What does Square the Range trading system mean?

What does Square the Range trading system mean? Find out how to plot out this type of geometry

Do you want to learn the secrets behind Square the Range trading system? Watch our latest video to discover an extremely effective and natural way to analyze a market.

Square the Range trading system – a roadmap for the future

Hello, and welcome to this video from Diary of a Trader. Today we’re going to go over one of W.D. Gann’s, William Delbert Gann, one of his, probably, most effective ways to chart a market and it is called the Squaring of a Range. And Gann was pretty on top of letting his students know that it’s an extremely effective and an extremely natural way to analyze a market, and if we construct a chart that looks like this, or if we construct a chart that looks like this, it’s often hard to determine, well, how do you plot out this type of geometry? Where do you put it? Because most people limit their charting to some indicators that only go as far as the current candlestick and it’s my opinion that if you don’t have a roadmap for you in the future, then you are destined to experience a lot of whipsaws, and it’s very difficult to trade without anything else except what is right in front of you.

And so, how we square a range is actually fairly simple. So, I’m on TradingView, and I’m on a daily chart and what I’m going to want to do is I’m going to want to go to a weekly chart. And I’m going to want to scroll out and what I want to determine is where the extreme high and the extreme low is. So, the extreme low is back here, and the extreme high is up here. So, what I’m going to do is I’m going to square the high. So, I’m going to square starting from the bottom to the top. And what’s extremely important to do in Gann’s work is make sure that your chart is squared. It’s hard to square a chart on software. When Gann did his, he used a 8 squares per inch graph paper, and that’s much easier to do. But, what we have to make sure is that we keep that square and we’re going to right-click anywhere on the chart. We’re going to go to Properties, and from here, we’re going to go to Scales, and then we want to, probably, set this to 0.05, so 5 pips, okay? And then, hit OK, and then do not use the scroll wheel, don’t touch the scroll wheel, don’t alter the scroll wheel at all, you can just click and drag. And the first thing we’re going to do after this, is we’re going to take our horizontal line tool, we’re are going to it at the high. Now, yours probably defaults to a, probably, just a thin black line and that’s fine.

The next thing we’re going to do is we are going to take the Gann Square Fixed tool. Again, that’s right up here, third toolbar down, Gann Square Fixed. Not Gann Square but the Fixed Gann Square. And we’re going to put that at the very bottom here. Again, if you don’t have this object selected, this is the Magnet. Magnet mode means that when you put something on a candlestick, the cursor will automatically move to the high or the low of the candlestick. So, if we just kind of hover near it, we can see that it will place it on the very bottom. So, that’s our all-time low. Now, we’re just going to move it like this, where the 45 degree angle just keeps moving. We’re going to stay here and then we’re going to go to the Gann Box. And we’re going to put it in the same place that we placed… Here we go, and then we’re going to have to drag it to where price, not price, but where the horizontal line and the 45 degree angle, where they intersect, that’s where we’re putting the Gann Box. Gann Box is technically a Square of 144, or it’s a square of 90. And now, so we have that here and then very simply, we just hit clone, or we could say copy and then we are just going to drag it and get it on next to it, as perfectly as possible, and then we can go back to our auto scale, because now that the square is squared on the chart, we can go back to looking at a chart where it’s easier to look at, and then I can go to a one-hour chart, and I can observe the past price action is pretty interesting because, these angles in Gann’s Box, they act as very natural support and resistance zones. And Gann had a rule, he called it “The rule of angles”, and The Rule of Angles states that, when price breaks and closes below or above an angle, it will always move to test the next one. So, for example, back here, when price broke this angle, and moved to test this angle. When price broke above this angle, tested again as support, and it moved up to test this angle and traded it above, failed to move higher, fell back down, tested this angle, broke down, didn’t go back. But we can see that most of the trading activity and where the beginnings of large moves typically happen where price intersects these angles. And what this represents is kind of the natural square and the natural geometric shape of an instrument. And so, you can do this for any instrument, not just in Forex, you can do it for regular equities, individual stocks, the futures market, cryptocurrencies. This is applicable to any market, and if you use it, and you apply the rest of your trading theory and skills, this is a very extremely effective form of trading. And what is so fantastic about it, is that it stands the test of time and I would encourage you, actually, to do this on a number of things that you don’t trade. Leave it there and write yourself a note to check it in 30 days and see how often and how much price respects these angles and these confluent zones of angles. It’s a really, truly fascinating thing that Gann found out.

Now, one of the ways that we can make our trading, in this type of structure, easier, is by using some indicators, in conjunction. So, we can use the Relative Strength Index and the Stochastic RSI, as well. And so, what we’re looking for now, in our indicators, is we’re looking for a condition where prices near an angle where we’re both overbought or oversold in the RSI, and where that is also matched by the stochastic. So, if price is near an angle, and our oscillators are also near an extreme, we want to know. So, one thing that I like to do, is I like to take my chart here and squeeze the chart, so I am only looking at these indicators here. And then, what I like to do is I take a vertical line and I like to plot, here it is, where there is the same kind of peak. So, wherever there’s a high in both the Stochastics and the RSI, that’s what I want to see. I want to mark those zones. So, just kind of looking at what we’ve got here, there’s one here, probably can say that there’s one here, there is a swing low here, there’s a low here, looking for… We could probably say that that’s in that area. A low there. That’s good enough. So, then, what we can do now is we can return this to a normal size, we can just drag these down. And now, what we see, we can compare these zones together. So, if I see that there was a low here, would it have been a good area to buy? Sure. But there’s really no angle to go off of, except for right below us, so that’s kind of a harder one to look at. But, if I look over here, put the vertical line right on here, price approached an angle and we were in overbought conditions, in the RSI and the Stochastic RSI, so that, as I saw price approaching this angle and I knew that we were in elevated conditions, this would have been a very appropriate short. And let’s kind of move back here, let’s check out this zone here, where we have a noticeable divergence in prices. But, we had a low in the RSI, we’re oversold in the RSI, we are oversold in the Stochastic RSI, and price is right on an angle and that would have been a Buy opportunity.

And similar to this zone, right here, where we also see price has approached an angle, and we’re oversold in both of our oscillators, in the RSI and the Stochastic RSI, and price is right on an angle. That means that I have a high probability of price bouncing off this zone. So this is probably one of the most natural ways and easiest ways to trade a market because you have a roadmap in front of you. You can see where these natural points of support and resistance are going to be, and notice that they are not in horizontal lines. One quick note before I leave you, guys, I want to point out that by default your Gann Box is going to look like this. So, what we want to do is we want to… I like to take off the backgrounds so that they’re not there and then we just click Angles and then there’s our angles. Now, you can leave the Fibonacci Time Cycles and the Fibonacci Levels, that’s really up to you, but most important is the grid itself, alright? Hope you found this video helpful and interesting and I look forward to talking with you, with our next video. Thank you!

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