Pattern, Price and Time

An updated look at applying W. D. Gann's controversial trading concepts to all major markets

W. D. Gann continues to be one of the most controversial figures in technical analysis. Despite his detractors, his theories remain fundamentally solid, and have been successfully adapted by several generations of traders. In this authoritative text, expert technician James Hyerczyk presents a straightforward overview of Gann Theory, its basic principles, and its proper applications in creating profitable trading systems. Hyerczyk examines, in complete detail, such essentials as swing charts and trend indicators, percentage retracements, Gann angles, and cycle dates. With fresh information about how to use price scales when charting forex, equity, and ETF markets, as well as discussions on how to calculate Gann angles for each market, this Second Edition of Pattern, Price and Time is a must-read for anyone looking to thoroughly understand–and successfully implement–one of the most important and powerful trading methods in existence.

Preface ix

Acknowledgments xiii

Chapter 1 Why Pattern, Price, and Time? 1

Chapter 2 Who Was W. D. Gann? 5

Chapter 3 Gann Theory in a Nutshell 17

The Basis of Gann Theory: The Law of Vibration 23

Pattern 28

Price 28

Time 30

Squaring the Price Range with Time 32

Advanced Price and Time Techniques 33

Gann Theory and Its Application to Trading 42

Chapter 4 Chart Basics 45

Gann-Format Charts 45

Proper Chart Construction 50

Charting Programs 56

Types of Charts 57

Summary 66

Chapter 5 Pattern: Trend Indicator Charts 69

Minor Trend Indicator 70

Intermediate Trend Indicator 74

Main Trend Indicator 80

Trend Indicator Construction 84

Stop Orders 87

Using the Information Generated 88

Characteristics of the Trend Indicator Chart 89

Summary 90

Chapter 6 Pattern: Swing Chart Trading 91

Reviewing the Trend Indicator Chart Rules 91

Basic Trading Instructions 95

Two Ways to Determine a Change in Trend 99

Other Swing Chart Trading Strategies 102

Swing Trading Rules 104

Swing Chart Negatives 119

Summary 122

Chapter 7 Pattern: Other Chart Formations 125

The Double Bottom 125

The Double Top 127

Prolonged Rally or Break Rule 128

Balancing Swings 129

Signal Tops and Signal Bottoms 133

Other Important Formations 140

Other Popular Patterns 141

Summary 141

Chapter 8 Price: Horizontal Support and Resistance 143

The Swing Charts 143

Percentage Retracement Price Levels 146

Other Retracement Levels 149

Multiples of Bottoms and Divisions of Tops 149

Pivot Price Calculations 150

Moving Averages 153

Summary 154

Chapter 9 Price: Gann Angles 155

Importance of Gann Angles 156

How to Construct Gann Angle Charts 167

Summary 195

Chapter 10 Combining Pattern and Price 197

Chapter 11 Time 203

Natural Cycles 203

Anniversary Dates 210

Seasonality 216

Swing Charts 221

Square Charts 225

Summary 231

Chapter 12 Combining Pattern, Price, and Time 233

The Intermediate Trend Indicator 233

The Signal Bottom 238

The Signal Bottom: The First Leg Up 243

Gann Angles 245

Percentage Retracement Zones 248

Percentage Retracement Zones and Gann Angle Combinations 251

Time Indicators 251

The Forecast 253

Conclusion 255

About the Author 257

Index 259

James A. Hyerczyk is a registered Commodity Trading Advisor with the National Futures Association and owner of J.A.H. Research and Trading. His firm publishes Forex Pattern, Price & Time Report and the Futures Pattern, Price & Time Report newsletters and offers daily, weekly, and monthly advisory service on the futures, Forex, ETF, and equities markets as well as providing educational, research, and consulting services. Hyerczyk, who has been actively involved in the futures markets since 1982, has been published in print in SFO and Futures magazines as well as on various financial Web sites including FuturesHound.com and ForexHound.com.

While W. D. Gann continues to be one of the most controversial figures in technical analysis, many of his theories have been successfully adapted by several generations of traders.

In this fully revised and updated Second Edition of Pattern, Price & Time, expert technician James Hyerczyk presents an accessible overview of Gann Theory, its basic principles, and its proper application to real markets. And while Gann's concepts are a prominent part of the book, Hyerczyk adds some of his own original ideas to the discussion and offers insights into using technical analysis to trade today's Forex, futures, and equities markets.

Written with both the expert and aspiring trader in mind, this reliable resource skillfully examines the key elements of technical analysis—pattern, price, and time—by highlighting the proven trading techniques of Gann, and explores how these three elements can help you anticipate market movements and make more informed trading decisions. Unlike other analysis or trading disciplines, Gann analysis can be used in conjunction with other popular trading tools such as pivot points and candlestick charts. In fact, Pattern, Price & Time, Second Edition is written so that the reader can use Gann techniques to complement most trading strategies. The procedures highlighted will enhance a trader's ability to make sound market decisions because it teaches the importance of balancing analysis with the right amount of pattern, price, and time.

Opening with a brief introduction to Gann, his theory, and the importance of having accurate data and charts, Pattern, Price & Time, Second Edition moves on to address other essential issues associated with this discipline, including:

1. Building swing charts using the minor trend, the intermediate trend, and the main trend

2. Using horizontal support and resistance levels to find balance points in the market

3. Calculating Gann angles for different markets

4. Understanding the various ways that time can be used to determine tops, bottoms, and changes—from the most difficult method (natural cycles) to the most popular method (the squaring of time)

5. Combining pattern, price, and time into an effective analysis and trading tool

6. And much more

After the first edition of Pattern, Price & Time was published, Hyerczyk received criticism that he was holding back on Gann's secrets. This couldn't be further from the truth, and in order to prove this, Hyerczyk points traders, who want to study the metaphysical aspects of Gann analysis, in the right direction. Hyerczyk also reveals what he believes is the source of Gann's Law of Vibration and, in an effort to further enhance your trading performance, includes a link to the TradeStation code for his trend indicator. This will allow you to create swing charts in the same manner as W. D. Gann.

To profitably trade today's markets, you can't rely on pattern, price, or time independently. You must apply a combination of these three elements to improve your analysis and trading—and with the Second Edition of Pattern, Price & Time as your guide, you'll quickly discover exactly how.

Praise for Pattern, Price & Time Second Edition

"Jim's breadth of knowledge spans futures, Forex, stocks, Gann, charting, price patterns, and the list goes on and on. He is a valued contributor to the TraderPlanet.com community and this book further demonstrates his unwavering commitment to educating traders to help them become more successful."
—Lane J. Mendelsohn, Publisher, TraderPlanet.com

"James Hyerczyk provides an illuminating guide to the fascinating world of Gann Theory and the combined analysis of price, pattern, and time. This book is very interesting from both a historical and practical technical perspective."
—Dan Blystone, Editor, TradersLog.com

"I have known James Hyerczyk since 1991. I have always valued W. D. Gann's methods. Reading Jim's book, Pattern, Price & Time, Second Edition is a good way to get started in learning the concepts of Gann's methodology. I highly recommend this book."
—Michael Popilchak, Director of Sales & Marketing, The Sweet Futures Division of Rosenthal Collins Group LLC

"Hunting out good opportunities involves good tracking. Jim has taken his vast experience with Gann's proven technical analysis, to show the savvy investor the foot prints in the snow to find those successful trades. As the Chief Investment Officer of LaSalle St. Securities, I have found over the last thirty-five years that good technical analysis is invaluable."
—Jay C. Carstensen, Chief Investment Officer, LaSalle St. Securities, LLC