Gann stated that there are nine mathematical proofs of point of resistance. These are: Angles from tops and bottoms
„h Angles running horizontally
„h Vertical angles or time periods ending major or minor cycles
„h The crossing of important angles starting from '0' at the time of top or the breaking of angles starting from '0' at the time of bottom
„h The crossing or coming together of angles starting from double and triple bottoms or double and triple tops
„h The crossing of double or triple tops or breaking of double or triple bottoms
„h Resistance points in the past movement of an individual stock
„h Volume of sales
„h Squaring of Time and Price
Gann's Trading Rules
Rule 1 Determine the Trend Determine the trend of the index that represent the market you plan to trade in. Use the 3-Day Chart for averages and the 9-Point Average Swing chart to determine the right time to buy or sell.
Rule 2 Buy at Single, Double and Triple Bottoms Buy at double and triple bottoms or on single bottoms when they are nearer previous old bottoms or tops or resistance levels. If the stocks decline to the same level the 4th time, in most cases they will break the bottom and continue down. The converse is true for tops (sell).
Rule 3 Buy and Sell on Percentages Buy or sell on a 50% decline from any high level or a 50% advance from any low level so long as these reactions or rallies are with the main trend. The most important resistance levels are 50% and 100% and the proportionate parts of 100%.
Rule 4
Buy and Sell on 3 Weeks' Advance or Decline Buy on a 3 weeks' reaction or decline in a Bull Market when the main trend is up, as this is the average reaction in a strong Bull Market.
Rule 5 Market Moves in Sections Stock market campaigns move in 3 or 4 sections or waves. Never consider that the market has reached final top when it makes the 1st section in a move up.
Rule 6 Buy or Sell on 5 to 7 Points Moves Buy or sell individual stocks on reactions of 5 to 7 points. Follow the rules and do not take profits until there is a definite indication of a change in trend.
Rule 7 Volumes of Sales Study the total volume of sales on the stock exchange in relation to time periods and using this to determine when the trend is changing.
Rule 8 Time Periods The time factor and time periods are the most important in determining a change in trend because Time can over balance Price and when the Time is up the Volume of sales will increase and force prices higher or lower.
Rule 9 Buy on Higher Tops and Bottoms Buy when the market is making higher tops and higher bottoms which shows that the main trend is up. Sell when the market is making lower tops and lower bottoms which indicates the main trend is down.
Rule 10 Change in Trend in Bull Market A change in trend often occurs just before or just after holidays. Rule 11 Safest Buying and Selling Points It is always safest to buy stocks after a definite change in trend has been established. When it starts to advance and crosses the top of the 1st rally, it is the safest place to buy as the market has already given an indication of an uptrend.
Rule 12 Price Gains in Fast Moves When movement on averages or individual stocks are far above normal, it will not last very long. ******************************************
