New Techniques  |  OCT 2004

Fibonacci And Gann Projections by Dennis D. Peterson

Stocks & Commodities V. 22:10 (28-34): Fibonacci And Gann Projections by Dennis D. Peterson It’s time to have a little fun and see what a day-at-a-time replay can reveal in terms of future projections. In 2002, I wrote an article in Working Money about using Fibonacci projections. Since then, the charting techniques in eSignal have improved considerably and with the generous help of eSignal’s Jason Keck, I decided to revisit the topic. Along the way, I thought, why not throw in couple of other goodies, like Gann’s square of nine and a retracement readout? The Fibonacci projections used here were first described by technician Robert Miner, who proposed this system in his article “A Spreadsheet For Time Ratio Analysis” in the December 1992 STOCKS & COMMODITIES. THE OBJECTIVE The system I will describe attempts to predict future turning points — that is, pivot peaks or valleys. It finds these turning points by applying Fibonacci ratios to the most recent swings. When it comes to trading, it’s helpful to rely on a system, since it removes emotion from trading. But it wouldn’t be wise of you to rely on a system that has not been backtested. The challenge when backtesting this particular system comes when the most recent swing depends on the point in time (peak or valley) where you start the backtesting. In a typical price chart, each point will have a unique set of projections, and in order to keep track of them, you need to have a unique identifier for each. But visually, this would be confusing. Ideally, you need to choose a point in time in the past, march forward one bar at a time, and watch how the actual swing points either hit or miss a projected swing point. This is made possible by eSignal’s “Replay” function.

by Dennis D. Peterson