Pattern, Price and Time E-Book

James A. Hyerczyk

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Wiley Trading Series
• Sprache: Englisch

Seitenzahl: 360

Veröffentlichungsjahr: 2009

Beschreibung

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.

Leseprobe

Table of Contents

Title Page

Copyright Page

Preface

Acknowledgements

CHAPTER 1 - Why Pattern, Price, and Time?

CHAPTER 2 - Who Was W. D. Gann?

COMMODITY LETTER: April 21, 1947

COMMODITY LETTER: January 26, 1948

CHAPTER 3 - Gann Theory in a Nutshell

THE BASIS OF GANN THEORY: THE LAW OF VIBRATION

PATTERN

PRICE

TIME

SQUARING THE PRICE RANGE WITH TIME

ADVANCED PRICE AND TIME TECHNIQUES

GANN THEORY AND ITS APPLICATION TO TRADING

CHAPTER 4 - Chart Basics

GANN-FORMAT CHARTS

PROPER CHART CONSTRUCTION

CHARTING PROGRAMS

TYPES OF CHARTS

SUMMARY

CHAPTER 5 - Pattern: Trend Indicator Charts

MINOR TREND INDICATOR

INTERMEDIATE TREND INDICATOR

MAIN TREND INDICATOR

TREND INDICATOR CONSTRUCTION

STOP ORDERS

USING THE INFORMATION GENERATED

CHARACTERISTICS OF THE TREND INDICATOR CHART

SUMMARY

CHAPTER 6 - Pattern: Swing Chart Trading

REVIEWING THE TREND INDICATOR CHART RULES

BASIC TRADING INSTRUCTIONS

TWO WAYS TO DETERMINE A CHANGE IN TREND

OTHER SWING CHART TRADING STRATEGIES

SWING TRADING RULES

SWING CHART NEGATIVES

SUMMARY

CHAPTER 7 - Pattern: Other Chart Formations

THE DOUBLE BOTTOM

THE DOUBLE TOP

PROLONGED RALLY OR BREAK RULE

BALANCING SWINGS

SIGNAL TOPS AND SIGNAL BOTTOMS

OTHER IMPORTANT FORMATIONS

OTHER POPULAR PATTERNS

SUMMARY

CHAPTER 8 - Price: Horizontal Support and Resistance

THE SWING CHARTS

PERCENTAGE RETRACEMENT PRICE LEVELS

OTHER RETRACEMENT LEVELS

MULTIPLES OF BOTTOMS AND DIVISIONS OF TOPS

PIVOT PRICE CALCULATIONS

MOVING AVERAGES

SUMMARY

CHAPTER 9 - Price: Gann Angles

IMPORTANCE OF GANN ANGLES

HOW TO CONSTRUCT GANN ANGLE CHARTS

SUMMARY

CHAPTER 10 - Combining Pattern and Price

CHAPTER 11 - Time

NATURAL CYCLES

ANNIVERSARY DATES

SEASONALITY

SWING CHARTS

SQUARE CHARTS

SUMMARY

CHAPTER 12 - Combining Pattern, Price, and Time

THE INTERMEDIATE TREND INDICATOR

THE SIGNAL BOTTOM

THE SIGNAL BOTTOM: THE FIRST LEG UP

GANN ANGLES

PERCENTAGE RETRACEMENT ZONES

PERCENTAGE RETRACEMENT ZONES AND GANN ANGLE COMBINATIONS

TIME INDICATORS

THE FORECAST

CONCLUSION

About the Author

Index

Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Australia, and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers’ professional and personal knowledge and understanding.

The Wiley Trading series features books by traders who have survived the market’s ever changing temperament and have prospered—some by reinventing systems, others by getting back to basics. Whether a novice trader, professional, or somewhere in-between, these books will provide the advice and strategies needed to prosper today and well into the future.

For a list of available titles, please visit our Web site at www.WileyFinance.com.

Copyright © 2009 by James A. Hyerczyk. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

The Gann charts were produced using Ganntrader 2.1; copyright © 1996 by Peter A. Pich. Release: 2.113, SN: 35182. Gannsoft Publishing Company, 509-548-5990.

Microsoft Excel is a registered trademark of Microsoft Corporation.

Navigator Software is a registered trademark of Genesis Financial Data Services.

TradeStation is registered trademarks of Omega Research Inc.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, [phone], fax [phone], or on the web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, [phone], fax [phone], or online at http://www.wiley.com/go/permissions.

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at [phone], outside the United States at [phone] or fax [phone].

Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com.

Library of Congress Cataloging-in-Publication Data:

Hyerczyk, James A.

Includes index.

eISBN : 978-0-470-46432-8

1. Speculation. 2. Gann, William D., b. 1878. I. Title. II. Title: Pattern, price, and time. III. Series.

HG6015.H94 2009

332.64’ 5-dc22

2008048191

Preface

I’m sure you’ve all heard the expression, “The more things change, the more they remain the same.” This is true when it comes to technical analysis. Although there have been advances in technology since the first edition of Pattern, Price & Time was published in 1998, the markets are still creating patterns, making percentage retracements, or hitting cycle lows just as they were in 1998 and even before then.

With each new software program there seems to be another way to analyze and trade the markets with some new oscillator or indicator in an attempt by the trader to gain an edge. Unfortunately, this theme of smoothing out valuable information like the Open, High, Low, and Close has, in my opinion, created more difficult trading conditions. Today, despite all the new technical analysis tools and equations, the definitions of an uptrend—higher tops and higher bottoms—and of a downtrend—lower tops and lower bottoms—have remained unchanged for decades. Today, while traders remain fascinated with smoothing out data in an effort to get the edge, the art of analysis of the simple basic data has been cast aside.

As I wrote in the first edition of Pattern, Price & Time, my intention is not to write about W. D. Gann, but instead to write a book about what I consider to be the major themes of Gann’s work: pattern, price, and time. In addition, I wanted to write a book that can be used by the analyst and trader who can apply Gann’s basic rules to the markets without having to learn astrology or buy Gann wheels and plastic overlays. I wanted to write a book that would introduce a trader to techniques that would allow a trader to take basic data that is available every day and through study, experimentation, and practice create sound market analysis.

My experience in the futures business has shown me that too often traders become hooked on either pattern, price, or time in their analysis. They tend to weight their analysis one way without an equal balance. The most common mistakes are systems built around time to enter and price to exit, or price to enter and time to exit. In addition, traders who use pattern often enter or exit at poor prices or with poor timing. These observations provided further evidence that a combination of all three methods is necessary for success in the marketplace. It is on this premise that I have based my book.

As I outlined this edition of the book, I decided to maintain my original objective to write about the simplest approaches that would demonstrate how each of Gann’s methods worked individually, and how each method worked in combination. In Pattern, Price & Time, 2nd edition, I even decided to include other popular pattern, price, and time indicators to show how they can be incorporated with Gann’s basic premise of balancing price and time.

After a brief introduction as to why I choose to write about pattern, price, and time, I introduce W. D. Gann and his theory. I follow this up with information on the importance of having correct data and charts. This is followed by descriptions of the key elements of technical analysis: pattern, price, and time. In the pattern chapters, I discuss trend indicators and chart formations. In the price chapters, percentage retracements and Gann angles are detailed, followed by a chapter on combining pattern and price. Finally, concepts of time analysis finish the core analysis techniques. The last chapter demonstrates the effects of combining pattern, price, and time into an analysis and trading tool.

After the last book was published, I received criticism that I was holding back on Gann’s secrets. This could not be further from the truth. I stated in the book that teaching financial astrology was beyond the scope of this book and could take years to learn and apply. I stated it was not my intention to write or teach financial astrology. I can say that if you understand the basics of this book then learn financial astrology, you will have an edge over those who only know astrology because, after all, astrology is a time indicator. Remember that although Gann said that time was most important in identifying changes in trend, price and time and money management are just as important when trading. In order to appease those who feel I am keeping secrets, I will publish a few surprises in this book that will point those who want to study the metaphysical elements of Gann analysis in the right direction. This includes what I believe is the source of his Law of Vibration and a list of books that he recommended. In an effort to provide the reader with more automation I’ve attached a link to the TradeStation code for my trend indicator at www.wiley.com/hyerczyk. This will allow the reader to create swing charts in the same manner as W. D. Gann.

In conclusion, this book is intended to be educational and informative. It is by no means intended to replace the books and courses written by W. D. Gann. At times the book may seem repetitive, especially in the chapters about the trend indicator. This is done intentionally because I wanted to emphasize, just as Gann did in his books, that the analyst must study, experiment, and practice these techniques over and over. If anything, this book should be used by the novice as an introduction to the subjects of pattern, price, and time. It should be required reading before computerized analysis is attempted. It is very important to learn how pattern, price, and time techniques work before using computerized trading indicators. This book will provide a good base for the analyst who wants to use more sophisticated technical analysis techniques. The expert trader could also use this book to enhance his or her analysis or trading abilities. While Gann analysis concepts are discussed in this book, it is not intended to be a book solely on Gann analysis as many original ideas and techniques are introduced throughout the text. Gann, for example, left no record on how to trade stock indices, Treasury bonds, or Forex markets. Although at times limited by page size in this book, I believe pattern, price, and time analysis is presented in a detailed but clear manner. I hope that you find the ideas in the book as useful as I have.

James A. HyerczykPalos Park, Illinois September 2008

Acknowledgments

I would like to thank my wife, Mary Colleen, and my daughters Amy, Kelly, and Erin for giving me the time and the space to pursue my passion for technical analysis. Each of you has a special place in my heart, and I love you all very much.

CHAPTER 1

Why Pattern, Price, and Time?

Despite the proliferation of trading analysis programs claiming to have “new” indicators and “new” ways to analyze the markets, I’ve come to the conclusion that there really is not anything new under the sun and that all of these discoveries can be placed into the categories of pattern, price, and time.

Ever since the early days of trading up until today, traders have been trying to create ways to manipulate data in an effort to find an edge over everyone else. Today’s sophisticated programs have the ability to smooth data and create sophisticated formulas to make the market’s basic data appear to show anything the programs want to find. Some programs create moving averages, while others try to break down the markets into oscillators that move between 0 and 100. All of these new ways to look at data may be fine for some, provided that they understand how these numbers are created, and the programs create rules on how to use them, but I find working with the original Open, High, Low, and Close data to be most beneficial. In addition, while I acknowledge that using computer-generated oscillators or indicators may speed up the process of analyzing a market, I have found that all of these smoothing tools will eventually collapse to or agree with my simple analysis of the markets using the Open, High, Low, and Close.

This book, although it is concerned with the technical analysis approaches to trading Forex, futures, and equities, should not be considered the definitive answer to making tremendous amounts of money in trading. Instead it should be used as a guideline to give the trader an edge as to what is actually taking place in the marketplace. My application of pattern, price, and time analysis allows me to see and understand what is happening in the markets. It does not hide anything in complicated formulas or computer number crunching. Although this is a personal preference, I feel that the analyst who understands how pattern, price, and time work independently and in unison with each other creates an edge to trading the markets that computerized analysis cannot.

Throughout the book the reader will see the phrase “study and experiment.” This is because the reader is encouraged to learn as much as he can about the movements of the markets, the characteristics of these movements, and how to make informed trading decisions once this knowledge is applied.

The basic premise behind pattern, price, or time analysis is that these three factors have not changed in the 100 or more years since Charles Dow unleashed his Dow Theory to the world. In fact, if you want to go back even further, take a look at Candlestick analysis which is said to have its roots back to the 1700s. This very popular analysis tool is a study of pattern with basic Open, High, Low, and Close the major elements. Despite the proliferation of today’s “new” trading analysis tools and trading systems as a result of the personal computer and trading software, trading tools used today can nevertheless still be categorized as pattern, price, or time.

Today’s pattern studies include stochastic indicators, relative strength indicators, overbought/oversold indicators, moving average crossovers, and Candlesticks. Price is categorized as moving averages, daily pivots, and retracements. Finally, time is used today in the form of seasonality, cycles, and time of day studies.

Hang around a trading room long enough, and you will often hear, “I had the right price, but was a little early” or “I’ve got a cycle low due at 11:00, I just don’t know where the market will stop.” These are the types of problems that can be created by using only price, or only time, or only a pattern. In this book I want to show the trader that there is a way to bring the factors of pattern, price, and time together in an effort to improve trading results.

When studying the history of technical analysis I came across several valid methodologies to analyze and trade the markets, but I found that these methods were weighted toward only one of the three main components of pattern, price, and time. This created problems for me because although at times one of these factors had control of the market, I found I did not have control of the trade. This frustration caused me to study the disciplines of Elliott and Dow, but I found personal issues with each. One relied too much on the forecast and prevented me from changing my mind while in a trade. My ego became too connected to the forecast, and I often failed to make necessary adjustments to the trade. The other analysis technique took too long to develop. I also tried to work with point and figure charts, and although I understood how to use the formations, I still felt time was necessary to help me become a better trader. When Candlestick analysis became readily available on the computer, I tried to use it, but found some of the patterns occurred too frequently and at random places on the chart, so I sensed that price and time would be necessary to improve this sort of analysis.

All of this study and experimentation of these other analysis disciplines led me back to the pattern, price, and time analysis of W. D. Gann. I chose Gann Theory as my primary source of analysis because throughout his works he wrote about the balance of price and time. This became very important to me because my work needed balance. I knew from my analysis and trading that I could not just rely on pattern, or price, or time independently. I knew that although I could use his techniques independently, I could improve my analysis and trading by finding a balance between his two or three key elements of pattern, price, and time (Figure 1.1).

FIGURE 1.1 Gann Format Monthly Dow Jones Chart Copyright © TradeStation.

In summary, the purpose of this book is to inform the trader of the analysis tools that are available just using the Open, High, Low, and Close. The other purpose is to teach the trader to categorize his trading tools into pattern, price, and time techniques and to apply combinations of the three to improve his analysis and trading. Finally, in an effort to jump-start the reader’s study and experimentation of pattern, price, and time, I have chosen to highlight the analysis and trading techniques of W. D. Gann because he was one of the first to speak of the balance of price and time.

CHAPTER 2

Who Was W. D. Gann?

If not the first technical market analyst, W. D. Gann was certainly among the more successful. Creating and publicizing a new approach to analyzing markets, Gann claimed that he had set a world’s record in leverage and accuracy more than once, that he had developed trading strategies for speculators, and that he could predict market moves to exact price levels.

William Delbert Gann was born on a cotton ranch on June 6, 1878, in Lufkin, Texas. He displayed a strong aptitude in mathematics during his early years, completed a high school education, and started trading in 1902 at the age of 24. By his own admission, Gann’s early trading was based on “hope, fear and greed,” all of which he later realized were not compatible with a successful trading strategy.