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The Square of Nine
by Joe Duffy

Master Time and Price Calculator

The Square of Nine is sometimes also referred to as the Master Time and Price Calculator. It is also referred to as the Octagon Chart. This is because there are eight squares (Octa meaning eight) surrounding the central square.

The Square of Nine has nothing to do with squaring 9 as in 9 X 9. The term square simply refers to the geometric 2 dimensional shape of a square. As well, there are nine boxes which make up the inner most, or centre square. Hence the name Square of Nine.

If I could pick just one trading tool, aside from a bar chart of price history, it would undoubtedly be the Square of Nine. This is true for three reasons. First, the readings and position of other standard technical indicators such as RSI, momentum, and moving averages, can be approximately known just by looking at the bar chart. However, the important time and price information given by the Square of Nine can only be realized by using the Square itself.

Second, the Square of Nine can be used in many different ways. There are several different techniques that can give specific price and time information for applications over all trading horizons.

The third reason I believe the Square of Nine is so valuable is that it combines ease of use with very accurate price and time forecasts. I have seen markets trade for months at a time, where virtually every market turning point corresponded to a turning point related to some methodology using the Square of Nine. This is incredibly powerful information.

Using Price to Forecasts Price Targets

This basic technique uses previous highs and lows to forecast the level of future turning points in price. Generally, major tops and bottoms will forecast the most significant turning points in price. Minor tops and bottoms will usually only forecast minor turning points in price.

The steps are as follows:
  1. To find a price bottom use a previous high to start. To find a price top use a previous low to start.

  2. Locate the block on the Square that corresponds to the historical high or low price. If using a significant high or low it may be any length of time in the past. Minor highs and lows should be the most recent highs or lows.

  3. If starting from a price high, then move counter-clockwise numerically 90 degrees, 180 degrees, 270 degrees, and 360 degrees to find potential price support targets. If starting from a price low, then move clockwise numerically 90 degrees, 180 degrees, 270 degrees, and 360 degrees to find potential resistance targets.

As an example, the number 527 (in the lower left quadrant of the Square of Nine) will represent a high or low price. (i.e. a price of $527.00 in gold).

This will yield the following potential support and resistance points:

Low of 527 then resistance at: High of 527 then support at:
90 - 551 90 - 505
180 - 575 180 - 483
270 - 599 270 - 461
360 - 622 360 - 440

Helpful Hints for Using the Square of Nine
  1. Best results are usually obtained by using three digits on the Square. Therefore, round prices accordingly. For example, 9812 becomes 981. For stocks, 20 3/8 becomes 204.

  2. For some commodities it may work to continue to use four digits as long as the price is under about 1500. The same is true to for stocks or commodities on the down side, as long as the number is over about 80. These are guidelines only, and for some very large moves these boundaries may need to be expanded somewhat.

  3. Bonds trade in 32nds so they may be converted to decimals (i.e.: 98 16/32 becomes 985 rounded). Alternatively they may be converted to ticks (98 16/32 becomes (98 x 32) + 16 = 3152 or 315 rounded. The third alternative is to convert to yields, for which you will need a yield conversion table.

  4. Occasionally, in runaway markets or blow offs, the price may exceed the measured target. This is referred to as a “lost motion”. Allow for this in exceptionally volatile markets.

  5. It seems that continually using front month prices for comparisons on the Square of Nine often yields better result. Look for two or more square measures to converge in the same price area. For instance, look for 2 highs that both yield measures to the same potential low or vice versa. This will add to reliability.

  6. The best way to use the Square of Nine is to be aware of potential turning points in advance. When the market nears these potential turning points, look to other technical evidence to see if a turn is indeed supported. The market will often pause at the support and resistance targets indicated by the Square of Nine. If the market pauses, but does not reverse, it is a good indication of the strength of the trend. If the support or resistance target only causes a temporary pause in price, then this indicates that the trend in force is strong and will likely continue.

  7. Many markets will work on the Square of Nine very well using just the futures prices. For some markets you should experiment with cash prices if you find the futures prices unsatisfactory.

  8. For some markets it is wise to keep track of related commodities in a complex (e.g. D-Mark, Swiss Franc, and Dollar Index or Soybeans and Corn, etc.) You may sometimes find that one or the other will hit an objective on the Square, and mark a reversal in the entire complex. Also, be aware that cash prices may work better where applicable. The only way to find what works is to experiment and track the results.

 
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