How to Day Trade Square of Nine. The Square of Nine trading method, also known as Gann's pyramid, is a way of using geometry to forecast the moods of the market. The two variables at issue here are time and price. For instance, the most extreme market reactions that are typically seen, such as very high highs and low lows, appear to occur during weeks that are squares of odd numbers.
Trade stocks according to cyclic principles, geometric patterns and square roots if you want to beat the system--if W.D. Gann is to be believed, that is. Mr. Gann, the inventor of the Square of Nine principle, espoused this system about a century ago, and it's still going strong today, with software available to help you calculate the best time and price for your trades.
Know that the Square of Nine theory puts time and price into a graphic representation and measures the angle between them. The theory is that, when the angle is at or close to 90 degrees, the stock will experience a major shift.
Keep your eye on a stock or industry and watch for highs and lows for specific time periods, from days to months to years. Calculate angles between these "tipping points" and the next day's or week's prices. It's usually easiest and fastest to simply allow Gann software to make these calculations for you.
Give the variables of time and price equal weight. This will allow you to see the relationship between them on a 1:1 scale, which is what's needed for angle calculations. It isn't the numbers that are important but the spatial relationships between the variables.
Day trade your stocks, mutual finds, bonds, currencies or other commodities using this system by understanding when an angle is ascendant, when it is descendant and where the price is in relationship to these angles. The Square of Nine theory proposes that a stock price will continue to move in a certain direction within an angle until it breaks the angle.
Know that this stock-trading theory uses past stock or commodity performance to predict future movement, which is something that many market pundits say isn't always viable. However, if you choose to day trade using the Square of Nine principles, know that Mr. Gann was firmly convinced of the cyclic nature of the market and the repetitive behaviors of both stocks and market players.