In keeping with the theme of pattern, price and time, one has to be aware of W.D. Gann’s use of mathematics. Price and time are the most important elements governed by Gann’s mathematical techniques.

**Introduction**

In keeping with the theme of pattern, price and time, one has to be aware of W.D. Gann’s use of mathematics. Price and time are the most important elements governed by Gann’s mathematical techniques. By applying these techniques, the trader will be able to isolate key price levels, important time periods and ideally a combination of the two. Once these price and time zones are isolated the experienced trader looks for a pattern to help him execute the trade.

Many traders get caught in the trap of using only price such as those that use pivot points and moving averages to enter a trade. Others are influenced by time such as seasonal traders who rely on statistics identifying up and down movement of a market between two dates. The more successful traders use a combination of both price and time to identify the best set-ups.

An example would be a trader who uses a service that tells him a certain market will move up from October 1 to October 10. He rationalizes the trade by accepting statistics which state that this move occurred 10 out of 15 years. The problem with trading based on this type of analysis is that the trader has to pick his own stop loss based on price. In other words, the trade recommendation is made using a time entry and a time exit, yet many traders ignore this fact and place a stop loss based on a price or pattern formation.

The ideal trade would use the time data provided by the service but the actual entry should be based on certain price activity or pattern formation. The exit strategy should also include references to pattern and price and or course the time period identified by the original research.

The following paragraphs are from my first book Pattern, Price & Time. They are written as an introduction to the various mathematical procedures W.D. Gann observed and applied during his time as an analyst and trader. More detailed explanations can most likely be found by reading Gann’s books and courses after obtaining a deeper understanding of higher levels of mathematics such as Sacred Geometry.

**Gann Mathematics**

W.D. Gann was a rare mathematician. He was a student of numbers, number theory, and the progression of numbers. He often said his analysis theory was based on natural law and mathematics. The use of natural law is a common theme throughout Gann’s books and courses. These are laws which cannot be altered by man. These are the laws that govern the movements of the planets and the activity of atoms.

An experienced analyst may “discover” a cycle in a stock or commodity market but it may not be a natural cycle. A natural cycle in this case refers to the positions of the planets, astrological aspects and other celestial phenomena such as eclipses and station points.

Each of these terms is used to identify specific natural cycles that cannot be altered by man and can be researched both forward and backward for hundreds of years. This is because natural laws are governed by precise equations discovered by the calculations of Kepler and Newton. Without knowing these laws, it would be impossible to predict full and new moons as well as ocean tides. Planetary movement and gravity are great examples of natural laws.

Since time progresses as the earth turns on its axis, and time is measured by numbers and progressions of numbers, and since prices in their movement upward and downward are measured in numbers, we can understand why Gann had an intense interest in numbers, number theory, and mathematics. And remember….he did not have a personal computer, or even a handheld or desktop calculator-just a pencil.

Gann said his trading method was based on natural and mathematical law. For years he refused to reveal any part of this method. The method was based on natural law, but the theory behind it was based on mathematics. Since price and time are denoted in mathematical terms (numbers), his system involved numbers and number progressions. He simply said he had researched far back into history and even went to India for old pre-Hindu records and philosophies as well as the ancient archives of the pre-Hindu period.

As we study Gann’s works, we begin to see the some numbers took a dominant place in his trading method. The square of numbers was an important issue with him, namely: 16, 25, 36, 49, 64, 121, and 144. He thought that markets moved in patterns sensitive to the price movement of these squares in terms of both price and time. For example, a rally in a specific market may have a tendency to find resistance 64 cents or 64 days from a bottom. Similarly, a decline in a market may find support 144 dollars or weeks from a top. This technique was combined with others that he developed, and it became a major part of his analysis tools.

**Key Numbers**

At this point, some of you may be discounting Gann’s methods because of their relative obscurity, but I would ask you to suspend disbelief. Gann found several numbers for a variety of reasons, some religious or spiritual, some historical, and some psychological. Whether or not his belief was reasonable or based on probable fact is largely irrelevant here-he used them as the basis for his trading, and they can work if incorporated properly into a technical trading system.

Gann researched numbers and cycles in many unique ways. Much of his research focused on the specific meaning of a number and how it relates to market movement. His research included the study of early Egyptian writings as well as cycle information. He also did extensive research of the cycles highlighted in the Bible. Records indicate that the early Egyptians considered the number seven to be the symbol of both earthly and eternal life. It is thought of as a number symbolizing a complete cycle, for seven is denoted as the number of time and rhythm. This information was used by Gann to develop a seven-day-cycle theory for short-term market moves.

Gann deemed three and one-half important, as it is half of seven, and in the Bible it occurs several times- for example, in the Book of Revelation, where the woman was sent into the wilderness for three and one-half years; during Daniel’s vision of 42 months (3 ½ years); when the Christ child was hiding in Egypt for three and one-half years; and during Christ’s public ministry, which lasted exactly three and on-half years. Gann used this information to study and research the 3 ½-day, -week, – month, and –year cycle, and applied the knowledge he gained to trade the market

Gann also considered the number nine important, as it occurs in the nine beatitudes recorded in Matthew’s Gospel, and he believed that nine corresponds with the number of stages of a disciple’s advance to a higher life. The number 12 was important to Gann, as it denoted space for him. He found it recurring in the twelve tribes of Israel, the 12 disciples, and the 12 houses of the Zodiac.

Other important Gann numbers are derived as follows: One year is 365 days, as this is the time it takes the sun to enter a hemisphere, move to the opposite hemisphere, and then return to the starting point. The movement of the sun produces definite seasons, affects crops and weather, and therefore has a dominant effect on our lives. For this reason the 30-day or sun cycle has dominance. Besides what has already been said about the number seven, it is important because of its link to the lunar cycle.

The number 144 was also important to Gann, whether because of there being 1440 minutes in a day (the decimal point is disregarded), it is 40% of a circle (360° x 0.40) = 144°), or because it is the square of 12. Numbers that occur repeatedly in the different sciences-such as mathematics, geometry, physics-cycles, and other natural studies were very important to Gann.

After studying mathematics and researching number patterns, Gann had to find a practical use for his newly acquired knowledge. Armed with this information Gann turned to the stock and commodity markets. After applying his strong background in mathematics to these markets, he concluded that markets adhere to mathematical law. From this conclusion he was able to develop parts of his trading theory.

This theory basically stated that market movement is governed by the forces of pattern, price and time. And the forces are controlled by natural laws and high level mathematics.