The Trading Methodologies of W.D. Gann [PDF]

Summary
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The Trading Methodologies of W.D. Gann – Book

The key to understanding Gann’s more complicated tools begins with understanding what a cycle actually is. According to Merriam-Webster’s online dictionary, the first definition of the cycle is “an interval of time during which a sequence of a recurring succession of events or phenomena is completed.”

This definition mentions time, and this is the use of cycles most of us are familiar with, even outside of trading and the markets. We can examine the spans of our lifetimes and see how seasons change four times a year. We can examine our 24- hour day and see our sleeping and waking rhythms come into play. We can examine our government and see how actions repeat, with our major elections every four years. The list goes on and on.

To help you grasp Gann’s advanced work, as you proceed with your study, you must understand that cycles apply to every aspect of our universe and to our trading, not just to time. In the case of the markets, cycles can be applied to the price. This is why you see old bottoms become new tops (basis of Gann Selling Point #1) and old tops become new bottoms (Gann Buying Point #1).

Definition 2a of cycle reinforces this point: “a course of series of events or operations that recur regularly and usually lead back to the starting point.” It might seem at times that prices move haphazardly between zero and infinity, but they do “recur regularly” and “usually lead back to the starting point,” depending on which point you are measuring from.