining some of Gannh known trading principles with a little imagination, some
very profitable trading techniques may be developed. These techniques are detailed in
this section.

Are the techniques presented here the ones that Gann actually usedb trade? My guess
is that t o some extent a t least, the answer is yes - although to my knowledge Gann
never nctunlIy wrote about or taught the techniques exactly a s presented here. In any
case, what is really important is the viability of the techniques themselves in actual
trading.

This section contains what I believe to be the very best of Gann related methodologies.
Actual trading performance must be the ultimate yardstick of any trading methodol-
ogy, and based on that yardstick, what follows are the methods that have proven to be
the most worthwhile for me in real time trading,

MASTER TIME AND PRICE CALCULATOR SQUARE OF NINE

The basic concept of the Square of Nine was introduced in "The Trading Advantage."
To refresh your knowledge, the Square of Nine is sometimes also referred to as the
Master Time and Price Calculator. The reason for this very appropriate title will I'm
sure become clear as we progress. T h e Square of Nine is also sometimes referred to as
the Octagon Chart. This is because there are eight squares (Octa meaning eight)
surrounding the central square. Lastly, it is also sometimes referred to as the Gann
Wheel. For the purposes of this manual, however, it will be referred to as the "Square
of Nine," or simply the "Square."

The Square of Nine has nothing to do with squaring 9 as in 9 X 9. Observe the Square
of Nine which accompanies the manual. The term square simply refers to the geometric
2 dimensionalshape of a square. As well, there are nine boxes which make up the inner
most, or centre square, Hence the name Square of Nine. There can be some confusion
surrounding the name because Gann used the term square in so many different
con texts.

If I could pick just one trading tool, aside from a bar chart of price history, it would
undoubtedly be the Square of Nine. This is true for three reasons. First, the readings
and position of other standard technical indicators such as RSI, momentum, and
moving averages, can be approximately known just by looking at the bar chart.
However, the important time and price information given by the Square of Nine can
only be realized by using the Square itself.

Second, the Square of Nine can be used in many different ways. There are four major
trading techniques which will be illustrated, and three secondary techniques which will
be discussed in this section. Each technique gives specific price and time information
for applications over a 1 trading horizons.

The third reason I believe the Square of Nine is so valuable is that it combines ease of
use with very accurate price and time forecasts. I have seen markets trade for months
at a time, where virtually every market turning point corresponded to a turning point
related t o some methodology using the Square of Nine. This is incredibly powerful
information.

HISTORY OF THE SQUARE OF NINE

Many traders beIieve that the Square of Nine was invented by W. D. Gann. However,
this is not true. The Square of Nine has been around for centuries. We know that
ancient civilizations, including the Egyptians, were aware of its existence, and judging
by its inclusion in tempIes and sacred buildings, these civilizations also accorded the
Square of Nine great powers.

Based on his discovery of the Square of Nine, Gann also experimented with other
mathematical squares. Hence, ifyou read literature written by or about Gann, you may
hear of the Square of 4, or the Square of 12, as well as the Hexagon Chart. The latter
is based on 6 squares surrounding the central square, and is in the shape ofa hexagon.
In my experience, it is best to stick with the original, which is the Square of Nine.

CONSTRUCTION OF THE SQUARE OF NINE

The Square of Nine is so named because the numbers one through nine complete a
square in the centre of the diagram. To appreciate the Square of Nine in terms of its
geometric origins, look at the diagram and visualize it as a pyramid, At the apex of the
pyramid is the number 1 and there are four equal sized triangular walls descending
down to a square base. Each block in the pyramid is given a number. As you can see,
each block has a cousin which is in the exact same relative position on the other three
walls. These related cousins are separated precisely by intervals of 90 degrees, 180
degrees, and 270 degrees. As you will see later, these relationships are key to using the
Square.
TECHNIQUE I

USING PRICE TO FORECAST PRICE TARGETS

This basic technique uses previous price highs and lows to forecast the level of future
turning points in price. Generally, major tops or bottoms will forecast the most
significant turning points in price. Minor tops and bottoms will usually only forecast
rmnor turning points in price.

The steps are as follows:

(i) To find a price bottom use a previous high to start. To find a price top use a
previous low to start.

(ii) Locate the block on the Square that corresponds to the historical high or low price.
If using n significant high or low it may be any length of time in the past. Minor
highs and lows should be the most recent highs or lows.

(iii) If starting from a price high, then move counter clockwise numerically 90degrees,
180 degrees, 270 degrees, and 360 degrees t o find potentiaZ price support targets.
If starting from a price low, then move clockwise numerically 90 degrees, 180
degrees, 270 degrees, and 360 degrees t o find potential ~esistancetargets.

As an example, locate 527 in the lower left quadrant of the Square of Nine. The number
527 will represent a high or low price. (i.e.a price of $527.00 in gold.)

This will yield the following potential support and resistance points:

Low of 527 High of 527

then resistance at: then support at:

In practice, the easiest way to determine 90,180,270, and 360 degree turns is through
the use of a clear plastic overlay as included in this manual. The overlay is simply a
transparent square annotated with the degree lines. Simply lay the transparency over
the Square of Nine, making sure that the intersection of the lines passes exactIy
through the centre square, as well as the square that represents the high or low of price.
The lines on the transparency will then pass exactly through the prices 90, 180,270,
and 360 degrees away.
HELPFUL HINTS FOR USING THE SQUARE OF NINE

The following factors should be considered when using the Square of Nine with any and
all of the specialized techniques in this section:

1. Best results are usually obtained by using three digits on the Square. Therefore,
round prices accordingly. For example, 9812 becomes 981. For stocks, 20 318
becomes 204.

2. For some commodities it may work to continue to use four digits as long as the price
is under about 1500. The same is true for stocks or commodities on the down side,
as long as the number is over about 80. These are guidelines only, and for some very
large moves these boundaries may need to be expanded somewhat. An example of
this is in the accompanying Coffee chart.

3. Bonds trade in 32nds so they may be converted to decimals. i-e.98 16/32 becomes
985 rounded. Alternatively they may be converted to ticks. i.e. 98 16132 becomes
(98 x 32) + 16 = 3152 or 315 rounded. The third alternative is to convert to yields,
for which you will need a yield conversion table.

4. Occasionally, in runaway markets or blow offs, the price may exceed the measured
target. This is what Gann referred t o as 'lost motion." Allow for this in
exceptionally volatile markets. An example of this is in the accompanying Soybean
chart.

5. Gann recommended maintaining constant contracts when using other methodolo-

gies trading commodities. This means Dec. Gold would aIways be compared t o Dec.
Gold, even if the comparison was to a period when Dec. Gold was not very active.
In current times, however, it seems that continually using only front month prices
for comparisons on the Square often yields better results. Usually one eor the other
technique will be working. Hence I would recommend trying both, and using the
one that is working.

6. Look for two or more square measures to converge in the same price area. For
instance, look for 2 highs that both yield measures to the same potential low or vice
versa. [See Coffee chart for an example.) This will add to reliability.

7. The best way to use the Square of Nine is to be aware of the potential turning points
in advance. When the market nears these potential turning points, look to other
technical evidence to see if a turn is indeed supported.

The market will often pause at the support and resistance targets indicated by the
Square of Nine. If the market pauses, but does not reverse, it is a good indication
 of the strength of the trend. If the support or resistance target only causes a
temporary pause in prices, then this indicates that the trend in force is strong and
will likely continue.

8. Many markets will work on the Square of Nine very well using just the futures
prices. For some markets you should experiment with cash prices if you find the
futures prices unsatisfactory.

9. For some markets it is wise to keep track of related commodities in a complex. (e.g.
D-Mark, Swiss Franc, and Dollar Index or Soybeans and Corn, etc.) You may
sometimes find that one or the other will hit an objective on the Square, and mark
a reversal in the entire complex. Also, be aware that cash prices may work better
where applicable. The only way to find what works is to experiment and track the
results.

10. When using the clear plastic overlay, be sure to always have the intersection point
where the lines cross over the number 1, or centre square.

11. Remember that the above points apply, where appropriate, to all of the Square of
Nine techniques referred to in this manual.

Lastly, like most of the techniques in this book, you will find these techniques quite
straightforward if you study the charts, and look at the actual Square of Nine to follow
how the projections were made. The text can then be used to fill in the details, once you
understand the concept.
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TECHNIQUE I1

USING TIME TO FORECAST TIME TARGETS

This technique uses the dates of previous price highs and lows to forecast the dates of
future potential turning points. Use the dates of major highs and lows to begin the
forecast.

The steps are as follows:

(i) Place the transparent overlay on the Square of Nine such that one of the lines
passes through the date of a previous high or low as indicated arotuid the
perimeter of the Square. The intersection of the lines at the centre of the overlay
should also pass directly though the centre square.

(ii) The lines of the overlay will now indicate the dates that are 90,180,270,and 360
degrees away in time. These dates represent possible trend change dates.

(iii) Allow for a margin for error of t or - one day in the forecasts.

You may have already recognized that the distance in time between each date in the
above methodology will the same. In fact, since this methodology in effect divides the
calendar year into quarters, the distance between each potential turning point will
alwaysbe 91,25days. i-e.36514 = 91.25. This will be true no matter what date isused
as the starting point.

Given the above, there isreally no need to actuallyuse the SquareofNine to obtain T h e
to Time trend change projections. Simply look for trend changes to occur in approxi-
mately91 calendar day intervals,measured from the daksof majorhighs or lows, Note
that these are indications only, and in some cases may provide no more than vety
temporary support or h t a n c e to a trend,

The ue3e of90-91day intern& was discussedin The Trading Advantage."You may also
recall that these internah were divided again into 45 day segments. The 45-90 day
count isone of the most useful time related indicatam. You should watch for this count
on both calendar days and trading days.
The charts on the following pages &ow examples of this technique.
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TECHNIQUE III

USING TIME TO FORECAST PRICE TARGETS

This techniqueuses the date of a major high or low to forecast the price of future support
and resistance zones. It may at fmt seem incongruous that one can use time to forecast
price. However, time and price are inextricably related. If you practice using this
technique in your own trading, you should soon begin to see that this statement is an
absolute truism.

The steps for applying this technique are quite easy to follow:

Ci) Establish the date ofa major turning point. A major turning point will usually be
the high or low of the last year, or at least the high or low before a significant trend
move. For example assume Jan. 20th was a significant low. h a t e Jan. 20th in
the lower right quadrant of the Square of Nine along the perimeter.

(ii) Place the transparent overlay on the Square of Nine such that one of the Iines
passes directly through the date of the major turning point, and the intersection
of lines passes through the centre square. Far the example given, Jine up the
overlay such that one of the lines passes through Jan, 20th, and the intersection
of the overlay lines passes through the centre square.

(iii) The lines of the overlay will now pass through price levels which may act as support
or resistance in the future. Note that the lines will pass through many levels in the
square. You will have to use the level that fits the price level of the commodity or
stock under study. For example, if you are measuring in a downtrend, you would
use the first price level below the high price of the turning point date. Vice versa
in an up trend. For example, assume a low of 527 was made on Jan. 20th and an
up trend was under way. Resistance would then be expected at 534,558,582, and
606.

(iv) This will yield four price levels. In practice, price may not always reach all of the
levels. As well, these levels may not always provide significant support or
resistance.

Iv) There is some difficulty in obtaining exactly precise measurements using the
overlay for this particular technique. Therefore, view the levels as target zones
rat her than specific prices. Use other methodologies in this manual to help you
obtain more precise price targets.

The charts on the following pages all use the Counter Clockwise Square of Nine. This
does not mean that this is the best for all markets. It may not even be the best for the
markets illustrahd here, by the time you are reading this. A little experimentation
should both helpyou better understand how to use the techniques,as well asdetermine
which Square of Nine is best for a particular market.

TheSquareofNineisaveryeasytool touse. Withminimal practice, youshouldbeable

to determine the best methodologies for a particular market, all of which can be done
very quickly. Follow the examples using the Square of Nine with the following charts
and you will see what I mean.
 USING PRICE TO FORECAST TIME TARGETS

This technique uses the actual price readings of previous highs and lows to forecast the
dates of future turning points. As with the previous technique, this bchnique is
dependent on the intermlationship of PI-iceand time in the rnarlrek.

57 1 The steps for applying this technique are as follows:

I (i) Establish the actual price level of the high or low a t a major market turning point.
I
A major turning point will usually be the high or Iow of the last year, or at lenst the
high or low before n significnn t trend move. For example, assume a significant high
I was made at 674 1 in thc Swiss Franc. Rounding to 3 digits this is 674. h t e this
*
x
I figorre in the upper right quadrant af the Square of Nine.
c 1
(ii) Place the overlay on the Squaw of Nine such that one of the lines passes exactly
iI through the price of the high or low, and the lines of the overlay intersect through
the centre square. Forexemple, line up the overlay such that one of the lines passes
through 674, and the intetrimtion passea through the centre square.

I I
liii) The linesof the overlay will now pass through dates that are probably future trend
change dates or turning points in time. Allow a margin for error of +1- 2 days. In
the example, Feb. 13th,May 13th, Aug. E3th, and Nov. 13th.

(iv) This will yield four trend change d a h . However, all of these dates may net always
provide trend changes.

The charts on the Following pages nll use the Counter Clockwise Square of Nine. This
does not mean Ghat this is the best for nll markets. It may not even be the best for the
markets illustrated here, by the time you are reading this. A little experimentation
$C should both help you better undentand how touse the techniques, as we1l as determine
which Square of Nine is best for n particular market.
I
I

I ZEROING IN ON PRICE TO TEME FORECASTS

There are two methodologies that can help in obtaining a more precise forecast of future
trend change d a b while employing Technique IV asjustdcscribed. The first is to look
backwads 90degrees from the approximate dateof thefimt forecast trend change date.
You will m a l l that 90 degrees is equal to approximately9 1calendar days. Therefore,
you will look back 9 1 calendar days from the approximate date of the first farecast trend
change date.

h o k for asignificant high or low point within 1 ar 2 days on either side d t h i s date. This
will not always occur. I-Iowever,if it does occur, the first forecast turning point date can
be expected exactly 91 calendar days forward from the date ofthe high or low. This will
give you a rnm precise date target to expect, although you should still allow for n
margin d error of +/- 1 day.

To employ the .second way to zero in on a more precise time target, you must wait for
a high or low to be est=ablishedat the first turning point. Then simply measure 91
calendar days forward in time to get a more precise foreeast of the next trend change
date. Again allow for a margin of error of +J- I day,

Both of these methodologies for zeroing in on n more precise target date, are illustrated
with one example for each on the following charts.
TECHNIQUE V

HOW TO PREDICT THE HJGH ANI) LOW FOR EXCH DAY

T h e Square of Nine can also be used to help in establishing very short term support and
resistance points in price, These can be used to help confirm the techniques discussed
previously, andlor as action p i n t s for day trading. A11 the price points established are
plus or minus n few ticks.

There are two methodologieswhich will yield eight potential high and low p i n t s for the
next day. These ptcntial support and mistance points can be narrow4 down further,
because usually six of these points wiI1 be tso far awny t~ be considered useful.
Therefom,you will usually be lefi with m e potential:mistance point and one potential
support point for each day.

Further you will usually find that either one of the two techniques works best with R
particular oommdity. Therefore, this will narrow down the potential high and low
points even further.

The steps to calculate tarnorrow's support and resistntlce points are as follows:

TECHNIQUE I

(i) Locate the date on the perimeter of the Square of Nine. As discussed previously,
place tho overlay on the Square such that one of the lines passes through the date,
while confirming t h a t the overlay lines cross directly over the centre square.

(ii) Fiecord the closest two prices which are intersected by the lines and above the
previous closing price. Also record the closest two prices which are int.ersec&dtry
the lines below the previrms closing price. These are four ofthe potential support
and resistance points.

TECHNIQUE XI

(i) Translate tomorrow's date into pl, numeric degree rending. Yiozl may recall that
this is simply the number of degrees the current date is past zero, which is March
21st. For instance March 2 3 d would be 2 degrees, and January 2 1st w I d be 300
degrees. You will recall that each 90 degree movement equals 91.25 calendar
days, EXJcalculations should not be difficult.

(ii) Locate the degree reading on the main W y of the Square of Nine. That is, find
 the actual block which correspondsto the degree reading of 2, or 300,or whatever
the current date degree reading is. Locate the actual block on the Square, not the
perimeter reading.

(iii) Place a ruler horizontally along the line which contains the block with tomorrow's
degree reading. Note the closest: number on this line which is above the previous
closing price. AIso note the closest number on this line which is below the previous
day's price. Next lay the ruler vertically along the line which contains the block
with tomorrow's degree reading. Again note the closest number above and the
closest number below the previous day's price, which is on this line. These are the
four potential support and resistance points.

Do not expect these numbers to always call the next day's high and low points. These
are guidelines only and will not be useful every day, However, when the market does
move enough to approach one of these points, often short term support or resistmce will
he encountered.

As well, note that most days the projectedhigh and low points will be relativelyfar away
from each other. Given this, only one will likely be relevant on any given day.

Lastly, recall that three digits work best on the Square of Nine, so c o ~ v e r tprices
accordingly.

The examples below illustrate the methodology for one day's forecast (Aug.8,1990)for
four different markets.

1. T-BONDS: Previous close 90 16/32 I905 as 3 digits)

Perimeter Forecasts (Technique I)

Highs: 96 3/32,93 3/32
Lows: 90 3/32,87 3/32

Degree Forecasts(Technique 11)

Highs: 91.0,94 29/32
Lows: 88 9/32,86 6/32

Closest Forecasts Actual High & Low

91.0 91 3/32 (excellent projection)
90 3/32 89 29/32
 the actual block which corresponds to the degree reading of 2, or 300,or whatever
the current date degree reading is. Locate the actual block on the Square, not the
perimeter reading.

(iii) Place a ruler horizontally along the 1ine which containsthe block with tomorrow's
degree reading. Note the closest number on this line which is above the previous
dosing prim, Also note the clmcst number on this line which is below t h e previous
day's price, Next lay the mler vertically along the line which contains the block
with tumorrow's d e w wading, Again note the closest number above and the
close~tnumber below the previous day's price, which is on this line. These are the
Four potential support and resistance points.

Do not expect these numbers to always call the next dafs high and low points. These
are guidelines only and will not be useful every dny. However, when the market does
move enough to appmach one of these points, often short term supprt or resistance will
be encountered.
.Aswell, note that most days the projected high nnd low points will be relabivelyfar away
from each other. Given this, only one wilI likely be relevant on any given day.

Lastly, recall that three digits work best on the Square d Nine, so cocvert prices
word ingly.

The examples below illustrate the methodolow for one day's Forecast (Aug. 8,1990) far
four different markets.

1. T-BONDS: frevious close 90 16/32 (905 as 3 digits)

Perimeter Forecasts (Technique I)

Highs: 96 3132,93 3/32
Laws: 90 3/32, 87 8/32

Degree Fortxnsts (Technique TI)

Highs: 91.0, 94 29/32
Lows: #I 9/32,86 6/32

Closest Forecasts Actual High & Low

91.0 91 3/32 (excellent projection)
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NATURAL SQUARES

1x1- 1

2x2- 4

3x31 9

4 x 4 ~16

5x5- 2 5
6x6- 36

7x7- 49

8x8- 64

9x9- 81

IOXLO- 100

llxll- 121
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13x13- 169

14x14- 196

15x151 225

16x161 2 5 6

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1 8 x 1 8 ~3 2 4

19x19- 3 6 1

20x20- 4013

21x21- 4 4 1

22x22- 4 8 4

23x23- 529

24x24- 5 7 6

25x25- 6 2 5

26x26- 6 7 6
CARDINALS AND CORNERS

This technique is the easiest of all of the Squam of Nine methodologies to employ. I t
requires no calculations or measurements,simply observntian of the block or p s i tion
where price is on the Square of Nine.

h k at the Square d N i n e and note Chat the line ofnumbers that run horizontally and
vertically through the centre square are highlighted by a darker border, These lines
of blocks are referred to as the "Cardinal" squares.

The''Gomem"are the lines of numbem which run diagcmnIlyout from the centwsquare
in four directions. These join the centre, or number m e square, ta the corners of the
Square of Nine, hence the name Corners,

FZXPANDITYG THE SQUARE

It has previously been stated under the widelines far using the Square of Nine that it
is usually best to use three difits on the Square. However, when using Cardinals and
Corners it is equally beneficial to expand the Square to include four digit and five digit
numbrs. For example a T-Bond price of 102 25/32 would cornspond to a Cardinal at
10279. I102 25/32 converted tm decimal form equals 102,79).

Cndinals and h e r s are not significant in Chemelves. The most important fnchr to
note in using this technique is that it will tend ta be very useful in streaka of three or
more occurrences, That is, once a Cardinal or n Corner price block is coincident with
a turning point in price, then a, smies of Cardinal or .Corner turning pints wiII o b n
follow. Therefore,once R high or low is coincident with a cardinal or corner, you should
be alert for m k q u e n t highs rind lows coincident with n c~rdinalor corner.

A numeric listing of the Square of Nine Cardinals and Cornera is contaEned an the
following page.
 GZ9P T6q6 LSSP
""~vP 9SVP €ZP&
tq&P PZFP 16ZP
qZZb C6T P 7915
L60P G90P EFOP
B96E 9C8E LOGE
C88E $la€ E8LF
TZLE: T69E 199€
1 O9E 1LGC T PGE
TQbE ZFPG EZPF
G9CF SCCE: LQGE
6PZE TZZE E61F:
LFTF 60TC t80C
SZOG 8562 'IL 6 Z
L 162 0682 6982
6082 EBLZ CSLZ
SOL2 6L9Z CSBZ
11092 9LSZ TW Z
IDSZ 9LVZ ITbZ
TOP2 LLEZ EGG2
91365 THZZ LGZZ
60ZZ 9812 €912
I LC2 b60Z IEZOZ
7 86 7 6GB1 LCRT
€681 I LOT 6P8I
LORI 9BLI G9LI
EZLT ZOLT 1891
IP91 1291 f09P
T9GI 'IFS t IZSt
F8 b 1 WbI CbbT
LO~T QSEl 69EI
€CCT ST FT L6ZT
1921 EFZI szzt
T6TT ~ t lT , ~
6801 CLOT
Gzar 6 0 0'1 CR6
196 9t B TE6
r 0s me PL!3
t PQ LZ8 €10
S8L T LC LSL
6ZL 91C SOL
LL9 Pg9 IC9
szg FT9 709
LL$ F9< FS'2
EZS 81s LO';
SOP PLP F9tr
TFP IFF TZb
TOY 16F TG€
T 9€ ZCC 6 PI:
GZF: 91 E: LOF
6QZ I RZ F/!Z
LGZ fib2 I tZ
THE TWO MASTER PRICE AND T M E CALCUTATORS

This is the shortest section in this manual. However, it contains very important
information for using the Square of Nine far maximum benefit, You will notice that on
the Square of Nine there isa clockwise scale and n counter clockwim scale. This simply
refers to which direction the dates move away from the starting point of March 21at.
Hcnce there are really two distinct Squaw.

Although there are a few traders who am a w m of the existence of the Square of Nine,
very, very few are aware of the existence oftwo distinct Squares. One of these two
Squares will work best for each market, A littllc experimentation should quickly
determine which Square touse for which market.

Note that in using the Square ofNine far price to price and time ta time measures, each
Squam will yield identical results. It is only when using the Square for time to price,
and price to time, measures that the distinction will make a difFcmce.

The chart examples in thb manual have used the counter clockwise Square for all the
measurn. However, you must determine by your own experimentation what Squam
is best for each market. You should be able to do this in n b u t 30 minutes with a little
back testing using previous highs and lows.
SUMMARY: SQUARE OF NINE

In the introduction to this section 1 state$ that the Square of Nine was probably the
single most powerful tool available for use in market analysis and forecasting.
HopefuIIy, you now see why I made this statement.

What the Square also shows us,is that time and price are undoubtdly related. The
Squnre of Nine can enable you to pinpoint the relationship hctween both high and low
prices and trend change dates, and h e m help reveal the arder in market movements.

Remember that no method ofanalysis contained in this manual will be applicable to all
markets, all of the time, This applies eqrrnI1y to t h e Square of Nine, As a trader, the
optimum point to take action will be when a confluence of analysis techniques are all
pointing toward a specific turning point in price and time. There are actually 14
different ways to use the SquareofNine. In this manual,seven havekendetailed. The
other m e n ways simply involve using a number other than one for the centre square.
Thk number would be the price of a significant high m low. 'fiereafler, the analysis
w w l d be the aame as has been previo~islydescribed.

This latter methodology obviously requires substantially more work. I personally do

not use this methodology,and therefore, cannot a t k t to lthe relative merits ofusing the
Square of Nine in this way.
PRIMARY NUMBERS, MTIOS, AND CYCLES

When fir.& ~tudyingoridnal W.D. Gann materials, one can be stmck by the fact that
Cenn s e e m d to think tbnt virtually every number and division was an Uirnportant"one.
This characteristic nllows one to see,in retrospect of course, that one or more of the
"important" numbers played a part in turning the market at a particular p i n t in price
and time. If one stap.s their investigation of Gann at this point, one could easily a m m e
that Gann considered so many numbers significant, as to b practically useless
market forecasting h t s .

While it is true that Gnnn did in fact write that many numbers and divisions were
important, a practical and objmtive study leads m e ta conclude that most of G m ' s
more public writing was perhaps a diversion. WhulGann discowned thal r e d l y works,
hR r e d s more in t k r y t h in specif~s.
By theory, I mean that the essence of all Gann's work is based on simple geometric
relationships. T h e geometric mnfirnrations u w d by G a m are the circle, the square,
and the triangle. In three dimensional terms, these are the sphere, the cube, and the
pyramid.

Gann waFi not the only historical figure of note Eo find power and substance in baaic
geometry. Leonardo Da Vinci consciously used these configurations, as well as the
Fibonacci ratios, in much uf his work. Isaac Newton had a Fibonacci circular spird and
a triangle carved into the headboard of his bed. In a self portrait, Pythagoraa held in
his hand a pyamid, which he proclaimed contained the key to the universe, In the
modern era, Albert Einstein nccorded great respect to simple geometry, and to its
repetitive nature and power = it is played out Ithrorrghaut the Universe.

Therefore, by studying thc numbers and ratios most n s h a t e d with basic geometry,
you can dismwr the basis for b d h Gann's number cycles, as well as the Fihnncci
numbem and ratios, These numbers m e prevalent and repetitive in many areas of
nature, By starting from this premise, I have found it possible to separate the tmly
significant from thc marginally useful,in the application of number cycles and ratios
in the financial markets.

Following is a brief discussion of important number cycles as well as speculation as ta

their possible derivation.

The circle contains 360 degrees, which is very close tothe number of days in the earth's
solar year. Our solar ycar is also divided into 90 d s p e segments according to solstice
and equinox, based on the relative position of the earth ns it revolves around the sun.
Therefore, the n u m b 360 and 90 represent two impartant nurnbr cycles which have
;a firm and repetitive foundation in geometry and nature.
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period, ( N o k The "Death 7fine" was discussed in the 'Trading Advantage" manual.)

The number cycle 72 - l.34- 288 was also considered important by Gann. You may have
heardorreadof"thesqua~dl44." Gannused theterm"squ.lareWbrdertoasi~ificant
market cycle. You will recall that '644 ia a Fibonacci number. Fibonacci numbers nm
important. I t is also the natural square of 12. i.e. 12 x 12 = 144. Natural squares are
also imprtnnt. The number 72 is half af144, but also twice 36, which is thc natural
square of 6. The number 288 is twice 144, but. is also only 1 away from the natural
square of 17, which is 289. Hence what we =is that 144 is probably no more significant
than any other natural quere, except that it is also a Fibonacci n u m b and is closely
related to other natural squares around it. Themfore, in my own trading I acood this
cycle same importance.

Another number cycle Gann considered important was 30 -60 - 96.Thiscycle probably
has its roods in nstronomical phenomena. That is, 90 degrees is the distance between
solstice and equinox. 30 degrees is the distance between Zadiac divisions. 60 degrees
is the halfway division point between the former 2 points. It in also the interior angle
measure in an epuilakral triangle. This can, therefore, also be conc;idel.ecEa g o d
secondary cycle.

Gann also m i d d 62 as a srignificant trend chnnm cycle. Thisprobably also is based

on an astronomical phenomena. Thus far we hava seen Gann consider 7,30,and 52 ns
important numbers. T h e m are the nurnbr of days in a week, days in a month, and
weeks in a year. As wall, the slope of the Great Pyramid waHs was approximately 52
degrees. I hnve sersn this cycle of 52 work in the s k k market particularly, ht its
influence fades in and out. It can be considered of significance in some markets.

Gann often divided tradingranges and other numbers into eighths. Each of these 118th
divisions then also became irnprtrmt. There is more than one possibility aa to why
Gann c h m to do this. One is the 45 degree and 360 degree relationship, Roth 45 and
360 are significant numbera which are recurrent using a variety of geometric and
sstronomical techniques, Since 45 is exactly U8th of 360, Gann may have chosen to
carry this relationship forward and apply it ta other kading situations,

However, I believe that the real basis for Gann'sdivisionof8 may well be Fibonacci, The
really interesting part ofthis, is that Gann never made reference to Fibonacci in any
of his writings. Not even o n e . This lock of reference is p m i ~ e l ywhy I believe Gann
accorded such great importance tn Fibonacci. Let me explain further.

It is well known that Gann was a workaholic, who studied virtually all significant
mathematical discoveries,especially those directly involving numbers. Something as
mysterious and esoteric as Fibonacci would be something virtually sure to capture the
attention af W,D.Gann, While Gann did not specifically mention Fibonacci, I believe
Gann understood Fibonacci, nnd Gann's Fibonacci short cut was the division of Bths,

The Fibonacci ratios and the divisions of 8ths are listed side by side below.
FTBONACCI RATIOS GANN DIVISIONS OF 118THS
,146 .I25
,236 .25
382 -375
.50 .SO
.618 ,625
,764 .75
,854 .875

As you can see, the divisions are in fnct quite close ta each other in absolute t e r n . Of
even greater interest is that the differences are all relrrM by a factor of 7. i,e.382 - 375
-
= 7,250 - 236 = 14, I46 - 125 = 21. On the other side 625 ti18 = 7,764- 750 = 14,876
- 854 = 21. This also incorporates Gann's reference to the number 7 as significant.
Again we see that all of the important numhers,cycles, and ratios in price and time are
inedricably related and intertwined. A summary of all the Fibonacci and Gann related
numbers, cyclea, and ratiw follows.
INTRODUCTION

This is a short section of the manual. However, do not underestimate its importance
ifyou are a day trader. These techniques can often provide uncannily accurate support,
resistance and trigger points on a short term trading basis. I use the price level where
there is a confluence of these points. This confluence does not happen every day. But
the days it does make it very worthwhile.

PIVOT POINTS

The Pivot Point formulas and derivations have been around for a long time and are very
well known. In fact, many tool box software programs and real time quotation services
provide these points as part of the analysis tools. However, their popularity does not
diminish the usefulness of these points. This section will introduce a new wrinkle for
using the pivot points for determining important support or resistance in price, First
the formulas for deriving the points are given below.

2nd HIGH PIVOT = P + 2 (P - L)

2nd LOW PIVOT = P - 2 (H - P)

3rd HIGH PIVOT = H + 2 (P - L)

3rd LOW PIVOT = L - 2 (H - P)

where P = PIVOT, H = HIGH, L = LOW, C = CLOSE.

The new wrinkle to the Pivot Point technique is to introduce an integration of time
frames. This simply means that the calculations are done using daily, weekly, and
monthly data.

All of the Pivot Points may act as either support or resistance. For example, if price is
below the 1st low pivot, then this pivot point will be potential resistance. If price is
above the 1st low pivot, thenit will be potentialsupport. Themonthly and weekly pivot
points are valid throughout the week or month, no matter how many times they may
be approached by price, However the first time a pivot point is approached is the most
significant.

After the Pivot Points are calculated on three time frames,the system can be used for
determining the strength of potential support and resistance zones. This is done by
looking for a confluence of Pivot Points at a specific price area within a few ticks. To
have significance, a particular price area must have a confluence of Pivot Points at a
particular price level. The greater the number of points at a particular price area, the
greater the potential for support or resistance.
Example

Daily H = 70.00 L = 67.00 C = 68.00

Weekly H = 72.65 L = 67.89 C = 68.40
Monthly H = 78.01 L = 73.00 C = 77.99

Calculations

DAILY PIVOT = 70.00+ 67.00 + 68.001 3 = 68.33

1st HIGH PIVOT = 68.33 + (68.33 - 67.00) = 69.67"

1st LOW PIVOT = 68.33 -(70.00 - 68.33) = 66.67#

2nd HIGH PIVOT = 68.33 + 2 (68.33 - 67.00) = 70.99

2nd LOW PIVOT = 68.33- 2(70.00 - 68.33) = 65.67

3rd HIGH PIVOT = 70.00+ 2(68.33 - 67.00) = 72.66

3rd LOW PIVOT = 67.00 - 2(70.00- 68.33) = 63.66

WEEKLY PIVOT = 72.65 + 67.89 + 68.401 3 = 69.65*

1st HIGH PIVOT = 69.65 + (69.65 - 67.89) = 71.41

1st LOW PIVOT = 69.65 - (72.65 - 69.65) = 66.65#

2nd HIGH PIVOT = 69.65 + 2 (69.65 - 67.89) = 73.17

2nd LOW PIVOT = 69.65 - 2 (72.65 - 69.65) = 63.65

3rd HIGH PIVOT = 72.65 + 2 (69.65 - 67.89) = 76.17

3rd LOW PIVOT = 67.89 - 2 (72.65 - 69.55) = 61.89

MONTHLY PIVOT = 78.01 + 73.00+ 77.99 1 3 = 76.33

1st HIGH PIVOT = 76.33 + (76.33 - 73.00) = 79.66

1st LOW PIVOT = 76.33 - (78.01 - 76.33) = 74.65

ZndHIGHPIVOT=76.33+2(76.33-73.00)=82.99
2nd LOW PIVOT = 76.33 - 2(78.01 - 76.33) = 72.97

3rd HIGH PIVOT = 78.01 + 2 (76.33 - 73.00) = 81.34

3rd LOW PIVOT = 73.00 - 2 (78.01 - 76.33) = 69.64"

* = price resistance in area of 69.65

# = price support in the area 66.65
HIGH/LOW LINES

Many well known traders have used the concept of line analysis in the past. From past
generations these would include W. D. Gann, George Marechal, Alan Andrews, and
Roger Babson, and more recentIy Charles Drurnmond. While the concepts introduced
here share a basic similarity with the work of all of the aforementioned traders, the
methodologies that follow are distinctly different. These methodologies represent what
I have found to be the best representation of geometric order in markets.

The lines which will be illustrated will be referred to as HighLLow Lines. This is simply
because they are all constructed using only the highs and lows of the last two bars on
any chart. They project potential short terrr~geometric order in the markets. The High/
Low Lines will not always be meaningful. This is because the market is not always
trading in an order that we can discern and quantify only using a straight line.
Therefore, HigWLow Lines are best used in conjunction with other s~lpportand
resistance techniques. '-'

HH & LL (High to High and Low t o Low)

These lines are constructed simply by joining the highs of the last two bars and
extending the lines into the future by one bar. This is a basic trendline. (A chart
example is on the page following this section.) Mathematically this would be expressed
as:

HH = (High Today - High Yesterday) t High Today

LL = (Low Today - Low Yesterday) + Low Today

HL & LH (High to Low and Low to High)

Constructed by joining high to low and low to high of the last two bars and extending
the lines into the future. Mathematically this would be expressed as:

HL = (High Today - Low Yesterday) + High Today

LH = (Low Today - High Yesterday) + Low Today

HHP & LLP (High to High Parallel and Low to Low Parallel)
The HHP is constructed by drawing a line off of the low, parallel to the HH line. The
LLP is constructed by drawing a line off of the high, parallel to the LL line. Mathemati-
cally expressed as:

HHP = (High Today - High Yesterday) + Low Today

LLP = (Low Today - Low Yesterday) + High Today

HHPI & LLPI (High to High parallel Inverted and Low to Low Parallel Inverted)

These lines, as the name implies, are simply drawn inverted to the HHP and LLP lines.
Hence if the HHP slopes up off of the low, the HHPI will slope down from the low by the
same amount. Mathematically expressed as:

HHPI = (High Taday - High Yesterday) - Low Today

LLPI = (Low Today - Low Yesterday) - High Today

HOW TO USE HIGHlLOW LINES

In using weekly and monthly lines be sure touse constant contracts. That is,you always
do calculations using the same contract month. This way the lines will not be skewed
by the rollover between contracts.

Any Hl/Lo Line can act as both support and resistance to prices. The first time price
approaches a price level indicated by a H i b o line, it is slightly more significant than
subsequent attempts at the same price level. However, when using the weekly and
monthly lines,remember that they are valid until the week or month is over,and a new
line is calculated. This holds true no matter how many penetrations and repenetrations
may occur.

The integration of time frames is an important attribute of Highbow lines. You should
calculate the numbers for each of daily, weekly, and monthly bar charts. This will
provide you with more ammunition in the quest for finding a confluence of support or
resistance points using different techniques over different time frames. This conflu-
ence in turn translates into a high probability trading opportunity.

H i g U o w lines could create quite a cluttered lmking chart if you attempted to draw
them all graphically. It is far easier and cleaner to simply calculate the values where
the lines are coming in. There are some tool box software packages with formula
builders where inputting the formulas for the Highbow lines and the Pivot Points
should be a reasonably simple endeavor.
EL
P
Id-
3
CD
This manual contains the rnost powerful predictive and forecasting taols that,I know.
Perhaps on its own each technique would not be very special. However, when several
different techniques are giving like signals at a particular point in price and time, it is
this confluence which affords the most outstanding trading opportunities. This
combination is the way these techniques are best used.

I have tried to present these trading techniques in the simplest way possible. Even so,
becoming comfortable using these techniques will take practice and experience. At first
you may see the reason for many turning points after the fact. Uo not be discouraged
by the feeling that you "missed the trade." This will forever happen to some extent, but
should happen less often as you progress. Recognizing a trade, even after the fact, is
at least a sign that you are becoming familiar with the proper applicationof the trading
tools. As you become more practiced, you should begin to anticipate your share of high
probabilit market turning points.

The price and time forecasting tools in this manual do not comprise an automatic
sys tern ofmaking money. The success that you have with these t~chniques will depend
on you. I t will depend on your aptitude and suitability for this trading style, and it will
depend on the amount of work you put in doing the analysis. Please understand that
I am not saying this in any way to hedge the v d u e ofwhat I feel are the extraordinary
and powerhl trading techniques taught in both trading manuals. I a m saying it
because virtually all successful traders have one attribute in common. They all take f i l l
responsibility for everything about their trading. When you do this you will be taking
a very, very important step towards your own success in this exciting and Iucrative
business.

Ifyou have questions, please feel free t o write to me care of the publisher. I wish you
every success in your trading.

Joe Duffy

P.S. lnforrnation on the "Trading Advantage" manual and other educational trading
material is avai1abIe by writing m e care of the publisher.

Futurea Learning Center

219 Parkade
y Cedar Falls, IA50613
INTRODUCTION

The Fibonacci Time Spiral technique is based on the principle of a series of expanding Fibonacci
relationships between turning points in the market. I n order that even those completely
unfamiliar with Fibonacci can completely understand this concept we will start with a review of
the basics.

The Fibonacci or Golden Section Ratio simply refers to the division of space in a ratio of ,618
and .382. See the illustrations below.

In the above diagrams one can calculate point C , given points A and B. As well one can
calculate point 2,given points X and Y. To do this you need only know the multipliers which
produce a Fibonacci division. These multipliers are;

and
Hence we can test for Fibonacci relationships such as the one in the chart below in 2 ways. The
first is by multiplying distance A to C by .618 and ,382 to see i f another trend change p i n t
occurred in between which would constitute a Fibonacci relationship. The second is to multiply
the distance between points A and B by 1.6 18 and 2.618 to see if another trend change occurred
at the projected point counting back. Either nf these 2 methodologies would uncover the same
Fibonacci relationship in the data.

Given A, B, and C are known. Trst tu

find e Fibonacci rcla~ionshipby eithrr;

1. ( A to C ) (.382) (A to C) * (.blR)
or e
2. (A to^)+(^ 68) snd ( A I O B ) * (261x1

I
1 I
C

I
0

In attempting to find these relationships in charts we start with the most recent trading bar.
Hence we are always looking backwards from the current bar. Therefore to start to test for a
potential trend change point the current bar must be a readily evident high or low. Most times
you try this exercise you will Q get a Fibonacci relationship to unfold. However when you do,
you can then begin to look for the potential Fibonacci Spiral.
CALCULATING THE SPIRAL

Once you have found the first relationship, by the trial and error method described, beginning
to construct the Fibonacci Spiral is easy. In the example below, let's assume you have already
calculated that the sequence of points A-B-C are in a Fibonacci relationship.
The next step is to simply multiply tne total distance from A to C by the Fibonacci multipliers
of 1.618 and 2.618. If either of these project4 points hits another high or low, then you have
another Fibonacci relationship, and the second ring in the spiral. In the example we will call this
point D.

As you might have figured out by now the next step is to simply multiply the distance from
points A to l) by the Fibonacci multiples of 1.618 and 2.618. Again look to see if one of these
projected points hits a high or low trend change point. If one does hit, then you have the next
point, and the third ring, in the Fibonacci Spiral!
The Fibonacci Spiral works on any time frame. On intraday charts allow a little more room for
emor (2 or 3 bars). On daily and weekly charts plus or minus 1 day margin for error is usually
good, but this may be expanded as the length of time gets greater. The charts following this text
show a step by step progression of the Fibonacci Spiral in the daily T-Bond market.