Price Time Volume Investing

This is the second in a series of posts meant to provide a guide to those who have been emailing about my method. The first post discussed finding a significant range to analyze and monitor. Once a range is found that appears to be significant, then vertical lines called time Gann Angles are placed using the starting and ending point as 100% of “time”. Adding time cycles will make it easier to validate (or invalidate) the range you selected.

Overlaying a time cycle on the chart of the bull market of 1995-2000 makes it is obvious that the bear market low could have been anticipated from this range. The 50% retrace in time or price is always good for a change in trend.

Now the question: Would we have known for sure that it was “the” bottom? No. Of course not. But all the internals were pointing to a big move up in October 2002. If the time cycle also hit at that time then the confidence level is much higher.

I know this analysis is after the fact. But it really is easy to project these ranges into the future. Time cycles are only one piece of data though. If the market internals are oversold (at historic levels in 2002) then these cycles can help determine if the bounce is occurring at the correct time. Bounces that happen too soon can be traded. But knowing that the bounce is happening too soon will allow a trader to exit positions early with profits and not hold with hope until all profit is gone.

Some may wonder how I knew that 1995 was a good place to assign the beginning of the time cycle. My answer is that you don’t in 1995… or 1996… or 1997… but eventually you can look back at the chart and see when the move started. It isn’t necessary to know what the range is until it is complete. In 2000-2001 it would have been easier to look back.

What if we wanted to use the entire bull market from 1991-2000. This range also would have given clues as the 1/4 time cycle was approximately at the same time as the 1/2 time cycle in the shorter cycle.

And finally, what about the range of the of the bear market from 2002 to 2002. The 50% time cycle is approximately the end of the first significant move of the bull market that ended in 2004.

The beauty with the tools available today is that anyone can go back in time and determine if this analysis would have worked. I have looked at hundreds of ranges (from years to days) and it is amazing how often it does work. So what if the cycles do not work on a specific range? My guess is that there is a good chance that the range selected was not significant.

The next post in this series will be “Add Price Range Analysis”

Post Modified: July 2nd, 2008 at 11:58 pm

Tags:   How To · Market CyclesNo Comments