Advanced W.D. Gann Analysis
Firstly thank you for taking the time to visit our website. Probably like me back in the early 1980s you've begun this journey of discovery after hearing about the legendary trading record of William D Gann. How much of that is true is up for debate. This is discussed in the free introductory webinar.
Probably the first and most important question you should ask yourself is "Was W.D Gann a genius or a con man". In my opinion after decades of research it's that he was a genius. But that doesn't mean that everything he taught was correct. Unfortunately people have made him into some kind of god, when in reality he was just a man with some very good ideas.
In fact of all the legendary market technicians whose work I've investigated, he was by far the greatest. I would even go as far as to say that he's the only technician worth following.
and it's a major one! is that an industry has developed of people claiming that they've found the so called Gann secret, and all you have to do is buy their book or software etc. and this will lead you to making a fortune, usually in a very short period of time. This is a lie and you're just hearing what you want to. As the old saying goes "If it sounds too good to be true, then it probably is".
In my opinion the biggest con out there is the Gann astrology community who claim this was his great secret. Now don't get me wrong, there's no doubt that Gann investigated the subject and used it but that doesn't mean it works. I personally in 30 odd years have never seen a convincing example of it working. Except with hindsight of course. But don't take my word for it. This is what Gann wrote.
The New York Herald Magazine, Jan. 5, 1919, p. 15
“An astronomer can predict to the minute when an eclipse is going to occur, but you would not consider him a prophet, would you? Of course not. He simply makes use of mathematics based on known laws of the movements of the planets in their orbits.
I have found in my researches that the Chinese understood all those laws and computed the coming of eclipses thousands of years before the Egyptians and Chaldean's. It is marvelous the knowledge that these ancients had. In making my predictions I use geometry and mathematics just as an astronomer does, based on immutable laws which I have discovered. There is nothing supernatural or weird about it.
Some weeks ago I read an interesting article on the failure of astrologers in their predictions regarding the war. Now there is a great deal in the vibrations of the planets, but to make accurate predictions the great law behind it all, which the ancients understood, but which they purposely refrained from putting in their books, as they wanted to keep the secret for themselves, must enter into the calculation.
That is why astrology fails, for nothing can be accurate that is not based on mathematics – and so few astrologers are mathematicians.” – WD GANN 1919 interview
Hopefully you can appreciate how easy it can be to be lead down a blind alley, but more importantly a potentially very expensive one.
The other great deception, whether intentional or not is to take one example over a very restricted time frame to substantiate the author's conclusions. The fact that it doesn't work anywhere else is ignored. These two video's explain how easy it is to do this when the reader has very little knowledge of the subject.
So what's the 'Secret'
Well if you're like me when I first started, I use to think "if only I knew the Gann secret". I now realise how silly that thinking was. It implies that the secret is one thing. It's not. It's a bit like saying I know how to add up numbers and therefore I'm a mathematician. Obviously you're going to run into problems at some stage.
The other myth is that Gann never revealed his real secrets. This in my opinion is completely wrong. You don't have to hide something from someone for it to be hidden. It's great marketing, but the truth is that most people are lazy and expect something for nothing. Not only must you read a book, but you must practice what you have learnt. I don't know any sports men who read a book and could play to a high standard straight afterwards. It takes time and effort.
So what is the secret that Gann discovered. Well he tells you in the article above, right at the bottom. The markets are MATHEMATICAL and have nothing to do with economics and news events. As Gann said in his book "How to make profits in commodities" Page 21.
SUDDEN UNEXPECTED NEWS: Many traders often ask me, "How can you tell what the market will do or what to do when some sudden, unexpected news happens over-night, such as wars breaking out. the death of a president, a storm damaging Cotton seriously, the failure of a large trader or brokerage house, or something of that order?"
My answer is that coming events cast their shadows before, and the market is nearly always prepared for these events and gives some indication of change in trend before these events take place. W.D. Gann
An example in our time is September 11th 2001. The FTSE 100 index/Dow Jones 30 Index etc topped out on the first day of 2000. A long time before the incident happened. This video explains a very simple Gann rule and shows that September 11th was mathematical using primary school maths. Obviously it's not always this simple.
Now that's an extremely simple example and obviously there is far more to all this than that. But remember, Gann wrote that rule down in the 1920's. I've applied the rule to an item that didn't even exist until 1983. What I showed in the video should be impossible. Think about it because you will have to change your mind set about how the speculative markets really work in order to apply his rules correctly.
What you must know
It's very important that you realise that making money on the speculative markets is extremely hard. Why? Simply because you're trying to predict the future. If conventual wisdom is correct then this shouldn't be possible.
Unlike most so called experts we predict the future with documented proof. A recent example is a prediction we made on the ASX 200 Index which was published on YouTube on the 30th June 2014.
Now here is the follow up video showing what happen when it reached the next level of 80.9523% from the major 2009 low. It was published on YouTube on the 11th November 2014.
The Intra-Day trading myth
So why do you want to start trading, obviously to make money. In the news you will hear of whiz-kids making millions while still at school. Large investment banks with dedicated intra-day trading departments making huge fortunes for their clients. How do they do it? It's simple, they don't. But it's extremely important that you believe they do. Why? because they make money from YOU trading. The more YOU trade the more commission you pay.
So what proof do I have. Well it doesn't take a genius to work it out. Quite simply why are there stock brokers; Investment Bankers; Fund Managers etc. if they're such great traders?
A little true story. Back in the early 1990's I went to see a client who worked for a major UK bank. I explained to him how intra-day trading was a mugs game and he said, yes you're right, our currency intra-day trading department loses a fortune every year. But he said it didn't really matter because they owned a famous UK travel agent and made a fortune from holiday makers foreign exchange commissions. He then added, they had an intra-day trading department because the other banks had one.
The Gann intra-day trading legend is based on the famous "Ticker and Investment Digest" article of 1909 (It later became the Wall Street Journal). It can be easily found on the internet. In there the reporter claimed the following:-
"We have seen him give in one day sixteen successive orders in the same stock, eight of which turned out to be at either the top or the bottom eighth of that particular swing. The above we can positively verify".
Pretty impressive, if true. The reason I have my doubts is because of the technology that was available in 1909. The only source of data was a ticker tape machine. It was very slow. In the picture below you might have to wait a long time for the company you were interested in to show a price. Also everything that Gann did was based on his hand drawn charts. This is very time consuming and no where does gann talk about keeping intra-day charts.
Even with today's amazing technology I'd struggle to make sixteen trades in a day. Telephone calls relied on manual switch board connections. All paper work was done by hand. I could go on but I hope you get the idea.
Now in 1909 Gann was 31 years old and like most 30 year olds you think you know it all, but as you get older and wiser you realize how little you really know. Gann was no different. He realised that day-trading was a mistake. How do we know this? Because he wrote it down in one of his last books "How to make profts in commodites" which was published in 1942. This would make Gann 64 years old. Remember that the ticker tape was the intra-day trading platform of the day.
"How to make profts in commodites" by W.D.Gann
Chapter 1 Page 5
You make a greater success when you sit at home or in your office, quietly following your charts and trade on definite indications.
I am not guessing or giving you wild theory. I have gone through the mills. I have had every ticker (real-time price feed) in my office for years. I thought I could not get along without them, and lost plenty of money by having them in the office and getting in wrong because the ticker showed some minor trend and threw me off the main trend which I had figured. I made a greater success when I took all the tickers out of the office and have not had a ticker in my office for the past 10 years.
Chapter 1 Page 11
THE BEST WAY TO TRADE: The most money is made by swing trading, or the long pull trades.
TIME TO STAY OUT OF THE MARKET: You cannot make money by trading in the markets every day or by getting in and out every day. There comes a time when you should stay out, WATCH and WAIT until you have a DEFINITE CHANGE IN TREND.
There you have it in Gann's own words. Don't look at intra-day prices. Notice how he admited that he had lost plenty of money trading that way. He also states that you have to stay in good trades, and also to WAIT for good trades. Basically everything that a day trader doesn't do.
As the old saying goes "Nothing dies harder than a bad idea".
Now that might sound pretty negative, but you have to realise what's possible trading and what's not. Day trading is a mugs game. When ever I say that to people they tend to reply "I know a successful day trader" or "I'm a successful day trader". My answer is always the same; prove it. In 30 years no one has.
How to trade successfully
The first and most important thing you need to obtain is the CORRECT knowledge. luckily you're in the right place, but there is no free lunch. If you make no effort you will gain exactly what you deserve; nothing.
If you remember nothing else from visiting this website, remember the following because otherwise you will lose a lot of money.
You MUST make small losses when wrong.
In my opinion you can only do this by finding tops and bottoms of major market movements, protecting yourself with a close stop loss.
You MUST make BIG profits when right.
You can only make big profits from big movements, so you have to use rules that will keep you in for the longer term.
That's it. But that's also why it's so hard. Understanding why is the begining of wisdom.