William Delbert Gann Trading Rules
William Delbert Gann (1878 – 1955) was a famous trader who introduced new technical analysis tools like the Gann angles, the Hexagon etc. Gann forecasting model is based mainly on geometry and mathematics but also in astronomy. Gann introduced the the stock market angles {Basis of My Forecasting Method -1935). The most important stock market angle according to Gann is 45° angle or 1X1, which represents a single unit of price under a single unit of time. William Delbert Gann is said to gained 50 million USD during the Great Depression. Only in 1933, is said to have gained 4,000% on his capital (422 winner trades in a total of 479 trades).
Picture: Gann's Personal Soybean Chart (May 1948)
Here are Gann advices for stock-investors, comments by Giorgos Protonotarios.
William Delbert Gann 20 Rules for Successful Trading
1.Only trade active markets
Gann recommends trading only high-volume markets where entry and exit is easy and cheap. An active market means liquidity, and liquidity means low transaction cost.
2. Avoid getting in and out of the market too often
The reason is again to avoid high transaction cost. A great number of trades equals either lower profits or greater loses.
3. Be willing to make money from both sides of the market
This is the common advice of many other great investors and refers to the ability of trading any kind of market bullish or bearish.
4. Do not try to guess tops or bottoms
The reason is that tops and bottoms are randomly formed in a chaotic system and thus can not be predicted. Furthermore, these tops and bottoms are formed in a very brutal way. A trailing-stop-loss order can provide a shield for those traders seeking to run their profits but as a general rule it is better to listen to Mr. Gann and not be greed.
5. Never buy or sell just because the price is low or high
Gann recommends focusing on real values and not on simple market prices. According to Phillip Fisher "The stock market is filled with individuals who know the price of everything, but the value of nothing".
6. Never risk more than 10% of your trading capital in a single trade
This is the golden rule of the financial markets. Portfolio Diversification is a very crucial issue that should never be ignored.
7. Never let a profit run into a loss
Gann recommends capitalizing profits before they become losses. Moving up your stop-loss is the perfect way to avoid the possibility that profits will suddenly become losses.
8. Never average a loss
Gann recommends not to apply what is called as the ‘Moyenne Strategy’. Moyenne is a stock-market tactic that involves averaging losses by buying more units in lower prices –This could also be called as the ‘Loosing Strategy’.
9. Always use stop-loss orders
Wise advice for all kind of trades either trading stocks, Forex or Commodities.
10. Never cancel a stop-loss after you have placed the trade
Gann means to follow your strategy and not to alter it for any reason.
11. Do not enter a trade if you are unsure of the trend. Never buck the trend
What was after called as 'Follow-the-Trend'.
12. When in doubt, get out, and do not get in when in doubt
Gann means to control and to discipline your trading behavior according to your fundamental expectations.
13. Distribute your risk equally among different markets
An advice focusing again on the important concept of having a great Portfolio Diversification (differentiate in terms of assets, markets, currencies, economic zones etc).
14. Never trade to scalp a profit
Scalping is a very popular trading strategy nowadays in the Forex market.
15. Never get out of the market because you have lost patience or get in because you are anxious from waiting
Balancing trading decisions with discipline and logic.
16. Avoid taking small profits and large losses
That means in other words "Cut your Losses and Run your Profits".
17. Never change your position without a good reason
Gann recommends again to anything in order to avoid transaction cost. Transaction cost reduces your real capital.
18. Never hedge a losing position
By hedging a losing position you enlarge the trading cost furthermore and that probably means loosing even more.
19. Reduce trading after the first loss; never increase
A bad trade usually affects your morale and the clearness of your decision-making.
20. Do not follow a blind man's advice
In nowadays, we can translate this advice into never trading according to information that you found in a no-name blog or in any other not-reliable informational sources.
◘ Giorgos Protonotarios, Financial Analyst
For Capitalinvestor.org
Read More: »Warren Buffett Investing Tips | »George Soros Investing Tips
William Delbert Gann 20 Rules for Successful Trading
Capital Investor (2013)
