written by Sergey Tarassov
In this article I want to demonstrate how one of the Gann techniques (true or mythical, I don't know) can be explained from mathematician's point of view. I would like to talk about the method described in the well-known book by W.D.Gann, "Tunnel Thru The Air".
The hero of the book, Mister Robert Gordon, uses it before making a trade. It is mentioned on the page 196:
He started in to pyramid on the way up. On
August 19th he bought 500 more December at 20.10
or on the page 198:
When he started pyramiding, his plan was to
buy or sell the largest amount first and then gradually
decrease buying and selling smaller amounts on the way
up or down, and always using a stop loss order.
as well as in many other pages there.
What does it mean? It looks like this is some procedure/technique/routine that helps to make a successful trade decision. Let us leave it like that for a while.
Instead, I would like now to share with you some story, a totally different story that comes from math science. I have heard it from one of my University mates, about a decade ago. There was some study in some University; they studied properties of some sequence of natural digits. I do not remember the technical details of this story (i.e. what digits these guys researched, where these digits come from, etc.), so I will explain the most interesting part of this story with one demo example. Suppose it is a sequence of these natural numbers:
6, 24, 32, 48, 52, 78, 88...
The researchers tried to find some order in these natural numbers, the algorithm how these are formed. And they could not find it. It was unclear whether these are some random numbers or there is some law/order that forms these numbers. And it was very important to get the answer to this question.
The solution of this problem came from an unexpected side; it came from a mistake... Someone clicked the wrong button and sent these numbers to printer. Guess what the printer did? It printed all natural numbers (1, 2, 3, 4, 5, 6, 7...) while marking the numbers from the analyzed sequence by X and marking all other numbers by some other symbol. Once again, I do not remember details. The printer output looked something like that (at that time the printers with fixed symbols width were used):
This is an explanation:
You see the cells that correspond to our series are marked by X symbol; all other are marked by 0.
Surprisingly, the pattern formed by these symbols did not looked random, it looked pretty regular. May be like this:
This visual analysis gave the right direction for the further research.
I want to emphasize the fact that the law behind these numbers was not obvious at all from the formal point of view. And it became pretty obvious with a printout. Non formal visual analysis gave a faster way to the truth compared to the formal one. The only question is: how to find a "right printout".
As I said, I do not remember the details of this story and I forgot who exactly told it to me. I have called my friends to ask for the details of this story. No results. I remember only that this approach was used in cryptography. Anyway, the details do not matter here.
OK. You may ask me, what is common between Gann's book and my story about the lucky printout and how Timing Solution users can use this information?
Let me explain it now.
I have downloaded S&P500 composite index since 2010. In Turning Points Analyzer, we can calculate how the major turning points are located:
Top turning point 55 - trading days since bottom on Feb 5, 2010; bottom turning point 63 days since Feb 5, 2010; top 68 trading days, bottom 78 trading days etc. In other words, we have this set of natural numbers:
Does it remind you something? I believe it is clear; it is a story of the scientists who searched some law in their series. In other words, the question is: can we find some order in these digits? The price of this question is billons and billions dollars. If somebody can answer this question, he or she will be able to name the dates of future turning points. Ideally we need to find the "right printout" that makes the location of these turning points obvious.
Maybe Mr. Gordon did something like that? Located these numbers in some way that makes their structure obvious? It does not matter what the pattern formed by these numbers looks like. For example, it can be snowflake. If we have enough numbers (enough price history), this figure can be prolonged; in other words future turning points may be forecasted this way. The most important issue is to find the right printout.
I already tried to apply "regular printouts" - as scientists did; no regular pattern found.
I also tried to locate turning points on Square Nine diagram. This is how it looks (red - top turning points, blue - bottom):
No regular pattern found.
Also it is possible to use 3D figures. Try to imagine the pyramid constructed from transparent glass bricks, every trading day corresponds to one brick. The first trading day corresponds to the highest point of this pyramid. To designate the days when turning points in the price movement occur, we use colored glass bricks. Something like this (source: http://www.google.ca/imgres?imgurl=http%3A%2F%2F4.bp.blogspot.com%2F-UdONAaY8LlQ%2FTgQ329CSBEI%2FAAAAAAAAD1g%2F-HzcPNN4-04%2Fs1600%2Fhow-to-draw-a-pyramid%2525255B1%2525255D.jpg&imgrefurl=http%3A%2F%2Fthemaldivestoo.blogspot.com%2F2011%2F06%2Fif-you-could-be-brick.html&h=628&w=800&tbnid=psBtb8n0GHAbKM%3A&zoom=1&docid=ojGR7ycLcZVkQM&ei=t5hFU_W7M-nV2QWYmYG4BQ&tbm=isch&ved=0CHYQhBwwCw&iact=rc&dur=3430&page=2&start=8&ndsp77=11 ) :
As this pyramid is transparent, we could see the colored bricks (that correspond to turning points) inside and see the pattern that they form.
April 9, 2014
Toronto, Canada
