GANN SQUARE OF NINE

Trading System
How to execute trades based on this system

To do intraday trades based on this system,

You need to take the LTP of the index or stock a er 9:05AM i.e. the
opening me in the morning!
The full form of LTP is the Last Traded Price. The price at which the last
trade occurs between the buyer and a seller in the stock exchange. The LTP
value varies in the live market.
Ideally You should take the Weighted Average Price between 9:00 AM -
9:15 AM (Pre-market Range) because of vola lity caused due to price
discovery in the ini al minutes.
However, a er 9:30 AM, You can just take the LTP!
This is in context of Indian Share Market when the pre-market starts from
9:00 AM and the market starts from 9:15 AM.
This system is not developed by Gann. It merely shows a vague use case
for Gann Square of 9 Calculator with 22.5 degree as a base.

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How to find Targets

Once We are done making our Gann Square, We know the buy and sell
levels from the support and resistances.
But how to find targets?
Use the same numbers as Pivots i.e. The resistance level will become
target if buy trade is triggered.
The support level will become target if sell trade is triggered.
Keeping slight versa lity, Let’s keep the Targets at 99.95% of resistance and
100.05% of support! So -
● Target for Buy Trade = Res * 0.9995
● Target for Sell Trade = Sup * 1.0005

So far, you have learnt -

● The concept of Time frames in Gann Theory on context of
construc on of the Gann Squares.
● How to create Gann Square of 9 calculator of Size 3 by using a base
of 22.5 degree to get Intraday Pivot Points.

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While we all recognize W.D. Gann as the brilliant mind behind the Gann
Square of 9, he didn't provide detailed instruc ons on how to use it.
Instead, he kept the finer points of its applica on somewhat of a mystery.
As a result, other traders who were passionate about Gann's approach
took it upon themselves to fine-tune and popularize this strategy, eleva ng
it to the prominent posi on it holds today.
But does it strategy works?
As of now, there hasn't been a comprehensive analysis or report available
for this strategy. In this sec on, we will walk through a detailed,
step-by-step backtes ng process of this well-known strategy, providing a
thorough and clear explana on at each stage.

Micro Condi ons for Strategy Stability

In the realm of market dynamics, it is impera ve to consider micro
condi ons that can significantly influence the stability and effec veness of
our strategy.

Market Vola lity at Opening

● One notable factor is the inherent vola lity observed at the
commencement of trading hours. This heightened vola lity can
largely be a ributed to liquidity fluctua ons within the market.
● Addi onally, brokers o en face a surge in trade requests during
this ini al period, leading to a notable number of trade rejec ons
as their systems contend with the influx of orders triggered at the
market's opening.

Op mal Entry Point

Consequently, it is prudent to consider an entry point at a later juncture,
specifically at 10 minutes past the market's opening, which typically aligns
with 9:25 am. It is essen al to note that Gann's strategy is not inherently
bound by specific meframes but operates autonomously.
Our choice of ming is rooted in a holis c analysis of market behavior and
prac cal considera ons influenced by technological constraints.

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Exit Time Condi ons

In the context of an intraday trading strategy, it is crucial to establish clear
exit me condi ons to op mize our trading approach.

Market Closing Time

Our focus is on intraday trading within the Indian market, where the
trading day concludes at 15:30. However, it's essen al to be aware that
brokers have the discre on to trigger autosquare off procedures at
unpredictable intervals a er 15:15.

Op mal Exit Time

Considering the above, we recommend closing the trade at 15:10. It's
important to note that this specific me selec on is somewhat arbitrary.
Despite this, it allows us to operate within a meframe that avoids
poten al autosquare off ac ons by brokers.

Trade Closure Procedure

In summary, if a trade remains ac ve and has not yet reached its
predetermined stop loss or target by 15:10, it will be subject to an auto
square-off.
This protocol ensures that our intraday posi ons are efficiently managed
within the market's opera ng hours while taking advantage of the leverage
available for stocks trading during intraday sessions.

Comparing Equity Curves of Reliance and Vedanta

In the following sec on, we present two Equity Curves, which are a
graphical representa on of the cumula ve Profit and Loss (P&L) over me.

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This curve is a result of deploying the strategy on Reliance, a prominent

company within the Indian Stock Market.
It's worth no ng that Reliance holds a unique posi on as one of the most
liquid stocks in India, and its diversified nature allows us to liken it to an
index due to its widespread influence in the market.

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The presented Equity Curve has been generated through the deployment
of the strategy on Vedanta, a dis nct company within the market. Vedanta,
characterized as a mining company, exhibits a notable correla on with
commodity prices. Moreover, a significant por on of Vedanta's valua on
derives from its holdings in various commodi es.
It's par cularly interes ng to note that W.D. Gann was primarily renowned
for his exper se in trading commodi es. Commodi es, as dis nct from
stocks, possess unique a ributes that make them a dis nct asset class
within the financial landscape.
They tend to be less suscep ble to manipula on, owing to their inherent
market dynamics. Unlike stocks, where a mul tude of events can influence
performance and where the lifespan of companies is o en limited,
commodi es remain enduring assets, with none facing the risk of
ex nc on. This enduring quality of commodi es adds an intriguing
dimension to their appeal in the world of trading and investment.

Comparing other trading metrics

Here are some key metrics of this strategy’s deployment over Reliance -

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The data, coupled with the displayed Equity Curves, unmistakably

illustrates a noteworthy pa ern of substan al and persistent losses
associated with the strategy. This consistency in losses is a cri cal
observa on and demands a thorough analysis and reassessment of the
strategy's parameters, risk management, and overall suitability for the
current market condi ons.
Here are the same metrics of the strategy deployment over Vedanta -

The strategy in this backtest analysis has been deployed over a capital of
5,00,000. In the both cases of Vedanta and Reliance it has gone beyond
100% drawdown.

Gann Square of 9 is a loss making strategy!

The backtes ng results unequivocally demonstrate that the Gann Square
of 9 strategy not only fails to perform as expected but actually yields
favorable results when taking the opposite trade approach. In other words,
selling when there is a buy entry appears to be more profitable, with the
buy target serving as our stop loss for the sell trade, and so on.

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Or, is it Misinterpreted?
It is also making the loss flawlessly!
Indeed, when a strategy does not perform with flawless precision, it
warrants careful considera on and scru ny. While this par cular strategy
has garnered considerable a en on and adop on, it is apparent that there
may have been misinterpreta ons and blind replica on, poten ally
leading to unfavorable outcomes.

Deploy The Reverse Trading Strategy

The strategy employed here takes a contrarian approach to the widely
accepted interpreta on of the Gann Square of 9.
In this context, the strategy entails a reversal of the typical direc ves.
Specifically:
● "Sell if the price goes below x" is transformed into "Buy if the price
goes below x."
● "Buy if the price goes above x" is converted into "Sell if the price
goes above x."
This strategic shi uses Gann Square of 9 as a calculator for the levels but
just changing the way the levels are used. And, it will grow the capital
beyond double if it gives similar return like before.
We are essen ally wagering against the efficacy of the ini al interpreta on
of the strategy, expec ng it to perform subop mally.
It's par cularly intriguing to note that our journey of exploring the
tradi onal and widely adopted strategy has led us to the discovery of a
profitable alterna ve.
This process has involved challenging the effec veness of the original
strategy and, in doing so, has illuminated a more successful path forward.
However on a different note, here is another observa on -

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The above data is from Reliance’s and the below data is from Vedanta’s.

In both cases, it's worth highligh ng that Tuesday consistently stands out
as the day when the strategy incurs the highest losses, closely followed by
Friday. This observa on implies that our contrarian strategy should ideally
yield the most significant profits on these par cular days.

However, it's essen al to exercise cau on when interpre ng these results,

as achieving such precise historical pa erns may have limited probability.

The fact that our backtes ng only covers a four-year period means that the
sample size is rela vely small, but nonetheless, this observa on remains
intriguing and merits further inves ga on.

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Some prac cal rules of W.D. Gann that can be applied

Here are some prac cal rules derived from the teachings of W.D. Gann
that can be applied in trading:

1. Resonance of Numbers: While Gann's trading methods have not

been scien fically proven, the principles of pa erns and numerical
harmony he discussed resonate not only in mathema cs but also
in various sciences, including trading, architecture, and design.
2. Friday's Impact: If the high price occurs on a Friday (the last
trading day of the week), it suggests that the following week is
likely to see higher highs. Conversely, if the low price occurs on a
Friday, it indicates the poten al for lower lows in the next week.
3. Day of the Week Trends: In a robust uptrend, weekly lows tend to
be established on Tuesday. Conversely, in a strong downtrend, the
weekly highs are o en reached on Wednesday.
4. Four-Week Indicator: A breach of a four-week high or low can
serve as a reliable indicator of further highs or lows, respec vely.
This roughly corresponds to a one-month meframe.
5. Ra o Pa erns: The 9:5 ra o suggests that if a price trend persists
for 9 consecu ve days, it may correct for 5 consecu ve days.
Addi onally, double bo oms and triple bo oms on a monthly
chart, with a minimum gap of 6 months, can signal the beginning
of a fresh uptrend, while double tops and triple tops in monthly
charts a er a similar gap can indicate a fresh downtrend.
6. Support Levels: Generally, the 50% mark of the last selling price
acts as a strong support level for a stock. A price falling below this
level may not be a suitable choice for investment.
7. Three Types of Pa erns: Gann theory can be applied to iden fy
and interpret three main types of pa erns in trading: Time Study,
Price Study, and Pa ern Study. While the effec veness of Gann's
approach remains ques onable, it serves as an important step in
recognizing and understanding pa erns in trading.

These rules provide a framework for traders to explore and poten ally
incorporate aspects of Gann's methodology into their trading strategies,
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always with a cri cal and cau ous approach due to the specula ve nature
of Gann's work.

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