Analyzing the USD JPY Using Pattern, Price and Time (Part II)

According to W.D. Gann, time had the strongest influence on the market because when time is up, the trend changes. Pattern, Price and Time Theory in keeping with Gann’s observation, uses swing charts, anniversary dates, cycles, and the square of price to measure time.

Analyzing the USD JPY Using Pattern, Price and Time

Pattern and Time (Part II)

Time

According to W.D. Gann, time had the strongest influence on the market because when time is up, the trend changes. Pattern, Price and Time Theory in keeping with Gann’s observation, uses swing charts, anniversary dates, cycles, and the square of price to measure time. In order to determine when time is up, it is important for the USD JPY trader to keep his charts up to date and have readily available a list of the duration of historical swings and a database of the important top, bottom and change in trend dates of the USD JPY.(Fig. 6)

USD JPY Key Time Points Chart

Swing-Chart Timing

A properly constructed swing chart is expected to yield valuable information about the duration of price swings of the USD JPY. This information is used to project both the duration of future up moves from a current bottom and the duration of future down moves from current tops. The basic premise behind swing-chart timing is that market patterns repeat: this is why it is necessary to keep records of past rallies and breaks of the USD JPY. As a swing bottom or top is being formed, the trader must utilize the information from previous swings to project the minimum and maximum duration of the currently developing swing. The basic premise is that price swings balance time with previous price swings. However, in strong up moves the duration of a rally is greater than the duration of a break, and subsequent upswings are equal to or greater than previous up moves. Conversely, in strong down moves the duration of a break is greater than the duration of a rally, and subsequent downswings are equal to or greater than previous down moves. (Fig. 7)

USD JPY Swing Chart Showing Uptrend

Anniversary Dates

Among the timing tools important to Pattern, Price and Time Theory is a concept referred to by W. D. Gann as “anniversary dates.” In this article, this term refers to the historical dates on which USD JPY made major tops and bottoms. The information collected in effect reflects the seasonality of the USD JPY because often an anniversary date repeats in the future. A cluster of anniversary dates indicates the strong tendency of a market to post a major top and bottom each year at the same time. For example, in order to predict future tops and bottoms in the USD JPY, a pattern, price and time analyst will have to research the history of the USD JPY, noting not only the prices, but the anniversary dates. Additionally swing analysis of top to top, top to bottom, bottom to bottom, and bottom to top movement will be fundamental factors in determining the future direction of the USD JPY. The information which is learned from this type of research is very important to time analysis as the dates will give clues as to when time is up so that the trader can anticipate a possible change in trend. (Fig. 8)

USD JPY Anniversary Dates

Cycles

As mentioned earlier, pattern, price and time analysts when following the techniques of W. D. Gann try to build analysis tools that are geometric in design. When looking at anniversary dates the analyst should see a series of one-year cycles. In geometric terms, the one-year cycle represented a circle or 360 degrees. Building on the geometric relationship of the market, Gann also considered the quarterly divisions of the year to be important timing periods. These quarterly divisions are the 90-day cycle, the 180-day cycle, and the 270-day cycle. In using the one-year cycle and the divisions of this cycle, the pattern, price and time analyst will often find a date where a number of these cycles line up (preferably three or more) on a single point in time in the future. A date where a number of cycles line up is called a time cluster. This time cluster is used to predict major tops and bottoms. Time cycles are a major part of pattern, price and time analysis of the USD JPY, and should be combined with price indicators to develop a valid market forecast. (Fig. 9)

USD JPY Cycle Chart

James A. Hyerczyk has been actively involved in the futures markets since 1982. He has worked in various capacities within the futures industry from technical analyst to commodity trading advisor. Using W. D. Gann Theory as his core methodology, Mr. Hyerczyk incorporates combinations of pattern, price and time to develop his daily, weekly and monthly analysis. His firm, J.A.H. Research and Trading publishes The Forex Pattern Price Time Report... More

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