Looking @ W.D. Gann – Part Two

Previous posts:  Introduction and Gann’s 24 Rules + Part One = Business Cycle / the end of Boom and Bust!

In Part Two, I’d like to focus on a few of Gann’s observations and Quotes – still highly valid and applicable 100 years later!

“Every man must get his stock market education and must remember that one never graduates from the Wall Street school.  You must take post-graduate courses every year to keep up with the times; in fact, keep ahead of the times, in order to make a success in Wall Street”

The Wise Fool:    “The cock-sure trader who thinks he knows it all, follows tips and inside information.  He condemns what he does not understand and never makes progress because he thinks he knows it all.  Such a man calls a follower of science and charts, a fool, but the follower of charts is a wise fool.  The natural or average man considers science as applied to the stock market foolishness and condemns charts because he does not know how to read them.  He has not had years of experience and has not been trained to properly read or accurately determine the future course of stocks.  The successful trader is the man who knows that he does not know it all and who is always trying to learn more.  When once a man decides he knows it all about the stock market, he is doomed to failure.  When activity decreases, stagnation sets in and when a man no longer continues to learn he goes backward, not forward.  A successful man must have a plan and rules and follow them.”

“Markets usually move in 3 or 4 sections”

“When a market begins declining or an individual stock starts down, it usually makes 2,3 and 4 movements before it reaches final bottom,  If the trend is going to reverse, it will only make the 1st and 2nd decline and then turn up again.  But after a prolonged decline and a 4th move down, you should watch for the bottom and change in trend”

“There are several sections to a major movement or swing”

“It makes no difference how high or low a stock goes during market hours; the price at which it closes shows whether it has made a gain or loss over the previous day”

“After it gets out of the sideways movement, which is always accumulation or distribution, and breaks into new high or low territory, then you can trade in it with some certainty of having determined the correct trend”

“The big money in many stocks is made by taking a long pull position, but there are times when it does not pay to hold stocks for the long pull, depending upon the cycle which the market is in and how near the market is to the distributing stage.”

“Never buck the trend, go with the trend always and you’ll make money”

“MORE PROFIT IN SWINGS: If you will go over any active stock over a period of 5, 10 or 20 years and note all the moves of 10 points or more, you will see that there is more profit trading for these swings than there is trading for dividends or holding for big increase in capital”

We can see from these quotes Gann made that he was truly on the ball and understood the markets in the early part of the 1900’s – I truly believe that today’s traders need to learn, understand and apply these concepts to be successful.

For Instance, Gann’s “More Profit in Swings” – I discovered this concept by simply looking at charts and seeing that markets often had decent swings and by being part of those swings I’d grow my capital faster than buying and holding, this then led onto investigating how to join the swings.  Years later when reading Gann’s courses its nice to see my original thinking & observations justified.

It’s interesting that Gann as R.N. Elliott (Elliott Wave Principle) noticed that markets move in swings of 3-4 sections – this is essentially the basic explanation for the impulse wave, but Gann obviously refrained from labelling swing points.  Gann was also using resistance levels (another posting) and R.N. Elliott used the Fibonacci process to identify support/resistance levels.

Keep an eye out for more on Gann in the weeks to come + charts

All the best

The Hovis Trader

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