Stocks & Commodities V. 21:11 (98-99, 102): Product Review: Gann Natural Squares Calculator by Dennis D. Peterson PRODUCT REVIEW
Gann Natural Squares Calculator Natural Squares Calculator LAMBERT-GANN EDUCATORS, INC. 1040 Spencer Rd. Sabina, OH 45169 Phone: 800 613-8919 Internet: www.lambertganneducators.com Product: Calculator for estimating times and prices following W.D. Gann’s square of nine method. Price: $547 plus $12.95 shipping by Dennis D. Peterson he Gann Natural Squares Calculator package consists of the calculator itself, which is a 19-inch by 19-inch Lexan board with three clear heavy plastic disks and a strip attached at the center, along with a manual and a CD-ROM. When I first saw this board I knew what it was immediately. Past STOCKS & COMMODITIES articles have looked at W.D. Gann’s square of nine†, but its use remained a bit enigmatic. Actually seeing the calculator was neat (Figure 1), and after a look at the materials it came with, I anticipated some interesting explorations.
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FIGURE 1: THE GANN BOARD. There are three rings over concentric squares. The square in the center goes from one to nine (for Gann’s square of nine). The board supports making price or time projections separately or together.
THE CALCULATOR The underlying board has Gann’s square of nine printed on it. The center square consists of the numbers one through nine, while the next concentric square consists of the numbers 10 through 25, and so on. The numbers in these concentric squares represent the prices to use. The largest of the three clear plastic disks has a set of green and red dates along its edge. The green dates move in a counterclockwise direction, while the red dates move in a clockwise direction. The edge of the next smaller disk identifies the degrees of a circle (Figure 2). The third disk identifies 60-degree increments. The attached strip is a line
that spans the calculator’s diameter, with a bull icon at one end and a bear icon at the other. All of the disks and the strip are secured with a bolt and nut.
GETTING STARTED The CD introduces you to the board’s use and each of the three wheels. The accompanying manual contains more detailed instructions. The language used to explain the theory is sometimes loaded with jargon, such as: “When
FIGURE 2: DATE RINGS AND NUMBERS. The calculator allows you to use either valleys or peaks. For valleys, the green date ring is used by aligning the zero-degree mark on the date, then aligning both over the price for the valley. Do the same thing for peaks, but using the red date ring.
Copyright (c) Technical Analysis Inc.
Stocks & Commodities V. 21:11 (98-99, 102): Product Review: Gann Natural Squares Calculator by Dennis D. Peterson
the price on the number grid makes an important aspect, or alignment, with time (the date of the high or low), an important change of trend may occur.” Overall, however, the manual is easy to read. What is missing is statistical analysis that shows its reliability. To get an idea of the usefulness of the calculator, I tried it on the Nasdaq Composite. I have seen Gann fans work remarkably well at times, and I can usually pick the chart(s) that will give interesting and positive results. I also know that there are charts where the fans fail miserably, so I had guarded expectations before I jumped in. I wasn’t necessarily look- FIGURE 3: NASDAQ COMPOSITE DAILY PRICES. Blue arrows represent peaks and valleys used to find the next ing to find good results immedi- peak or valley. The calculator gives you half a dozen potential points of future resistance and support. When using ately. I also asked Ken Gerber, the the peak of July 14, 2003, at 1776, the calculator showed a low of 1640 on August 11, 2003. The actual low on August 8, 2003, at 1640 was fairly close. Unfortunately, the other peaks and valleys were not able to identify author of the material, to help out. subsequent peaks or valleys. He warned me that he was a commodities trader, with a preference for used 45-degree increments, I got the fol- cember 9, February 6, March 8, April 7, grains and especially soybeans. I remem- lowing prices: 1127, 1161, 1195, 1229, May 9, June 9, and July 10. As I menbered a highly respected analyst saying 1372, 1245, 1265, and so on. tioned, the Nasdaq Composite did hit a that he felt the current equity market was When I added in the results for 60- peak on January 13, 2003, at a high of not trending. I can see some merit to the degree increments, the number 1419 ap- 1467. That date was just three days from statement when I compare current equity peared. This was followed by a further 90 degrees. If I allow for a six-calendarcharts to those of currencies. Even know- high of 1521. However, the price levels day error, I’ll end up using as many as ing very well that in a trendless equity of 1467 and 1353 were both areas where 12 calendar days as my margin for error. market, finding prices and/or dates where prices pivoted. I found both numbers If there’s an overlap with other peaks there is a trend change could be the acid using multiples of 90 degrees, which are and valleys, there is a possibility of test for the calculator, I plunged in. I did considered the strongest. The problem is using up even more days of the month. experience some difficulties. that when you are trading and expecting Calculating from January 13 forward, a trend change at all of the 90-degree the July 14th pivot peak came at 180 PRICE POINTS: FIRST ATTEMPTS dates, you are going to get out of long degrees of time. Starting with the Nasdaq Composite low positions earlier than you want to, let According to the manual, “Stocks make on October 10, 2002, of approximately alone all the additional values created by important changes in trend every 30, 60, 1108, we set the wheel and looked for the using multiples of 45 degrees. 90, 120, 150, 180, 210, 240, 270, 300, projected possible prices for the next point and 360 days or degrees from any imporof resistance using 90, 180, 270, and 360 DATE TARGETS: FIRST ATTEMPTS tant top or bottom.” Ken Gerber felt that degrees. We then went out another set of To find the dates where the trend a three- to four-day error was reasonable, squares at 90-degree increments. These changes, you pick a major or intermedi- but also commented that a longer cycle were the results: 1142, 1176, 1210, 1245, ate price peak or valley and then go may be involved. Longer cycles are ob1281, 1317, 1353, 1390, 1428, 1467. The forward using 45- and 60-degree incre- tained by using the wheel on weekly, high price of the January top was 1467. ments. As with price, the strongest dates monthly, or quarterly data. While the The next resistance on the price chart was are the 90-, 180-, 270-, and 360-degree price levels can be obtained normally, at 1419 on November 6, 2002. This num- dates. Using October 10, 2002, as a the longer-term cycles require that each ber did not hit the radar screen using the starting point, some dates that appear degree on the 360-degree ring represent 90-degree increments. However, when I include January 7, November 8, De- one week, one month, or one quarter.
Those of us who have analyzed stock movement know that correctly predicting both a date and price is remarkable. Copyright (c) Technical Analysis Inc.
WHAT TO LOOK FOR We tried a couple more lows, mid-February and mid-March, without any hits coming from either date. Let me explain what is happening when I say “without
Stocks & Commodities V. 21:11 (98-99, 102): Product Review: Gann Natural Squares Calculator by Dennis D. Peterson
any hits.” Using historical data allows you to set the calculator up for a specific date and price, and then look for the price that corresponds to the next peak or valley. If the price does not fit with any of the possible resistance/support prices suggested by the calculator, then it is easy to conclude that the price/time combination you have set the calculator to is unreliable. You should look for an occasion where the calculator closely identifies a price level, and if that occurs, you may conclude that the calculator is likely to have found either a time synchronization or a time/price synchronization. This will give you an idea about future prices.
degrees from 1675 of July 21 (the square root of 1675 = 40.926; add 1 for a 180degree move; 41.926 squared = 1758). With the reassurance of the calculator locking onto a cycle by nearly identifying both the date and time for the next event, namely a low (and the high of 1757 is 180 degrees from 1675), I expected the calculator to find a rally from this low to find resistance. The candidates are: 1722 (180 degrees from that August 8th low of 1640), 1757 (an old top that shows up on August 20), 1776 (old top), 1806 (360 degrees from 1640), and 1891. As of this writing (September 17, 2003), the Nasdaq Composite closed at 1888, which is relatively close to the 1891 level.
SUCCESS STORY The following took place when I set the calculator to the July 14, 2003, high of 1776. As it turns out, the August 8th low of 1640 shows up on the calculator, except that the calculator called that low for August 11 (Figure 3). But the rally high of 1757 on July 31 is 180
SUMMARY I also tried some cyclical stocks and didn’t have much luck. However, the CD-ROM gives some fairly recent examples of both a stock (GM) and a commodity (soybeans) working rather well. The stock example encouraged
Copyright (c) Technical Analysis Inc.
me to try the Nasdaq Composite. Those of us who have analyzed stock movement for some time know that correctly predicting both a date and price is remarkable. If time allowed, you would want to try every combination of the calculator, along with, say, 30 cyclical stocks to get an idea of its reliability. I think you could then come to a legitimate conclusion about the calculator. I know it is possible to take any trading system and find it produces successful results for a portion of a stock price movement, and of course, every system has its faults. My conclusion is that under the right circumstances the Gann Natural Squares Calculator may be beneficial, but it should only be used in conjunction with other indicators or patterns to determine approximate areas of price targets. This will bolster confirmation of price turns. Dennis Peterson is a Staff Writer for STOCKS & COMMODITIES. †See Traders’ Glossary for definition
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