- 2000: Volume 9, No. 1 Time: Gann's Neglected Tool

The work of William D. Gann remains much too valuable to just skim-there is wisdom that has stood the test of time, but it remains unnoticed and out in the cold as has been its fate. To many familiar with Gann's body of market knowledge and analysis, there is one analytical tool that Gann specifically emphasized as being vital to market forecasting.

In my article in the July/August 1999 CRB Trader, I noted that the real key to Gann's highly developed analytical thinking is his discovery-"The Law of Vibration." It is so powerful in concept that having revealed its existence when being interviewed by Richard D. Wyckoff in 1909, he never mentioned it again in his own writings. (This interview has remained almost unknown for many years now, but being the vital key to any understanding of all Gann's principles, a free copy is available by e-mail from dmack144@aol.com)

While Gann's intricate Law of Vibration definitely incorporates esoteric content, there certainly is also much in it that is non-esoteric. In this latter category we find the Gann tool technique we are about to meet. The result is in using it we get precise straightforward applications-ones that all traders and investors can profit from, but (and it's a big "but") it will only be after doing detailed homework and thoroughly delving into each new usage found. There's no getting away from Gann's dictum-as long as we are market active, it takes hard work and hard study to gain the market knowledge that we all absolutely must have to win and with no thought of ever stopping our studying.

Time Is of the Essence

If one never learns anything else from the works of Gann, the two quotes that follow should be remembered: "the two most important things in the market are price and time, and of the two, time is the most important;" and "when time runs out, a change of trend is imminent." Why should it be that time reigns so supreme?

To answer that question we must turn to the foundation of much of technical analysis-the bar chart. Drawing this chart we enter the price scale vertically and the time scale horizontally. That, in turn, gives a graph representing Mr. Gann's two most important things in speculative markets-price and time. Price indications are accurately marked with the appropriate high/low range and the opening/closing prices on each vertical time line which represents the pre-chosen time period (one to 60 minutes, hourly, daily, weekly, or whatever).

The reality is that each price entry is a variable-one that is superimposed on its designated vertical time line resulting in a number of relationships with the price bars before and the price bars after. On the other hand, the time demarcation is a constant, and always remains constant in terms of its denominated time period. The time scale's measuring properties are exact, its great strength; whereas with price, it requires interpretation that is always conditional. This is why Gann gives time the highest of marks; it is as precise a measuring and forecasting tool as we can possibly find. And it always will be the vital trend reversal forecasting tool.

There's a market axiom that states: "the majority of market people are generally wrong the majority of time, especially at important turning points." So for any doubters here is the proof of Gann's insistence that time is much more important than price. Yet the majority of traders and investors generally analyze stocks and futures in terms of price and price action only. The belief that price is more important than time should be reversed.

Beyond Time

Gann's assertion that time methodology and its endless possibilities are at the apex of market analysis is not enough.

In 1942 Gann published one of his masterpieces How to Make Profits in Commodities (most of its rules equally apply to stocks). A revised edition published in 1951 saw not one bit of the earlier 1942 text material omitted or changed. The difference between the two editions was 20 additional pages that formed an appendix of material of which he obviously wanted to make traders and investors aware. A casual glance at this appendix will quickly establish its major subject-time, time, and again time. (Read and annually re-read his rules and this appendix should you already have this Gann masterpiece, or be sure to obtain a copy if you do not.)

Time Applications

Having made the Gann case for the winning ways of time's analytical techniques, practical applications are now called for. In reading the appendix in How to Make Profits in Commodities, Gann repeats several times the same words, "time turns trend," and that applies to any trend reversal of any span of time whether it be a scale of minutes, hours, days, weeks, or months. He also leaves clues for valuable research the reader would do well to undertake-the overbalancing, the underbalancing, and the balancing of time (and price also).

To put into motion an expansion of time applications, we first have to develop our counting skills, and our Fibonacci knowledge. To do this we can start with an easy application that, while rough at times, it does call coming turning points with a fair degree of accuracy. First though, we have to review our knowledge of the numbers that make up the Fibonacci Summation Series and its associated Golden Ratio. Due to the limited space available here, it has to be assumed that the reader is already familiar with the Fibonacci Series numbers of 3-5-8-13-21-34-55 and upwards.

To start, we select a clearly drawn bar graph (large is better and time space should be in proportion to price space) of any active stock or future. The time scale can be in minutes, hours, days, or weeks. We start by counting the bars from any top or bottom formation of three bars or more. What will be found most times is that the next top or bottom will generally be Fibonacci numbers of 3, 5, 8 or 13 bars afterwards, and if not, then 21 or sometimes 34 bars afterwards. Be aware that there are no hard, fast rules here. (Markets are never that orderly for any rules, any systems, or anything else one might come up with.) We have to be flexible in our counting practices. At times we have to fudge on the counts, especially with the five and the eight counts, like sometimes starting a count on the bar that follows the highest top or lowest bottom bar instead of that bar itself.

Fibonacci time counting has to be done thousands of times to get the feel for it. Many times the numbers work beautifully, but practice is the key to using them. If a move doesn't appear to change after five bars and eight bars, then look for it about the 13^TH bar, and if not, then about the 21^ST bar or the 34^TH one. Additionally in connection with any count, we have to additionally seek out as many confirmation signs as might be there of a possible reversal. The more of these signs we can discern, the more our confidence levels can rise along with the odds on the possible trend change that we suspect. Confirmations are vitally important. They can be as simple as a breaking of a trend line, or at tops a bar that opens above the prior high and closes below the prior close or opens below the prior low and closes above the prior close at bottoms.

One Gann time technique calls for counting the bars between two tops or two bottoms, or between a top and a bottom, and then to project those counts forward. Sometimes the forward projections will be found to be mirrors of the counts. More times than not this projection could be the Fibonacci ratio of 1.618 or 0.618 or 1.27 (the square root of 1.618) times the count. All projections are from what is determined as the very top reversal or bottom reversal bar that is chosen. Be aware though that you are projecting into the future and there is no way to know whether it will be a top or a bottom at the time forecasted. However, as the time draws nearer for that projection to be possibly fulfilled, the evident trend direction closer to that time will be the clue to the coming point of topping or bottoming (plus or minus a bar or two). Flexibility of thinking and looking for confirmation signs are definitely a prerequisite with all reversal methodology.

Do Your Own Research

Recognize that there are thousands of ways to use time measurements and make time projections. Generally we should have something like twice as many time techniques under our belt as against price interpretation techniques. However, think in terms of developing your own time methodologies. Open your mind to even the wildest ideas of technique applications; try all sorts of time counting possibilities; experiment all over the place. Read and study what others have discovered using time methodologies (and other techniques also). Don't stray from applying Fibonacci Number projections everywhere; they work so beautifully and so frequently. In a nutshell, the advice here is that each reader start with the time techniques above. Then follow these with a grand mixture of growing market knowledge, never-ending hard study, and being open to a flow of time creativity.

This is how the great market masters from "The Golden Age of Technical Analysis and Market Literature, 1922 to 1957" operated. And we can do no better than to go with their thoroughly innovative thinking as shown in their rare and brilliant technical classics which I am currently involved in re-publishing. Rare books and superb market knowledge that I never tire of at any time in bringing to the attention of traders and investors everywhere.

Donald Mack offered the only specialist bookstore in the U.S. for new and old market books in the 1980s. He specialized in pre-1960 Technical Analysis classics (by Gann, Wyckoff, Schabacker, Dunnigan, Cole, etc.), writings he considers superior in many ways to those post-1960. An intense student of TA, he now works with Financial Times Prentice Hall of London, England bringing back great and mostly unknown pre-1960 TA and other classics. Books available now-Schabacker's Technical Analysis & Stock Market Profits (greatest book ever on TA); Dunnigan's New Blueprints & One-Way Formula, Cole's Graphs and Their Application to Speculation; Wetsel's A Course in Trading; Bayer's George Wollsten, Expert Stock and Commodity Trader; Redmond's Stock Market Operators; Schabacker's Stock Market Profits; Angas' Investment for Appreciation. He can be reached at dmack144@aol.com.