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(Including a sample kit of stock forecasting ruler)
Johnson K. Gao
1. The importance of stock prediction 2. How to predict stocks 3. The Gao’s Equation: $n+x = n$d + $x + n$v 4. The art and skill of using the simplified Gao’s Equation 5. Buy and sell: Fourteen types of sailing pattern 6. Prediction of stock price for the next week 7. Forecasting the stock price of tomorrow 8. Alteration of sailing angle caused by shifting force 9. The existing force that caused the sailing angle shifted 10.Forecasting stocks with Yin and Yang 11. Optimal amount of money suggested in trading 12. Being a defensive investor Links The front cover of the first edition Appendix 1 Appendix 2 About the author
The following equation is called as the Gao’s Equation, which was first proposed by Jonhson K. Gao as early as in January 2001. That equation can be used for the prediction of stocks. $n+x = n$d + $x + n$v. n denotes the number of time unit, either days, weeks, hours, or minutes, that were used to draw a special moving average curve of a stock. (Please compare to Chapter 6, Fig. 1) The commonly used moving averages are those of 50-week, 200-day, 50-day, and 25-day. x denotes the time unit which is counted after the time unit n. It may equal to 1, 2, 3, etc. $n+x denotes the dollar amount of a stock price under prediction at the time unit n+x. When x = 1 (time unit), $n+1 represents the stock price of tomorrow (in which days are used as time units), or, next week (in which weeks are used as time units). $d denotes the average dollar amount difference per time unit along the moving average curve, and n$d equals to An - Ao, while An is the dollar amount of the moving average at the end point (time unit n) of a moving average curve, and Ao is the dollar amount at the beginning point (time unit = 0, i.e. counted back n units from the end point of the curve) of a moving average. When An < Ao, n$d turns into a negative figure. $x denotes the dollar amount of a stock price in the past, which is at the time unit that is counted back n-x units from the current time unit (i.e. today or this week, etc.) $v denotes the average dollar amount variation per time unit, which was caused by the shifting force (n$v) that changes the sailing angle. $v = An/n multiplies by tg∠A . Here tg∠A means the tangent value of calculated shifting angle of moving average (when the length of n = An), that may differ from the tangent value of ∠α on the chart, because the different scale was used. tg∠α = f tg∠A. The value of f (a function) may vary from chart to chart. If the value of f is larger than 1, the length of n time units has to be smaller than the value of An; If the value of f is smaller than 1, the length of n time units has to be larger than the value of An. When ∠A (the sailing angle) is above the horizontal line, $v is a positive (+) figure; when it is below the horizontal line, $v is a negative (-) figure.
Prediction of stock price for the next week
How to predict a stock price for the coming week by applying the model of dynamic balancing of sailing angle of moving average? The chart of choice is a 50week moving average that covers a period of one year. Figure 1 shows that each price bar represents the average stock price of a given week. The time units used are 50 weeks. A prerequisite is that the stock should have existed for two years. Otherwise, the curve shall not be able to cover the entire range of the chart.