W.D. Gann, a renowned trader and market analyst, developed numerous trading strategies based on mathematical principles and geometric patterns. One of his notable strategies is the Quarterly Opening Price Trading Strategy. This strategy focuses on identifying key price levels based on the opening prices of quarterly timeframes. In this article, we will explore the basic principles of Gann’s Quarterly Opening Price Trading Strategy and how it can be applied in practice.
Understanding Gann’s Quarterly Opening Price Trading Strategy
- Timeframe Selection
Gann’s Quarterly Opening Price Trading Strategy utilizes the opening prices of quarterly timeframes to identify significant price levels. A quarterly timeframe consists of three months or approximately 90 trading days. This timeframe provides a broader perspective on market trends and helps identify long-term support and resistance levels.
- Calculation of Quarterly Opening Price
To apply the strategy, calculate the quarterly opening price. This is done by taking the opening price of the first trading day of a new quarter. For example, if you are trading on a daily chart, identify the opening price on the first trading day of each quarter (January, April, July, and October) and mark it on the chart.
- Identification of Support and Resistance Levels
Once the quarterly opening price is determined, it serves as a reference point for identifying potential support and resistance levels. Gann believed that significant price movements often occur around these levels. Here’s how to identify support and resistance levels using Gann’s Quarterly Opening Price Trading Strategy:
a. Quarterly Opening Price Support: When the price moves above the quarterly opening price, it is considered a bullish signal. The quarterly opening price then acts as a support level, and traders can look for buying opportunities when the price retraces to or near this level.
b. Quarterly Opening Price Resistance: Conversely, when the price moves below the quarterly opening price, it is considered a bearish signal. The quarterly opening price then acts as a resistance level, and traders can look for selling opportunities when the price retraces to or near this level.
- Confirmation and Trade Execution
To confirm potential trading opportunities, traders should use additional technical analysis tools and indicators. This can include trendlines, moving averages, oscillators, or other indicators that align with the identified support or resistance levels. Traders may also consider factors such as volume, market sentiment, and price patterns to strengthen their trade setups.
When the price approaches the identified support or resistance level and the confirmation criteria are met, traders can execute their trades. Stop-loss orders should be placed to limit potential losses, and profit targets should be set based on the trader’s risk-reward ratio and overall market conditions.
It is important to note that like any trading strategy, Gann’s Quarterly Opening Price Trading Strategy is not foolproof and may not work in all market conditions. Therefore, it is essential to backtest the strategy, practice proper risk management, and continuously evaluate its effectiveness.
Below are the List of all FNO Stocks for March Month based on Quaterly Open. Levels are valid till 30-Sep-2023.
https://docs.google.com/spreadsheets/d/1HgcOzo3yjHlcotJ4KqtSekvwcsB-2-It28Y-3crvS0E/edit?usp=sharing
Conclusion
Gann’s Quarterly Opening Price Trading Strategy provides traders with a framework to identify potential support and resistance levels based on the opening prices of quarterly timeframes. By utilizing these levels as reference points and incorporating additional technical analysis tools, traders can enhance their decision-making process and potentially identify profitable trading opportunities. However, it is crucial to understand that no trading strategy guarantees success, and traders should apply proper risk management and evaluation when implementing Gann’s Quarterly Opening Price Trading Strategy or any other trading approach.