InvestingSuccess

To most people, price action on a stock is often regarded as a random event. Many years ago, W.D. Gann recognized that price action was not random. He realized that price action was related to the square root.

Take a significant price high (or low). Express that price as either a 3 or a 4 digit number. For example, $43.25 would be 4325.

Take the square root. Subtract 2. Re-square the resulting number. Repeat. Repeat. Each time, draw a horizontal line across the chart at the calculated price. If dealing with a significant low price as a start point, you will add 2 each time.

Take the significant price start point and take the square root. This value will be your time factor (in chart bars). Draw a vertical line at these intervals. For example the root of 4325 in round figures is 66. Every 66 bars on the chart, draw a vertical line.

Here is an example of Micron Technology (MU) using a significant high as a start point.

Notice how many of the subsequent high and low swing points touch (or nearly touch) one of the horizontal lines. Such is the harmony between price action and Nature.