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Swing bars

Everything in the method starts with one small decision, made once a day for every stock: how does today's price range compare with yesterday's?

The answer gives each day a label, called a swing bar. There are four, and they're built only from each day's high and low.

The four bars

  • Up bar: a higher high than the day before, and a low that's no lower. The whole range has shifted up, or at least stretched upward.
  • Down bar: a lower low than the day before, and a high that's no higher. The range has shifted down.
  • Inside bar: a high no higher and a low no lower than the day before. Today's range sits inside yesterday's.
  • Outside bar: a higher high and a lower low. Today's range swallows yesterday's.

An example with made-up numbers: yesterday ranged from $48 to $50. A day from $49 to $51 is an up bar. A day from $47 to $49.50 is a down bar. A day from $48.50 to $49.50 is inside. A day from $47 to $51 is outside.

Each day gets exactly one of the four labels. The barType field in the signals guide reports the label for the signal's day.

Tesla (TSLA), January to February 2025: each day's swing bar, labelled by how its range compares with the day before: up (U), down (D), inside (I) or outside (O).
Tesla (TSLA), January to February 2025: each day's swing bar, labelled by how its range compares with the day before: up (U), down (D), inside (I) or outside (O). From our daily price data and the swing points our engine found. Drawn to show the idea: not a signal, and not a typical result.

Why the range matters more than the close

Most charts lean on the closing price. Swing bars mostly ignore it. A day's high and low show how far buyers and sellers pushed in each direction, and those extremes are the levels the method later treats as places where the market turned.

The close still has one job: it helps decide how an outside bar is read, because an outside bar is a day when both sides pushed hard. A day that closes above its open leans toward the buyers, and one that closes below its open leans toward the sellers. The next section shows why that matters.

Counting a countertrend move

In an uptrend, the method is waiting for a dip, and in a downtrend, for a rally. These moves against the trend are called countertrend moves. A pullback is only taken seriously if it lasts long enough, so the method counts days.

By default the count is three. In an uptrend:

  • The first down bar starts the count.
  • After that, a day counts only if it reaches lower than the last counted day: a lower high and a lower low. A down bar that doesn't get below the last counted day is part of the noise, not a step in the dip.
  • Inside bars are ignored. They show the market pausing, not moving.
  • Up bars don't count, and they don't restart the count by themselves. A day that bounces and then falls again leaves the dip intact.
  • An outside bar can count too. If it's the day that completes the count, its lower low is enough, whatever the close (Marc Rivalland's second amendment, below). Before that, it counts when it starts the dip, or when it reaches a lower low and closes below its open.
  • The count starts again only if price rises above the high that began the dip, because then the dip has failed.

In a downtrend everything reverses. Weekends and holidays don't count, since there are no bars for them.

Once the count reaches three, the dip is mature enough for the method to start looking for the day it ends. That's the continuation signal covered on page 4.

Marc Rivalland's amendments

W.D. Gann's own swing charts asked for three days in a row going the same way before they'd register a turn, and then three days in a row back the other way before they'd call the trend resumed. Marc Rivalland found that too slow. By the time the third day back had arrived, most of the move was already gone and the protective stop had to sit uncomfortably far away.

He made four changes, and the signals are built on the same ideas:

  1. Act early. Three days set the trade up, but the first day that moves back with the trend triggers it, rather than waiting for three more.
  2. Outside bars can complete a dip. If the third day of a dip is an outside bar, it counts as part of the dip.
  3. Days needn't be consecutive. A pullback with a day or two of interruption is still a pullback.
  4. Count trading days only. Weekends don't inflate a Friday into three days.

Each change gets the entry closer to the turning point, which makes the stop closer too. Page 5 shows why that matters.

Where this leads

Bars are the raw material. Page 3 uses them to find the turning points that define a trend.

Next: Swing highs, lows and the trend.