As an addition to the "Swing-trading" article, we are talking mow abour swinf Forex.
Gann often mentioned such number series as cardinals - 4, 8, 16, 36, 54, 144 and odd-numbered 3, 5, 9, 11, 13, 25, 49, 63 and 121. Price likes there numbers, stops near them and turns. If price took cardinals, entire swing structure will consist of this series. That is to say, if the first swing was 8 bars, correction will be 4 or 8, and whole cycle of swing will be at least 54 or 144 bars.
As a rule, under momentum movement of price there is series of cardinals and under correction it is uneven, but exceptions may take place, when complex correction includes cardinals. When number series mix, there is a high probability that correction will be held for a long period of time and trading range must be found out with the help of swing.
Each swing may consist of smaller swings, number of bars in them and total number of bars in entire structure matter, because point of reversal along the time axis depends on that. Many of you will be surprised that an exact reversal time can be calculated on the basis of swings.
It happen, when price turns without updating High and Low and total number of bars in swing from High to Low are less than number series, but in such situations as a rule the pattern “inside bar” appears thereby adding number series and helping to define “breaking” time and reversal, when you can enter at once with a short “Stop”. Also “pin bar” pattern assists in defining ending time and reversal of swing. If “pin bar” is formed on one number of number series, such a “pin bar” can be used in work with no doubt. This number series can only be used on М1, Н1 and Daily time-frames.
Being aware of regularities of price movement along Gann number series, you can enter without waiting break up of swing with a short “Stop”. On this image we can see the swing formed of cuttings 1 -3 and through laying trend line we will get a triangle. Borders of swing-trading are defined, now we are waiting for entrance using Gann numbers.
For a start, we will consider the two first swings
The first swing in a triangle consists of 9 bars, which means that the next one will also be odd, but in this case on six bar, “pin bar” has been formed. In this situation we cannot involve “pin bar” in the work, because at least three more bars are required to form a swing, further situation gets more complicated and “inside bar” is formed followed by the second “inside bar”. Two controversies, the most complicated in swing analysis, nothing remains for us but to waiting for the ninth bar. In this case, the ninth bar breaks “inside bar” down and the tenth bar breaks swing up, therefore, we are wating for 11th bar and enter market on 12th.
As a result, the second swing has 11 bars, without updating with High, the third swing is 13 bars. The first swing of cutting 3 -4 consists of 4 bars meaning that the next will have 4, 8 or 16 – in this case 8. Since number is 12 and it is not from number series, upward movement will keep on, thus, only Sell for correction is opened, on third bar Sell is closed or is transformed to break-even. At that we consider total number of bars in triangle; on 50th bar one can enter with Stop next to the nearest Swing. In 6 point from triangle's border one can make enter for correction for three bars. In 8 point we see exit from triangle, because total amount of bars corresponds to number series 16, that is to day, one can enter to test triangle's border. Since total number of swing bars in triangle must be 49, growth must approximately be equal to this value – 36 or 54, in this case 36 growth bars.
All patterns are traded in the same way: swing + number series
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- How to trade with using of Gann Line?