24 Rules of Gann
Make sure you don`t violate any of these WD Gann trading rules when you decide to make a trade. These rules are essential and very important for your successful trading. Whenever you close a trade at a loss, move on to these principles and see what principle you have violated. Do not repeat the same mistake the second time. Among the many indicators and technical tools, WD Gann has established some basic rules to follow for trading: – Although these rules provide you with the basic guidelines for trading and investing in the stock markets, you should know that without proper strategies, all your efforts will be in vain. 01. Amount of capital to use: Divide your capital into 10 equal parts and never risk more than one-tenth of your capital in a transaction. 02. Use stop-loss orders. Always protect a business. 03.
Never exaggerate. That would violate your capital rules. 04. Never let a profit become a loss. Once you have made a profit, increase your stop loss order so that you do not have a capital loss. 05. Don`t resist the trend. Never buy or sell if you are not sure about the trend according to your charts and rules. 06. If you have any doubts, go out and in case of doubt do not enter. 07. Trade only on active markets.
Stay away from the slow deaths. 08. Equal allocation of risk. If possible, trade two or three different trading instruments. Avoid tying all your capital into a single trading instrument. 09. Never limit your orders or set a buy or sell price. 10.
Do not close your transactions without a valid reason. Follow up with a stop loss command to protect your profits. 11. Accumulate an excess. After making a series of successful trades, place money in an excess account that can only be used in an emergency or panic. 12. Never buy or sell just to make a scalping profit. 13.
Never an average loss. This is one of the worst mistakes a trader can make. 14. Never leave the market just because you have lost patience, or enter the market because you are afraid to wait. 15. Avoid taking small profits and losses with you. 16. Never cancel a stop loss order after placing it at the time of a trade. 17. Avoid entering and exiting the market too often. 18.
Also be willing to sell short that you can buy. Let your goal be to follow the trend and make money. 19. Never buy simply because the price of a commodity is low, or sell short simply because the price is high. 20. Be careful with the pyramids at the wrong time. Wait until the commodity is very active and has exceeded resistance levels before buying more, and until it has left the distribution area before selling more. 21. Select commodities that have a strong upward trend towards the pyramid on the buy side and those that show a clear downward trend to sell short. 22. Never secure yourself. If a commodity is long and it starts to fall, do not sell another commodity short to cover it.
Go to the market: take your loss and wait for another opportunity. 23. Never change your market position without a valid reason. When you make a transaction, whether for a good reason or according to a certain rule; Then, don`t go out without a clear indication of a trend change. 24. Avoid increasing your trading after a long period of success or a period of profitable trades. Good trading rules, such as those developed by Mr. Gann more than 50 years ago, take into account the important psychological aspects of trading.
Placing a stop-loss order with a broker, as opposed to a “mental stop”, is a good example. The broker not only executes the order at the moment the market trades at the specified price, but also eliminates the possibility of the trader uttering these fateful words: “I just give the trade another day to become good. With experience and research, you will be able to find the value of the WD Gann rules mentioned above. And observation and study will lead you to correct and practical theory and successful trading of stocks/commodities/currencies. 22) Never hedge a losing position. If you are long, a commodity that begins to fall, do not sell another commodity short to cover it. Get out of the market. Take your loss and wait for another opportunity. (Personally, I trade with a very profitable forex hedging strategy! Hey, some rules were just meant to be broken!) Here are the rules.
Everything in italics is a comment I added, and is not part of its original rules. W. D. Gann`s twenty-four flawless rules are at the heart of his massive contribution to the accumulated knowledge of trade and investment. In this article, third part of the series, rules 13 to 15 are discussed: Trading can be exciting. Money management is boring in itself. As a result, many traders ignore the basic rules for managing money at their own risk. It is no coincidence that Mr. Gann`s first rules are rules of survival. As Mr.
Gann: Price in December 1906 – $199.62. Price of January 5, 1940 – $0.25. Chicago Northwestern From my perspective, investors are the big players. They make a bet, stick to it, and if everything goes wrong, they lose everything. (page 25) Again, the average cost of the dollar has the same fatal flaw as the average of a loss when the share price goes to zero; Any inventory becomes worthless. 26) Do not follow the advice of a blind person. (Only trust the advice if you are 100% sure that this person`s trading system is working) Rule 20 » Be careful with the pyramids at the wrong time. Wait until the stock is very active and has passed resistance levels before buying more and until it is out of the distribution area before selling more.
Price on February 9, 1906 – $348. Price on January 2, 1940 – $26.63. Gann Rule 8 raises the important issue of diversification. There`s an old Wall Street saying that says, “Don`t put all your eggs in one basket,” which Gann clearly agrees with. The second form of overtrading is to make too many transactions in a relatively short period of time. This form of overtrading can: When traders open a trade, they commit to a “round trip” of transaction costs. These costs are actual trading costs and can make a significant difference in the profitability of different trading systems. A system with an average trading time of three days has transaction costs that can be up to twenty times higher overall than a system with an average trading time of three months. When you enter a trade, you need to have a game plan to get in and out of the trade. The plan should be definitive and not subject to changes in your psychology during market hours.
Gann knew exactly what he was doing all the time. You should have a stop in the market at all times, as you never know when a time cycle might backfire. You should also have a profit goal in the market. So many traders lose today because they use computer oscillators to trade with them, and they never know where they are going.
