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 Understanding Trends & Trend Line Breaks

The purpose of this article is to show reader’s how I used my method to become quite cautious in October 2007. As a result of this caution I avoided the big losses that occurred from 10/07 to 1/08. It would be helpful to reader’s to go to www.stocksharepublishing.com and click on the “REIF PLUG IN TRADE SET UP EXAMPLES”. On that web page you can access the research paper I wrote back in 1993 that explained my method. In addition there are many more examples of trade set ups that I posted to the site during the past year or two.

In October 2005, Jeff Cooper and I presented a course that described my theory in detail at a seminar in Las Vegas. This two day seminar was filmed and saved on DVD’S which is now being sold by Trader’s Library, along with the 300 page manual. The title is “Unlocking the Profits of the New Swing Chart Method”. In this course, I take the reader through the Swing Chart behavior of the DJIA from 1928 to 2005. I also showed the power of using the Principle of Squares along with my Swing Chart Theory to improve trading results on any tradeable. In addition, I showed in agonizing detail how the Principle of Squares worked on the S&P 500 index from 1962 to 2005. I also showed numerous examples of how to analyze any market including stocks, commodities or currencies. The course provides numerous appendixes that can be used to help in the analysis of any tradeable. The key to my work is not just the swing chart plots, but the “behavior” of these charts once they turn up or down. I can not cover all of these things in this article, which is why I have agreed to publish several articles in future editions of Trader’s World. Before I show you how I saw the setup for a major top in October 2007, I will have to describe the principles I use in my analysis. There are four major principles in my theory. They are: The Principle of Squares; The Principle of Fractals; The Principle of Tests; and The Principle of Reflexivity. In order to help the reader follow my analysis, I will provide a short description of each of these principles.

The Principle of Squares is a mathematical representation of the Gann Square of Nine. Let’s assume you have a stock that made a low on it’s Yearly Swing Chart at 25. If we take the square root of 25 we get 5. We do this in order to convert price in to the degrees of a circle. As it turns out, if we add 2 to the square root of any number then re-square it, we get a price that is 360 degrees up in price. If we subtract it, we get a price that is 360 degrees down in price. In the case of the example above, 5 + 2 = 7, 7 x 7= 49. So we can conclude that 49 is 360 degrees up from 25. We can subdivide the circle in to any subdivision we desire by adding or subtracting divisions of 2, or multiples of 2 to the square root of the number, since 2 = 360° ; then 0.50 = 90°. So if we want to know the price of a stock that is up 180 degrees from its low, we add 1 to 5 and re-square it to get 36 .00. If we want to find 720 degrees up in price we add 4 to the square root of 25 (5+4=9) and then require it (9X9) to get 81.