As mentioned in previous articles from this author, as well as many of the greats such as W.D. Gann, one of whom I actually learned the concept from, TIME is an important element in making profits in the Futures or Equities market. It is the deep belief and opinion of this author/trader that this element should be available FIRST before even considering anything else. The second element, and one which completes all the requirements of market information needed, is of course PRICE.

The markets are moved by perceptions of a large mass of people, and they tend to divide into many camps. Yet, the remarkable thing about this is that no matter how aligned or divided their individual perceptions are, once it has been placed into action, the market tends to make turns in areas that are in complete agreement with natural laws. Yes, you can use mathematics to find all the areas of which the masses will stop moving a market and go the other way.

To uncover these areas would provide the astute trader with the second half of the TIME/PRICE equation. Once this marriage is complete, there is no more that needs to be known about the market itself, other than how to get in and out. Knowing 'when' and 'where' the market is likely to turn makes other devices unnecessary.

There are many techniques that have become part of the public domain in relation to finding PRICE, and some of these are really good. One such technique was published by W.D.Gann, of which I will share with you here in this article.

Gann's observation of the markets brought him to the conclusion that the markets moved to and fro within the confines of natural mathematical laws. This author agrees completely, knowing that 'all things' are connected by natural laws that exceed the current ability for man to understand. Yet, as Gann was able to discover, some of this information is available and within our grasp that can help a trader discover PRICE with a minimum of risk.

Gann noted that the halfway point in a market range from a MAJOR BOTTOM and a MAJOR TOP was a significant support/resistance area. Once reached, it may in turn create MINOR ranges, where the market has turned between a MAJOR TOP and a MAJOR BOTTOM to create a MINOR TOP and a MINOR BOTTOM, or a SUB TOP and BOTTOM if you will. Halfway between this range again provides another LEVEL of support or resistance.

For example: Say you take the LOWEST price and the HIGHEST price the market has ever made. You then take the price DIFFERENCE of this MAJOR TOP and BOTTOM and divide by two. The result becomes one of this markets support/resistance LEVEL. Now, suppose after this MAJOR TOP is made, the market then comes down to our halfway LEVEL price and makes a bottom. We can now take the range (difference) of the last MAJOR TOP and this new MINOR BOTTOM, divide it by two as well to get another support/resistance area for this market. Each time these support or resistance areas form another TOP or BOTTOM, you then have another range of which to find the midrange point for support and resistance.

Now, there are other things to consider here. Although the halfway point MANY TIMES provides support/resistance to prices, there obviously are going to be times it will fail to do so. What Gann had discovered was that there are other areas as well that provide such opposition to advancing prices. Here is another simple function one can do to discover these PRICE LEVELS.

Take the range from a market BOTTOM to a market TOP. The best to use are those with some width to them, that is, some time has elapsed from one extreme to the other. A few weeks or more is best. Now, divide this range by 8, providing you with 12.5% of the total range. Now, add this value to the BOTTOM price for your first PRICE LEVEL. As well, until you reach the market TOP you used for the range, keep adding this value to the last PRICE LEVEL you completed, effectively dividing the range into eight equal parts. You may first notice that the halfway price is included as well. What you have done is uncovered other areas of support or resistance that most likely resist market prices once the halfway point gives out.

Take your charts out and try to for yourself. You will find it quite fascinating on how the market moves within these divisions. So, if you have already solved for TIME by whatever means is available to you, you can now determine with a high degree of confidence the PRICE to which you can enter a trade.

Rick J. Ratchford has been trading since 1989 and since 1996 is an Analyst for ProfitMax Trading Inc., a membership for traders specializing in the advance forecasting of market tops and bottoms.

http://www.profitmaxtrading.com "Know Today the Market Turns of Tomorrow!"

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