The following chart shows the
ALT 1 AGGRESSIVE
same October Bean Oil with the
WAVE COUNT.
ALT 1 (Aggressive) Wave count.
Here, the software re-labels the
decline as an ABC. The software
logic drops the idea for a Five
wave decline and instead con-
centrates on the new rally
phase.
Concentrates
on the new
Please keep in mind that the ALT
rally.
1 (Aggressive) count should only
be used when the Oscillator re-
Oscillator exceeds 38% of
traces more than 38 % in the op-
W 3 peak
posite direction from the Major
Wave Three peak. In this ex-
ample, the Wave Three Oscillator
peak was minus 262. The 38% in
í W 3 peak
the opposite direction is +99.
The 38 % level where the oscillator exceeds can be drawn by using the Retracement tool in the Drawing Tools.
OVERLAP PERCENTAGE (OPTION):
By default, he software automatically allows a 17% price overlap between Wave Four and Wave One for Commodities. For Stocks and Indexes, the software switches to a 0% overlap.
The traditional Elliott rules do not allow any overlaps at all. However, from our extensive research, we have found that many commodity contracts tend to overlap and still con-figure to clean Five Wave sequences. However, you can change this overlap percentage based on your beliefs. Once you have changed the overlap, GET treats the Elliott Wave counts as Alternate counts.
ALTERNATE WAVE COUNTS ARE DISPLAYED IN GREEN BY DEFAULT
TO DISTINGUISH IT FROM THE DEFAULT COUNT DISPLAYED IN BLUE.
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Applying Technical Analysis
1 – 3 % OPTION – While labelling Elliott Wave counts, the default count allows the software to label Wave One anywhere between the start of the Five Wave Sequence and the 50 % of the length of (0 – 3). In some cases the software picks a pivot that is at the higher range and Wave One is labelled well into Wave Three. The user can override this and limit where Wave ONE is labelled as shown on the figure on the right.
3
DEFAULT
3
3
USER SELECTED 3
Wave One labelled
inside 50 % of the
length of
Wave One labelled
(0 – 3).
1
inside 20 % of the
length of
(0 – 3).
2
1
2
Start of Five Wave sequence
DEFAULT Wave
OPTION SET
One labelled in-
TO 20%. Wave
side 50% of the
One labelled in-
length of (0 – 3)
side 20% of the
length of (0 – 3)
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Applying Technical Analysis
Gann Techniques
W. D. Gann —
For some reason or the other, everything relating to Gann seems to have a mysterious flair.
Many publications carry this tradition and compose their material in a hard to understand manner. To fully understand this technique and to believe in it, one has to ignore this mystical taboo and dig into the inner-works of this collection of techniques. We will try to keep our presentation as simple as possible.
W.D. Gann used a collection of techniques. From our work, we have come to the following conclusion: the reason Gann was so accurate in his predictions was not due to any one single technique. It is due to his ability to use the right tool at the right time. He was a master at this.
He was an excellent mathematician and had a quick working mind. As an example, he could tell when a market was overbought without ever using an indicator. The Stochastics is a well known mathematical based formula to represent an overbought/oversold condition. Perhaps, Gann could calculate such an indicator in his mind by looking at the prices.
The GET approach is to take only the easily applicable Gann techniques and improve them.
Then add concepts to enhance them and, finally, reduce them to computer equations. Since computer equations are structured and straight-forward, you will also benefit in applying them manually.
Gann Angles And Lines —
We are all familiar with trend-lines. The main disadvantage of a trend-line is the requirement of at least two price points to connect the line. The Gann angle/line approach requires only one pivot price point and various lines can be drawn from this point. The concept behind Gann angles are described below.
Price swings caused
by trader’s emotion
(greed & fear)
Appropriate angles contain their price swings
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Applying Technical Analysis
Gann Angles And Lines
When prices rally off a low, the rate at which the market rallies and fluctuates is controlled by the fear and greed combination of the mass public trading that particular market. The fear and greed causes swings in the markets. This human behavior goes from one extreme to another in cycles of various degrees. These varying cycles can be defined within the parameters of certain angles originating from the price lows.
The task is to find the appropriate set of angles which can define the various cycles that represent the fear/greed swing of traders involved with an individual market.
Incorrect Approach
Same geometirc angle failed
to contain prices when the
Altered Price Scale
scale is altered.
The appropriate angles were not found overnight. It took Gann several years. With the help of computers and the right concept, we have been able to calculate the angles for most commodity futures traded in the U.S. and some overseas markets. Our angles are based on the past five to ten years of data. The core angle for each market is constant and does not change over time. The sensitivity and vibration may alter slightly, but the core angle has stayed the same.
The GET approach is to use constant angles for each market that define that particular market’s price fluctuations caused by the fear/greed emotions of traders. This is illustrated on the next page.
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Applying Technical Analysis
A Real-Time Example
True Gann Angle Ratio
Altering price scale will not
change true Gann Angles
Altered Price Scale
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Applying Technical Analysis
The Fear And Greed Cycle —
It is extremely difficult to predict the fear and greed behavior of traders in advance. However, we can overcome this difficulty in a roundabout fashion.
When a market makes a major low or bottom which results in a very large price swing, it is reasonable to assume that the general public has expressed their emotions to an extreme. In other words, at a major top, the greed of the traders has peaked and the subsequent market decline is due to the fear of the same traders. Having defined this, we can go one step further and state the following: When a major top is in place, the majority of trader emotions (greed, in this case) are synchronized for that moment in time.
Thus, Gann angles from such a major top, originate at the infancy of the next trader emotion cycle phase; Gann angles from a major top can better define the larger emotion cycle than Gann angles from a minor top.
In simple words: Gann angles originating from a major price swing are more useful in defining future price swings than Gann angles originating from a minor price swing. The GET software provides more importance to the major Gann angles.
Defining Price Swings —
This leads us to the question of defining major price swings. It is easy to look at a price chart and say
“this is a high,” or, “this is a low.” Our task was to teach the computer the same.
By measuring the percentage price swing from each high and low, GET software defines price pivot points as: P= primary, J = major, I = intermediate, and M = minor. (Illustration is shown above) T-93
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Applying Technical Analysis
Gann angles originating from primary lows/highs have higher priority in defining the future path for the trader’s emotional cycle. The next in line will be angles from major highs/lows, followed by the intermediate and minor pivots.
In general all Gann angles could provide support and resistance for price swings. However, the higher hi-erarchy angles, such as angles from primary or major pivots, typically provide a more sustained and stronger support/resistance.
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Applying Technical Analysis
USING GANN ANGLES WITH ELLIOTT WAVES
(for Waves 3 and 5)
When the market is moving up in a five wave
impulse, draw Gann angles going up from the
previous PRIMARY PIVOT HIGH. The angles
5
should provide resistance for the tops of wave three
and Wave Five.
3
P
4
1
2
2
1
4
P
3
When the market is moving down in a Five
Wave impulse, draw Gann angles going down
3
from the previous PRIMARY PIVOT LOW.
The angles should provide resistance for the
bottom of Wave Three and Wave Five.
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Applying Technical Analysis
USING GANN ANGLES WITH ELLIOTT WAVE 3
(for Wave Four)
When the market is moving up in a Five Wave impulse,
draw Gann angles going up from the previous PRIMARY
PIVOT LOW. The angles should provide SUPPORT
for the BOTTOM of Wave FOUR.
4
1
2
P
P 2