How to Use Gann Square of 52

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Apply a Gann trading line to predict the price movement of markets.
Apply a Gann trading line to predict the price movement of markets. (Image: Jupiterimages/Goodshoot/Getty Images)

W.D. Gann was an innovative investor who predicted market changes by using long-term time cycles. He accurately predicted the market rally of the 1920s and the bust of the 1930's. His system can help us understand the major cycles today. In particular, you can use the Square of 52 cycle to determine the market movements on a short-term basis.

Set up your trading software to view each period on a weekly basis. Usually there is a drop-down button that allows you to view the chart for different time periods. Maximize the screen until you are looking at several years of data.

Add the Gann trend-line indicator to the chart. Understand the principle that 52 weeks equals one square of the Gann trend line.

Divide the chart into eighths. In this case, 1/8th equals about 45 days or 6.5 weeks. This is an appropriate division of the Gann line. Make sure you are using calendar days and not market trading days, because the indicator is based on calendar time.

Look for reversals at each 1/8 interval. When the chart drops or rises sharply before the beginning of a period, it has a tendency to move the opposite direction back to the mean afterward. Use these trends to anticipate moves in the price of a stock. Use the weekly charts to guide your investment decision-making process.

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