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Preview of

Prediction of Stocks withGao’s Equation:$n+x = n$ d + $ x + n$ v

(Including a sample kit of stock forecasting ruler)Johnson K. Gao

Contents1. The importance of stock prediction2. How to predict stocks3. The Gao’s Equation: $ n+x = n$ d + $x + n$ v

4. The art and skill of using the simplified Gao’s Equation5. Buy and sell: Fourteen types of sailing pattern6. Prediction of stock price for the next week 7. Forecasting the stock price of tomorrow8. Alteration of sailing angle caused by shifting force9. The existing force that caused the sailing angle shifted

10.Forecasting stocks with Yin and Yang11. Optimal amount of money suggested in trading

12. Being a defensive investor LinksThe front cover of the first editionAppendix 1Appendix 2About the author

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Gao’s Equation

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 wereused to draw a special moving average curve of a stock. (Please compare toChapter 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 unitn+x . When x = 1 (time unit), $n+1 represents the stock price of tomorrow (in whichdays are used as time units), or, next week (in which weeks are used as time units).$d denotes the average dollar amount difference per time unit along the movingaverage curve, and n$ d equals to An - A o, while An is the dollar amount of themoving average at the end point (time unit n) of a moving average curve, and Ao isthe dollar amount at the beginning point (time unit = 0, i.e. counted back n unitsfrom the end point of the curve) of a moving average. When An < A o, n$ d turns into

a negative figure.$x denotes the dollar amount of a stock price in the past, which is at the time unitthat is counted back n-x units from the current time unit (i.e. today or this week,etc.)

$v denotes the average dollar amount variation per time unit, which was caused bythe shifting force (n$ v) that changes the sailing angle. $v = A n/n multiplies by tg∠A. Here tg∠A means the tangent value of calculated shifting angle of movingaverage (when the length of n = A n), 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, thelength of n time units has to be smaller than the value of A n; If the value of f issmaller than 1, the length of n time units has to be larger than the value of A n.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.

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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 50-

week 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 usedare 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.

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