Further description of William Gann’s theories
Algorithm of drawing and practical use if Gann’s Square of 9 in middle-term and short-term analysis of the BTCUSD pair. Combination of common technical analysis tools with Square of 9.
I go on my series of articles, devoted to Gann’s studies. Today, I’ll continue explaining how to exploit Gann’s Square of 9 and draw the levels for middle-term and short-term outlook of the BTCUSD pair, to predict it more exactly.
Those, who are unfamiliar with the first two articles, devoted to this method, I strongly suggest you read the previous posts here:
Those articles will help you understand the material, published in this post, and make up your own forecast according to Gann method, following the steps, described
Well, in the previous two articles, I described how to identify the key dates on the time scale and draw the key support and resistance levels in the long run. I also explained one of the ways to make a forecast, using Gann grid and Gann fan.
To predict BTC price in the middle-term, I need to follow the same logic as for the long-term forecast, only operating in 30-minute timeframe. Besides, I’ll analyze the period between the previous week and the next one.
So, the first date to start the analysis will be November 19.
I marked the week from Nov. 19 to Nov. 26 with a big translucent box in the chart above. Next, I identify the extremes, nearest this week’s start – the price high and low. You see that the nearest extreme is on Nov. 20 at 11:30. I mark this level in the chart in the same way as for long-term analysis, with the red vertical line, only the line is dotted to distinguish between different tiers in the timeframe. Next, I mark the rest of local extremes in same way.
The results of my analysis are in the chart above.
I marked the following dates and times:
20/11: 11:30, 17:30, 23,30;
22/11: 00:30, 04:30;
23/11: 00:00, 08:00;
I recommend you to write down these results on a sheet of paper, so that it will be easier to work with the numbers in future.
Next, we shall configure Gannzilla Pro v.8.2, you’ve already know from the previous posts. You may have different version of the program, but do not worry, Square of 9 is a basic function of the software.
In the settings, you leave everything the same as it was for the long-term analysis. You only need to change the following parameters:
- You change that data type in the Layout section into Time
- In the Time section you enter the value of the first extreme that is on 20/11, 11:30;
- Increment is 30 minutes
- If you analyze the crypto market, then you switch off the option Show trading days.
- The data format must be dd.mm
(see the details in the chart above).
Finally, if you’ve done everything correctly, you should have the following picture:
Where, there will be 20/11, 11:30 in the middle of the square.
The decagon, I constructed for the previous forecast, must be removed, so that it won’t confuse the current analysis.
Next, you mark on the new square the cells that correspond to the extremes, marked above. After that, like in the long-term forecast, you attach the figure, whose diagonals cross the maximum number of the marked cells.
Finally, I’ve got an octangle (see the figure above)
Next, you identify the Gann favourite angle. You need to find the median line that crosses the maximum number of highlighted squares.
If there is more than one and you hesitate, you choose the median that is surrounded by the biggest number of green cells. If it doesn’t help, you look for the line that is the closest to the values of the Cardinal and Diagonal crosses (gray squares).
In the given example, the situation is clear. The favourite price angle is easy to find out.
It is clear from the chart above that the angle is 144 degrees.
Now, within the identified angle, I mark the cells that are within the current and the following weeks, that is until December 9.
As the square size covers 10 lines drawn the center, the last date of the square is on 27.11
To mark all the needed dates inside the studied zone, I need to increase the square size, so that in its lower left corner, there will be the date, further than the last date in the period, December 9.
Finally, the size of the square is 16 lines from the center.
Now, in the new space, I need to mark the cells that are included into the studied zone.
Finally, I have three dates, they are:
I mark the new dates in the chart with small blue dots. You see that the red square form the chart above accurately identifies the moment of the strong momentum, it is 01/12 13:00. So the marked points are highly likely to work out in future. Now, I need identify the price levels for the middle-term scope. I’ll apply the same method as for the long-term forecast, described in the previous article (see Unknown Gann Method: Square of 9 (part 2)).
First, I’ll identify the price low for last week. It is 3657 USD.
So, first, I need to find out the price high and the low for last week. They are 3657 USD and 5655 USD (see the chart above).
Next, I enter these values in the above formula to calculate the square increment
Finally, I have 22.19 USD
I modify Gannzilla settings in the same way as for the long-term analysis, I described in the previous post (see the chart above). On the Gann favourite angle, I marked the cells that meet the needed diagonal.
Finally, there are the following levels:
3835 USD; 4190 USD; 4744 USD; 5454 USD; 6365 USD; 7430 USD.
Next, I change the increment sign to minus and do the same procedure, marking the squares.
The following cells correspond to the favourite angle that is 144:
3480 USD; 3125 USD; 2570 USD; 1860 USD; 950 USD.
All the obtained levels are marked with the small blue dots in the chart.
That is how I construct Gann grid (see the chart above).
Next, I need to construct Gann grid in the short-term period.
Here, I operate in the 15-minute timeframe and the analysis is based on the previous day to forecast the price for the next one. In my example, I take 01/12. I will identify the levels for 02/12 and 03/12.
I perform the same procedures as for the middle-term prospect. First, I mark the extremes in the studied period of the previous day. As the daily volatility is quite strong, I suggest using the volume profile to filter the extremes, so that you mark only the points that were accompanied or preceded by volume surges. I marked the levels with green dots.
If it is not clear from the chart, I present the marked points here:
00:50; 02:30; 03:40; 07:30; 09:50; 11:15; 15:00; 17:45; 19:10
Next, I need to configure Gannzilla to operate in the 5-minute timeframe.
The date type is Time;
The Time value is at the start of the previous day (00:00);
The Increment is 5 minutes
In the Chronometer section, the Angle is 270 degrees;
The Range is Daily.
To check, make sure that the Chronometer and the Protractor have zero values at the same place on the right of the screen center. If they don’t, you need to check the settings for the Range and the Angle and corrected them if needed. After that, you mark all the points, figured out above, on the updated Square of 9.
You can see my results in the chart above. Finally, the most appropriate figure for this square is the symmetric heptagon. Its diagonals bisect the angle, meeting the maximum number if green cells.
The favourite angle is 219 degrees. This line is surrounded by the most number of green squares.
That is why I’ll identify the future time levels for the short-term trading range here.
As it is clear from the chart above, levels, marked in the chart history, quite accurately identify the change of the fractal model. Now, I need to find out the price levels for the short-term analysis. The procedure is the same as for long-term and middle-term analysis. First, I find out the highs and lows on 01.12.
You see from the chart above that, on Dec. 1, the BTCUSD low was at 3953.6 and the Bitcoin high was at 4338.0 USD. Then, I enter the obtained values in the formula to calculate the increment for the short run.
So, I have:
Therefore, the increment is Х=5.37 USD.
Now, I enter the obtained values into the Gannzilla settings and mark the levels on the Square of 9.
The screenshot above displays the right settings.
Finally, I have the following levels:
3964 USD, 4018 USD, 4114.7 USD, 4254.32 USD, 4331.53 USD, 4657.07 USD, 4925.57 USD.
Next, I change the increment sign to minus and mark the levels below.
I have the following levels:
3942.86 USD, 3889.16 USD, 3792.5 USD, 3652.88 USD, 3475.67 USD, 3250.13 USD, 2981.63 USD
Remember, to mark the price levels, you base only on the Gann favourite angle.
I mark the calculated levels in the chart above. So, I have a grid of three tiers:
Blue solid line is the long-term,
Blue dotted line is the middle-term,
Green dotted line is the short-term.
For the analysis, I, first of all, need to identify the series of levels of different tiers at the same place.
I highlighted all the series of levels in the 15-minute BTCUSD price chart above. As it is clear from the timescale, there is a series of the middle-term and short-term levels on 03.12 in the period of 13:30 – 14:45.
Based on the BTCUSD price, the resistance zone above is between 4209 and 4287 USD, where, there stands out a smaller zone, between 4254 and 4287 USD.
Another series is in the support zone:
It is from 4018 to 3942 USD. Inside the zone, there is reinforcement between 3964 and 3942 USD. I hope it goes without saying, how you should exploit the data. There are multiple short-term levels between the upper and the lower support zone. Basically, you can operate with the levels in any strategy, using them as additional signals.
There is an example of use in the 30-minute BTCUSD chart above. You see that the ticker rebounded from the resistance zone and headed down towards the support zone 4114 USD (see the green arrow). Next, there formed white candlestick of the bullish hammer that sent a buy signal. As the pattern completed at the same time as the rebound, I can put an early long entry with a stop, lower than the low of the candlestick tail. Besides, I already know the target; it is Gann level at 4254 USD.
Next, you see that the long worked out very accurately, having reached the level of 4255 USD.
Now, I can construct the trading channel, drawing the lines along two highs and two lows. You see that RSI oscillator entered the overbought zone. MACD and RSI don’t yet send bearish signals, so I can try to put an early sell entry when there is an attempt to test the high at 4254 USD, and put a short stop beyond the resistance zone, according to Gann levels, at about 4300 USD. The levels, marked with short green dotted lines are rather weak and may not set the market move back for the second time. So, if Bitcoin is heading down, the target should be at about 4018 USD. Close to the level, there is a volume surge, indicated by the volume profile. It confirms the local buyers’ interest at this level.
In case bitcoin is going up, I can also use Gann grid to suggest a scenario and offer some trading ideas for BTCUSD .
If Bitcoin price goes up, it is likely to rebound from Gann level at 4431 USD. When it is retracing towards the nearest local high at around 4338 USD, I may enter a long and hold it up towards the next Gann level at 4627 USD. In this analysis, I consider the key date for the short-term Bitcoin forecast that is on 3.12 at 03:00 GMT. Therefore, if the price hasn’t reached the target by this time, but it is going up, I can close at least a part of the position to go breakeven is the stop loss is triggered, or I can completely take the profit, if the indicators and candlestick analysis suggest signal a bearish correction.
I described one of the simplest ways to exploit those levels. I will describe more opportunities provided by Square of 9 in my next training article.
Here, I am about to finish another article, devoted to Delbert William Gann and his studies, which I applied to the BTCUSD pair. I hope this information is interesting and useful for you.
I wish you good luck and good profits!
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Price chart of BTCUSD in real time mode
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