Intraday Gann Grid Construction

In this blog entry I will show how to come up with degrees of price and time and plot them on an intraday chart using the stock tools in Metatrader 4.

For intraday, the first thing I do is square the chart. ie one unit of price equals one unit of time. To do that, right click on the chart or hit F8. On the lower left, click the box for "Scale Fix One to One". You may have to use the +/- keys or chart zoom to get price to fit in the screen.

Next, find a high or low that you want to use as the zero point. For this example, I'm using a EURUSD 30 minute chart and going all the way back to 6-13-07 10:30. Price for the low is approx. 1.3261. Because this is a low, I want to build the grid going up first.

The price needs to be converted to something useful. Because this is intraday, I drop the decimimal. I then apply the handy price to degrees formula to come up with the next higher 45° price level on the Square of Nine. (In reality, Gann never called it the Square of Nine. His Square of Nine was something entirely different.)

45° Price=((ConvertedPrice^0.5+DegreeFactor)^2)/10000
or
45° Price=((13261^0.5+.25)^2)/10000 = 1.3319

To figure the price level going down the formula is the same except the Degree Factor is substracted instead of added:

45° Price=((ConvertedPrice^0.5-DegreeFactor)^2)/10000

The key component here is the .25. I want 45°. 45° is 1/8 of the circle or .25. 180° would be 1, 360° = 2, etc.

So now I have the price for 45°. Next up is time. For this example I'm using each bar as one degree. So I count out 45 bars and mark it with a verticle line. Now I have the start of price and time and the termination of price and time for the MT4 Gann Grid tool. If your chart has been squared, the Gann Grid tool should now form perfectly square diaganols.

If you like doing the math, calculate the price levels up and down. I don't so I just put horizontal lines at the intersections. Note that if you don't square the chart, the intersection lines will shift in horizontal scale and it will appear that the horizontal lines aren't correct as the chart advances forward or back. They are correct, just not in relevence to the messed up chart scaling. Time will always be correct unless you don't count off your bars right when setting up the first square.

For the time lines, I use the cycle tool and add in the time lines. I also add one more instance of verticle cycles to mark off 360° degrees of time. In this example, I use red.

We now have 45° levels of price and time going out to infinity. The first chart below shows the start. The second chart shows current events. Notice how the levels are still relevent in both price and time. The most recent division of time was Friday's high from the move resulting from the Fed interest rate drop.





This type of chart is also called a Pyrapoint chart and you can read about the Pyrapoint style of usage here: http://www.ensignsoftware.com/help/pyrapoint.htm

Dollar Showing Strength?

The US Dollar has made quite the rally. However, I don't think it's due to fundamental strength. Quite the contrary. I think it's due to the liquidation of other assets and instruments such as the US stock markets. They've been taking a beating the last few weeks. But since the greenback doesn't really have any real strength, I think it's only a matter of time until dollars get dumped for something else. That's just my uneducated opinion. I'm sure it's not original nor unique, but I haven't browsed around for any commentary that is in agreement. It's just a hunch.

Below is a 4 hour chart of the US Dollar Index (DXY). The aqua and yellow moving average looking lines are moving average forecasts. They don't track price, but give a general idea on direction and timing. They will invert, as many cycle line type forecasts will ie Bradley Index, Mass Pressure Index, and most planetary cycle composites. But when they turn, or at least show a bump, price usually acts in kind. They can even show possible flat and consolidation areas as well as major changes in direction. I've marked of red X's as possible price and time targets. Even if price doesn't touch those spots, I think that the gray vertical lines will still be significant turns. Those targets are based off of the same geometric concept I used in my very first forecast that is talked about in the first entry of this blog.



And now about the market turn forecast method I mentioned in the last entry. Unfortunately, I lost the image that showed the details for that particular GBP/JPY chart. But I do have an example for the USD/CHF. This is not a pair I normally trade so I when I created this example, I wasn't too familiar with the movements or ranges. This pair mirrors the EUR/USD pair, which I don't really follow at the 1 hr. detail.

The method is simple and is one I discovered in my early days of trading the foreign exchange market. Many PC charting packages have the ability to draw trend lines as rays. In other words they go on forever. What I noticed was that when these lines would intersect there would be a reaction in price. I'm not talking about breakouts from a triangle, although that is the best example. I'm talking about what seems like completely unrelated trend lines. The chart below is kinda messy, but it illustrates the idea. Not every intersection will be a reversal. Many times it's just a rogue bar. Other times it's the beginning or end of a run.



The concept isn't limited to just trend lines. Support or resistance lines provide excellent forecasts when intersecting a trend line. There are some other related tricks and ways to optimize the process that I won't go into here, but with experimentation, it shouldn't be too hard to figure out what those are. One thing I will say is that it helps to use fixed scaled charts or squared charts. Otherwise the trend lines will change in angle as the chart is advanced both forward or back and the intersection points will move around. Squared charts are best. Because I was in a hurry, I forgot to square the chart used in this example. It is a fixed scale chart though, so hopefully that minimizes the shift. Once price has advanced far enough, I'll post up an updated chart to see how things panned out.

British Pound Update

Price has runaway like a train. My price target was reached and them some, but a lot earlier than I expected. Now my 32 bar target is a long trade target and perhaps a good area to short? Because 23 bars is another number that showed up quite a bit in the past, I've drawn in a yellow time marker at 23 bars from the top at where there could be a retracement based on the previous number cycles.



The previous 1 hour chart proved me wrong but proved squaring right. I got stopped for a small loss. The squaring of 360 degrees of price and time was the breakout bar to the downside. That was my short opportunity and I missed it. However, anytime "price and time square change is inevitable" - WD Gann.



The next blog entry will show a method that forecast the peaks and valleys in the chart below.

British Pound Price and Time Squares

I'm out of my long trades. I had two entries right on time. The second entry didn't yield a whole lot of pips, but at least it wasn't a loss. I had used a 15 minute chart to come up with a price and time target. The price target was wrong, but the time target proved to be a spike and the bar where price broke support. It's easy to be wrong on price, but on time, there's usually something happens. A spike, a reversal, breakout, etc. The hard part is knowing what side to be on and what to do if you're wrong.



Below is a 1 hour chart showing one of the reasons I went long in the first place. Price and time squared up at 315 degrees. 315 is a powerful number on the British Pound that usually means reversal. More so than 360 degrees with the method I normally use. This applies to all time frames. However, in this case, price has gone on down to 360 degrees of price. If I get a signal to short, around 315 of price or a fibonacci price number, I'll look for the 360 degree corner of the square as the target for both price and time. If the target of price hits, it's trailing stops. I probably won't trade long again until I see signs of reversal on the daily charts. But my focus on the short side as indicated in my previous post.

British Pound bar counts

One of the more simple ways to find cycles is by counting bars. Simply go back on a chart and start counting the bars from peaks to valleys on the big moves. Also count the bars on the rectracements. Count the bars on the minor moves. Count the bars peak to peak and valley to valley. More often than not, the same numbers will show up. The chart below shows where I counted the major moves on the GBP/USD pair. Notice which numbers come up consistently.

So now that I've got a number for the big move, I concentrate on the smaller moves. The smaller moves tend to follow the Fibonacci sequence. 1,3,5,8,13,21,34, 55,89,144 etc. So from a top or a bottom, I'll watch for what happens at 3 bars, then 5 bars, then 8 bars. Because these are Fibonacci numbers, there will be recurring patterns. IE the 8th bar from the 5th bar is 13 bars but also 21 bars from bar 1. Knowing that, it's easy to simply count the bars into the future and watch for signs of a turn and also come up with a long term direction to trade and a long term target. (Long term being relative to the chart size.)

The daily chart below shows the major counts and then minor counts of the current move I'm trading. There are also arrows that show my manual entries based on "time". The limit and stop entries for add on positions aren't shown. Those are based on price and not time. Mostly simple support/resistence breaks. A future post will go into the various support/resistence methods I use.

For the most part, I try and stick to a specific direction. Occasionally something shows up that I can't pass up trading which is why I'm long right now. Treading very carefully, though.



One of the things that bothers me is that most cycle and time books and materials are long on charts and concepts but usually say nothing about actual trading. For example, the Brad Cowan 4D Market Geometry books do not say one word about trading. Pretty hard to believe. So that leaves the reader to figure how to actually trade the concepts. Pretty patterns on the left and the past don't do much for the right side of the chart and the future. So I'll try and focus on the right where it matters.

A little history and how I ended up where I am at

I started out studying charts and trading back in college in 1989 through Ken Roberts and his "World's Most Profitable Manual" or something like that. It was basically a pattern trading system for the futures market with a lot of hype. Knowing what I know now, it was probably the "World's Most Dangerous Manual". It really only showed a few patterns and then hyped up the amount of money one could make with little regard to money management. I do think chart patterns are key and while I never traded a dime in the future's market, I still watch for chart patterns as they provide the best setups and easy targets for trading. I never did do any actual trading while going through college, but I analyzed futures charts and paper traded off and on until about 1997.

In 2001, I saw some 4x Made Easy infomercial that introduced me to the forex market and rekindled the trading bug. I attended one of their seminars to find out more but wasn't impressed with the price nor the marketing hype and gimmicks. But I was very interested in the forex market and the low margin requirements to get in the game. It was also my first introduction to indicators. My previous study had been only chart patterns and trend lines. Trading naked as it's called. I will say that the basic 4x Made Easy concept works. Trading multiple time frames and waiting for all time frames to be in agreement.

Over the next year or so after that 4x Made Easy seminar, I studied every indicator out there. The usage, the math, the pros, and cons. I came pretty close to replicating the 4x Made Easy lines. I also designed some indicators of my own that went into a complete system I designed in Excel with a live data feed and flashing colors showing when and where to buy/sell. It was basically 4x Made Easy on steroids. I did very well with that system but it was missing one element. Time.



My 4x Made Hard system, as I called it, was very good for showing when to trade with the trend, what price to add on and exit and a general idea on when. But there was no precise way to gauge turns in advance other than a couple of probables that showed up on the intraday charts occasionally. In researching, designing, and using the system, I did learn a lot about market price behavior. There's a pretty detailed journal at moneytec.com that goes over some of my exploits from back then. A lot of the images probably don't work though. http://www.moneytec.com/forums/f118/4x-made-hard-1-0-a-15803/

In researching how to add a time element to the 4x Made Hard system, a whole world was opened up that I had no idea existed. My first research was into WD Gann. Most of his writings went right over my head. I then read people's writings about using the Gann Square of Nine. Now it was starting to make sense. From there I found Brad Cowan's works. Again, most of it went right over my head. But diligent study not only of his books, but his suggested areas of study... ie platonic solids, sacred geometry, astronomy, astrology, etc... I made my first forecast using market geometry and cycles on the EURUSD pair. That pattern took about a month to play out, but price hit my target almost to the day and to the exact price and conformed completely to the geometric structure.




I used to keep some trading journals at www.moneytec.com. From that, I met a guy who became my mentor and showed me the path. From this path I've met a handful of others on the same journey whom have provided me more than I could ever imagine in finding the cycles or price and time in the markets. So a big thank you goes out to Stoxx, Akuma, Soso, Bear, and Xtsunami. They'll occasionally post here: http://beginnertrader.com/forum2/

I never really went back to that 4x Made Hard stuff. I was able to get the charts out of Excel and into Metatrader 4, but I rarely use it. I did add a cyclical element that is still in sinc, though. But even then, I think that there are better ways. And that is what this blog is about.