WD Gann and Time in Financial Markets

Natural Cycles: The Rhythm of the Markets

For Gann, the most significant cycles are those related to natural phenomena, particularly the movements of celestial bodies. Some of the key cycles he identified include:

• 90-year cycle: Fundamental to the stock market, it's twice the 45-year cycle.

• 84-year cycle: Correlated with the period of Uranus' revolution around the Sun.

• 60-year cycle: Crucial for the stock market, it allowed Gann to predict the 1929 crash.

• 49-50-year cycle: Relevant for extreme highs and lows in the grain and stock market.

• 45-year cycle: Associated with the synodic cycle of Saturn and Uranus, important for the American market.

• 30-year cycle: Related to Saturn's orbit around the Sun.

• 20-year cycle: Linked to the conjunctions between Saturn and Jupiter, one of the most relevant cycles.

Gann argued that by studying different periods and cycles, one could observe how the market repeated price analogies in similar time periods of a certain previous cycle.

Minor Cycles and the Importance of the Number 7

Gann identified minor cycles of 14, 13, 10, 7, 5, 3 and 2 years. In particular, he attached great importance to the 7-year cycle, considered the number of time, arguing that panic and depressions occur in the stock market every 7 years, with extreme fluctuations every 49 years (7 times 7).

Harmonic Analysis: Squaring Time and Price

Gann integrated financial astrology, studying the positions of the planets and their influence on the markets. He used analysis and price/time chart patterns to confirm trading signals. The squaring of time and price is a key concept that emphasizes the harmony between duration and amplitude of market movements.

The Bible as a Source of Financial Wisdom

Gann frequently integrated biblical references into his financial theories. An emblematic example is the quote from Ezekiel "wheel in a wheel," which Gann used to explain the complexity and interconnectedness of market cycles.

He believed that every law of nature included cycles of different durations: major, minor, and intermediate. This vision was reflected in his analysis of financial markets, where he identified multiple cycles that influenced price movements.

For Gann, the Bible was not just a religious text but a source of wisdom applicable to finance. He believed that biblical teachings offered a deep understanding of natural cycles and, consequently, of financial markets. The "wheel in a wheel" of Ezekiel symbolized for him the complexity of the cycles that govern market movements, where each smaller cycle is inserted into larger cycles, all interconnected.

According to Gann, every event in the financial market was influenced by cycles of different duration, just as described in the Bible.

The Importance of Cycles in Gann's Theory

For Gann, each cycle was influenced by previous cycles and contributed to forming future cycles, creating a perpetual cyclical structure. This concept of interconnected cycles was central to his theory, allowing him to predict market movements with surprising accuracy.

Gann believed that understanding these cycles was essential for any trader who wanted to successfully predict future market movements. It was his ability to connect ancient principles to modern trading strategies that made him a legendary figure in the world of finance.

He argued that:

• Major Cycles: These are long-term cycles that span decades and are fundamental to understanding secular trends.

• Minor Cycles: They cover shorter periods and are crucial for medium-term analysis.

• Intermediate Cycles: They bridge the gap between major and minor cycles, offering a detailed view of market fluctuations.

Practical Application: Example of the Nasdaq

A notable example of the practical application of Gann cycles is represented by the prediction of extreme fluctuations in the Nasdaq in 2020. The Nasdaq, born on February 8, 1971, experienced its 49th year of life in 2020. According to Gann, these years are critical for observing significant swings in financial markets.

In 2020, the Nasdaq recorded significant fluctuations, confirming Gann's theory. This period highlighted extreme price movements, reflecting the cyclical nature that Gann had predicted.

Gann argued that significant events such as extreme lows and highs tend to repeat themselves in these 49-year cycles, offering investors a valuable opportunity to identify potential turning points in financial markets.

The case of the Nasdaq in 2020 represents a concrete example of how cycle analysis can be used to predict and understand long-term market movements.

Conclusion: Gann's Legacy in Modern Trading

Gann's approach, based on harmonic analysis and market cycles, continues to be relevant in modern trading. His emphasis on understanding natural cycles and using multiple analysis tools offers traders a unique perspective for interpreting and anticipating financial market movements.

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