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Aaron Lynch A question that many ask regarding the study of Gann is how does the ‘square of nine’ work? It is certainly not my intention in the space of the Trading Tutors newsletter to explain the intricacies of this tool as the best way to understand is to prove the concepts for yourself through further study.
However, in studying the ‘square of nine’ it’s firstly beneficial to understand a little about its history. Many incorrectly believe that Gann must have created or developed this tool as it is one that is often associated with his name. Deeper research will show you that this tool was used by ancient civilisations as a square root calculator and has been part of many cultures. The square of nine is a tool that is based on pure mathematics; this can be where some people find it gets a little heavy going. The basic premise of this tool is to start with the number 1 in the centre of the square and “spiral” the numbers out moving clockwise (or anti clockwise) by adding 1 to the previous number. The square of nine is sometimes referred to as a “spiral” calculator.
Gann relied very heavily on both numerical and geometrical relationships within markets to determine future price movement. The easiest way to approach the 'square of nine' is to think of its capability in the form of support and resistance in price. There are more advanced techniques that will involve the use of time as your understanding grows. It is also a tool that some traders focus on in a singular way. In my trading however, I use this tool as a confirmation indicator in conjunction with other tools to trade a set-up in the market.
A great recent example of price support and resistance is on the oil market. This contract CL-SPOTV has been a market that we have focussed on considerably this year in the Trading Tutors newsletter and many of our workshops. The chart below shows the oil contract since the important June low of this year at $35.52. Running the 'square of nine' tool from this point (available in the Ultimate Gann Software) you notice the points of support and resistance over the coming months, particularly around the 90, 180 and 270 degree points.
Chart 1
click chart for more detail
Combining this analysis with the existing price and time tools can add some confirmation to your view on a markets move. There is much to encompass within the study of the ‘square of nine’. I would like to point out that Noel Campbell will be doing a break-out session on this technique next year at TradeFest: www.tradefest2005.com.au. For those interested in extending their knowledge this will be a must.
Finally as this is my last contribution to Trading Tutors for 2004 I would like to take this opportunity to thank all the students of Safety in the Market for their ongoing support in 2004 and wish you a Merry Christmas and profitable 2005.
Good Trading
Aaron Lynch
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