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Cornelius Luca FX Concepts, Inc. Fibonacci versus Gann Retracements versus Extensions

Cornelius Luca FX Concepts, Inc. Fibonacci versus Gann Retracements versus Extensions Market Technicians Association September 10, 2007.

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Cornelius Luca FX Concepts, Inc. Fibonacci versus Gann Retracements versus Extensions

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  1. Cornelius Luca FX Concepts, Inc. Fibonacci versus Gann Retracements versus Extensions Market Technicians Association September 10, 2007 FX CONCEPTS, INC. • 225 West 34th Street • Suite 710 • New York NY 10122 • tel: (212) 554-6800 • fax: (212) 554-6905 • www.fx-concepts.com

  2. Presentation based on these books

  3. The Business of Currency Management • Currency Research Provider since 1981 • Systematic approach to trading • Unique focus on market cycles • Technical Analysis • Awarded 1st Mandate to manage money in 1987 • Traditional currency overlay • Alpha currency overlay • Leveraged absolute return programs • One of the World’s leading independent Currency Managers • Approximately $12.5 billion in assets under management

  4. Beta: How Currencies Generate a Return FX Beta is the return provided by simple strategies that work over time in the currency markets The main betas are: • Trend (Direction) • Carry (Yield) • Volatility (Options)

  5. Percentage retracements All trends are subject to price retracements and reversals. Trend analysis should help you identify trend reversals.

  6. What Clients Need • Levels • Timing • “Objective” view of the markets

  7. Retracement Analysis ObviousNot obvious

  8. Retracement Analysis

  9. Percentage retracements All trends are subject to price retracements. There are two key sets of percentage retracements: 1. The Fibonacci ratios (Popular) 2. The Gann ratios (Very useful)

  10. Percentage retracements Gann ratiosFibonacci ratios .125 .146 = (-3√5 + 7)/2 .25 .236 = .6183 (or .618*.382) .375 .382 .5 (really) .5 (not really) .625 .618 .75 .786 = √.618 .875 .854

  11. Ratio Analysis Retracement methods: 1. Horizontal Lines 2. Fan Lines 3. Arcs 4. Free Angle Extension methods: 1. Horizontal Lines (Price) 2. Vertical Lines (Time)

  12. Fibonacci Sequence and Ratio 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, 1597, 2584, 4181, (etc.)

  13. The retracements of an initial trend remain in effect for as long as the original high and low remain in effect. Golden ratios of multiple moves

  14. Fibonacci retracements (monthly)

  15. Fibonacci retracements (weekly)

  16. Fibonacci retracements (daily)

  17. Fibonacci retracements (hourly)

  18. Multiple Fibonacci retracements

  19. William Delbert Gann Gann developed a complex set of mathematical Methods based on time and price analysis, which helped him make 264 successful trades out of 286 transactions in various stocks in only 25 market days in October, 1909.

  20. Trading strategies He had different strategies for four situations: • Bull market • Bull market top (reversal from bull to bear market phase) • Bear market • Reversal phase from bear to bull market

  21. Importance of number 3 Majority of moves will generally occur in time period of three - days, weeks or months. Never trade in the direction of the trend on its third day.    

  22. Nine mathematical proofs of any point of resistance • Angles from top and bottoms, • Angles running horizontally (previous tops and bottoms) • Time cycles (vertical angles) • Crossing of important angles originating at zero • Crossing or coming together of angles from double or triple tops or bottoms • Crossing of double or triple tops or bottoms • Past resistance/support • Volume of sales • Squaring of time and price

  23. Important features of Gann analysis 1. Geometric forms 2. Geometric angles 3. Ratios 4. The squaring of price and time 5. The cardinal square

  24. Gann percentage retracements Gann attached importance to the 1/8 breakdowns along with the 1/3 and 2/3 retracements. Advantage? Smaller steady steps, more signals. 123

  25. Gann percentage retracements

  26. Gann percentage retracements

  27. Fan Lines • While most retracements focus on horizontal lines drawn at specific percentages, the retracement analysis can be enhanced by using fans based on the same percentages. • Therefore, you can draw fans based on the Dow, Fibonacci and Gann percentage retracements.

  28. Fan Lines B The fan lines are based on retracements. C A 50

  29. Fan Lines • Measure the range of a trend. • Divide it into the ratios that you like (Fibos?) • To plot the first fan line, connect the origin and the .382 of the range. • To plot the second fan line, connect the origin and the price at the .618 level. 51

  30. Fan Lines

  31. Fan Lines

  32. Fan Lines

  33. Gann geometric angles • The core line, (anchor line), which connects the extremes of the trend is represented as 1X1. • Steeper lines are determined by a ratio of 1X8, 1X4, 1X3 and 1X2. • Flatter lines are determined by price and time ratios of2X1, 3X1, 4X1and8X1.

  34. Time cycles on a geometric square The 45o angle in the most important 52 39 26 13 0 13 26 39 52 www.LucaFXTA.com

  35. The steeper (1X8, 1X4, 1X3 and 1X2) lines are not really useful. • Focus on the flatter lines: 2X1, 3X1, 4X1and8X1.

  36. Gann fan lines

  37. Gann fan lines

  38. Gann fan lines

  39. Arcs • Those looking for a time target in addition to the price target might consider arcs, also based on percentage retracements. • Plot the retracements on the anchor line and draw arcs from either the peak of an uptrend or the trough of a downtrend.

  40. Fibonacci arcs Fibonacci arcs provide both price and time objectives. Divide the length of a trend by the Fibonacci ratios at .382, .50 and .618. With a compass, extrapolate these levels in the future in order to achieve price and time targets for retracements. 61

  41. Fibonacciarcs 62

  42. Fibonacci Lines, Fans and Arcs

  43. Fibonacci retracements of channels (John Taylor)

  44. Gann Geometric Forms • Gann employed other geometrical forms, such as circles. • A circle has 360 degrees, and this number, along with fractions of 360, is omni present in his work. • Gann extrapolated 30, 90, 120, 180 and 360 days from significant chart points. • These forward periods are potential reversal dates. • The secondary reversal dates are 45, 135, 225 and 315.

  45. Gann Geometric Forms

  46. The Gann Emblem Pointer 91 ¼ days 121 2/3 days 182 1/2 days 273 3/4 days 243 1/3 days

  47. The Cardinal Square – USD/JPY Application

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