🎯William Delbert Gann Trading Rules

 

William Delbert Gann (1878–1955) was a renowned trader who introduced new technical analysis tools such as Gann angles and the Hexagon. His forecasting model is based mainly on geometry and mathematics, as well as astronomy. Gann introduced stock market angles in his work Basis of My Forecasting Method (1935). The most important stock market angle, according to Gann, is the 45° angle or 1x1, which represents one unit of price movement per one unit of time. William Delbert Gann is said to have gained 50 million USD during the Great Depression. In 1933 alone, he reportedly earned 4,000% on his capital, with 422 winning trades out of a total of 479.

Here are Gann’s pieces of advice for stock investors.

📉 Gann's 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

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