Gann wrote quite a few books on buying and selling. Opinions are sharply divided on the worth and relevance of his work. Gann market forecasting strategies are primarily based on geometry, astronomy and astrology, and historic arithmetic. Gann, "The Basis of My Forecasting Method" (the Geometrical Angles course), p.William Delbert Gann (J– June 18, 1955) or WD Gann, was a finance dealer who developed the technical evaluation instruments generally known as Gann angles, Square of 9, Hexagon, Circle of 360 (these are Master charts). This ennegram is what’s come to be known as the Square of Nine from the Greek root “enneas” which is the word for “nine.”Īlthough Gann never revealed exactly how he used the ennegram we can gather from his words that it was probably very important to him: "We use the square of odd and even numbers to get not only the proof of market movements, but the cause." W. Gann used an ennegram, a diagram of numbers constructed in such a way to show square and square root relationships. His method was more complex and appears to have been based on some ideas he picked up on during his trips to India or Egypt. Gann was using square roots to forecast stock and commodities prices.
March 14 high = 1.35 = 1350 = Square Root 36.74īefore Dunnigan and Templeton, probably starting in the early 1900s, W.D. Now that you know the drill let’s look at the remaining swings on the Eurodollar chart.įeb 9 low = 1.28 = 1280 = Square Root 35.77 In this case multiply the actual Eurodollar price by 1,000. First step is to convert the actual price into a useable number so that we will not be dealing with tiny decimals. The chart is Eurodollars continuous futures.Įurodollars made a high of 1.37 on December 30, 2004. Let’s go through a recent example and see how it works. Even a few minutes with a pile of stock charts and a calculator will build confidence that major highs and lows are related to each other by additions and subtractions to their square roots. There are hundreds of these examples across the stock, financial and commodity markets. Again, a few percentage points from the square of the sum of the square root of the low + 6 or (3.87+6)^2. GM made a low of 15 in November, 1974 and a high of 95 in May, 1999. This is within a few percentage points of the square of the sum of the square root of the low price + 9 or (2.12+9)^2. For example, IBM made a monthly closing low of 4.52 in June, 1962 and monthly closing high of 125.69 in July, 1999. The theory holds that stock prices move over the long and short term in a square root relationship to prior highs and lows. He went so far as to call this theory the "golden key" and claimed recognition from some economics and statistical trade journals of the era.
Dunnigan was above all a portfolio manager and not happy with the risk-reward aspects of his own trading methods, Dunnigan supported and publicized the Square Root Theory. Both methods had several advantageous entry techniques but each had an absence of exit techniques. In the 1950s William Dunnigan developed two stock trading systems called the Thrust Method and the One Way Formula. In 1983, a book entitled The Templeton Touch, by William Proctor, disclosed that one of Templeton's 22 principles for stock market investing was that stock price fluctuations are proportional to the square root of the price. Norman Fosback used the theory in a 1976 publication called Stock Market Logic to make the case that the normal trading range of low price stocks provides greater profit opportunities than the normal trading range of high price stocks. References to the Square Root Theory as a predictor of stock prices pops up every now and then in financial writings.
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