Gann's Time Factor, Key Commodity Trading Strategy
A key characteristic of W D Gann’s trading system is the Time Factor, which he used as a foundation stone for all his Annual forecasts on how he saw commodities performing.
According to Mr Gann everything moves in cycles as a result of the natural laws of action and reaction.
He believed the cause could be worked out a number of years in advance.
The trading system architecture he constructed in effect says that the future is but a repeat of the past.
You can now subscribe to the free Commodity Universe Ezine below, and get the latest articles on the commodity sector . Just your first name and email. It's as easy as 1-2-3! These are truly bold statements and have stood the test of time in commodity trading circles.
So how did the legendary forecaster of commodity prices come to creating this time factor principle?
While studying the past he discovered which cycles repeat in the future. So to accurately forecast the future, his system says we must understand the major cycles.
Gann also forecast the 1930’s depression and the US entry into the Second World War in 1941. Most money is made when fast moves and extensive, volatile fluctuations happen near the end of major cycles.
Mr Gann experimented systematically, comparing past market movements to find the major and minor cycles, and so he could determine when the cycles would be repeated in future years.
By carrying out extensive research and gathering wide range data, Gann could predict which cycles were most likely to be reliable. Major and Minor Cycles
Looking at this time factor, which are the great cycles where we observe high and low prices over long time periods?
The Major Year Cycles: 90 year, 82-84, 60, 49-50, 30, 20, 15, 13 and 10 years.
And the Minor Year Cycles: 9, 5, 3, 2 and 1 year.
So the future is a repeat of the past, and the time factor is most important when we try to understand market movements.
Study yearly high and low charts over a long period of time and you will see the years when Bull markets form and the years when Bear markets start and finish. Gann viewed a 10 year cycle as a campaign, with certain years of a decade showing qualities similar to years in previous decades, for example, 1982, 1992, 2002.
So if you can get a grip of Gann’s forecasting rules and have a great trading strategy you will find you can get into and importantly out of the commodity market at the right time.
History of Commodity Prices Gann accumulated commodity trading data as far back as the 18th century, in fact from 1730. This is where the time factor really comes into play if you adhere to these principles.
What are the benefits of these data?
Well, for one thing they will show you how even the commodity bull market which started around 2000 and still going in 2008 is small in the overall scheme of things.
Just look at these growth rates and again the importance of the time factor:
These impressive rates show what a commodity trader following Gann’s trading system could achieve over comparative timescales.
If you combine W. D Gann’s rules with a look at the fundamental analysis such as global crude oil reserves, continued strong demand for industrial metals and low levels of food inventories, then the future looks promising for the commodity trader.
The time factor gives us a wealth of data to plan our trading strategy and the proper perspective from which to see the long term and short term trends in commodity prices.
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