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).
Here are Gann's pieces of advice for stock investors.
William Delbert Gann 20 Rules for Successful Trading
1. Only trade active markets
Gann recommends only trading high-volume markets. An active market means liquidity, and liquidity means low transaction costs as the spread between ask/bid is getting tighter.
2. Avoid getting in and out of the market too often
Frequent trading leads to a high transaction cost.
3. Be willing to make money from both sides of the market
Having the ability and the mindset to trade both sides of the market (bullish or bearish).
4. Do not try to guess tops or bottoms
Tops and bottoms are randomly formed in a chaotic system and they cannot be predicted.
5. Never buy or sell just because the price is low or high
Gann recommends always focusing on real values instead of 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 on a part of your profits before they may become a loss. Shifting your stop-loss is the perfect way to avoid the possibility that profits will suddenly become losses.
8. Never average a loss
Averaging a loss is often called 'Moyenne' and involves averaging losses by buying more units at lower prices. This could also be called the ‘Losing Strategy’ as it usually fails.
9. Always use stop-loss orders
Limit the potential of your losses by applying a stop-loss order to every trade
10. Never cancel a stop-loss after you have placed the trade
Follow your strategy and do not alter it for any reason.
11. Do not enter a trade if you are unsure of the trend. Never buck the trend
Being able to recognize the trend is essential in order to be able to trade successfully.
12. When in doubt, get out, and do not get in when in doubt
Control your trading decisions according to your fundamental expectations. Trade only when you are sure.
13. Distribute your risk equally among different markets
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, but it leads to a high transaction cost.
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 following your initial decisions with discipline.
18. Never hedge a losing position
By hedging a losing position you enlarge the potential to lose 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
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.
◘ William Gann Trading Rules
G. Protonotarios, Financial Analyst
TradingFibonacci.com (c)
