William Delbert Gann: The Mysterious Trader

Famous traders

WD Gann
  • William Delbert Gann was a trader born in 1878.
  • He studied the market in-depth and created a strategy highly based on mathematics.
  • He also gave a lot of importance to time cycles (especially 60 & 90 years).

If you’ve been studying and practicing technical analysis for some time now or you’re a trader, you must have heard or seen the name of W.D. Gann and his trading theory.

Even your indicators will have the name of WD Gann at least once. So, who was Gann? Why is he sought out even after 60 years of his death?

William Delbert Gann or was born on June 6, 1878. As a finance trader, he began his trading career in 1902 when he was 24. He created various technical analysis tools. Including the WD Gann Angles, Circle of 360, Square of 9, Hexagon and many more. Most of his works are on astronomy, astrology, geometry, and ancient mathematics.

Most of these were very powerful, that they are widely used by traders even today. His theory on intraday trading is one of the most successful methods for day traders.

Gann is probably the most mysterious of all famous traders in history. He used calculations to predict events in the financial markets and historical events. Gann’s trading strategies are still widely used today.

Gann was a finance trader who developed a technical trading tool known as Gann angles. Just as impressive as the trading tool he created are the rules he used in trading.

The rules range from basic money management principles to the all-important mental game. But what is really amazing about these rules is that while he wrote them one hundred years ago. They are just as true today as they were then.

Disciples of Gann claim he was one of the most successful stock and commodity traders who ever lived. However, critics argued that there’s no concrete proof he ever made a great fortune from his predictions.

Early life of W.D. Gann

Gann was born in 1878 in Lufkin, Texas, and he was the first of 11 children. He was born into an impoverished cotton-farming family. He neither graduated from grammar school nor attended high school because his parents wanted him at home to work on the farm.

William Delbert Gann got most of his education from the Bible. He used it to learn to read and in the cotton warehouses, where he learned about commodities trading. Gann began his career working at a brokerage firm and attended business school at night.

A year after he started trading in the stock markets, he moved to New York City to work at a Wall Street brokerage firm. Soon, he opened his own brokerage firm, W.D. Gann & Company. He went ahead and created his investment strategy as a broker as he observed the mistakes of clients and learned from them.

In 1919, he started publishing a daily market letter. The letter is as The Supply and Demand Newsletter. It covers stocks and commodities and making yearly forecasts. In 1923, he began another publication, The Busy Man’s Service, in which he provided specific trading recommendations.

He also wrote various books throughout his life, including The Tunnel Thru the Air and 45 Years in Wall Street. Late in his career, he sold a ‘master course’ to private students for $5,000 apiece.

Gann time cycles

He often quoted the Book of Ecclesiastes. His favorite was chapter 1, verse 9. It says:

That which has been is what will be, that which is done is what will be done, and there is nothing new, under the sun.

Gann believed everything happening in markets has historical reference points. Everything has happened before and will eventually repeat itself. He studied ancient texts to investigate how market events and particular numbers repeated across different time cycles.

60-Year Cycle

He identified some important time cycles. He viewed the 60-year cycle as being of great importance. Gann said that this is the greatest and most important cycle of all. It repeats every 60 years or at the end of the third 20-Year Cycle. t

Traders will see the importance of this by referring to the war period from 1861 to 1869 and the panic following 1869. This is the greatest bull market in history and the greatest panic in history followed.

90-Year Cycle

Gann also placed emphasis on the 90-year cycle. It predicts a potential financial crisis occurring in 2019. This year will be 90 years after the financial crisis of 1929, which itself occurred approximately 90 years after the Panic of 1837.

A smaller cycle of note, 144 months, also coincides with 2019. Some of his ideas are commonly used in technical analysis tools today. They are often integrated into charting and trading software platforms.

Important Rules of WD Gann

Among most indicators and technical tools, Gann laid down some basic trading rules. The rules are:

  • If the high price of the entire week happens on Friday, expect to get prices next week
  • If the low price of the entire week happens on Friday, expect much lower price next week
  • In a highly uptrending market, weekly low happens on Tuesday
  • If the market is in a strong downtrend, the weekly highs are generally achieved on Wednesday
  • When the price crosses the high of the last four weeks, it indicates more higher prices
  • When the price breached the low of the previous four weeks, it means more lower prices
  • If prices break the 30 DMA and stays below it at least for 2 consecutive days, it indicates a much greater correction
  • If the market rises for 5 consecutive days, there’s a chance that correction will last for 3 days
  • When price crosses the high of the last 3 days it indicates a much higher prices on the 4th day
  • If subsequent correction is higher than the previous correction both in terms of price and time, this means that trend is changing
  • 50 percent of the last highest selling price is the strong support area. Any stock which is trading below this level is not that useful for investment
  • If a price is rising for 9 consecutive days at a stretch, there’s a high chance of a correction for 5 consecutive days
  • Don’t ignore a double bottom and triple bottom signal on a monthly chart, after a minimum gap of 6 months
  • When the price is choppy or in a consolidating, it indicates that trend will likely change

Recommendations

  1. Always use stop-loss orders.
  2. Don’t overtrade.
  3. Never enter a trade if you’re not sure of the trend. Don’t buck the trend.
  4. When in doubt, get out, and never get in when in doubt.
  5. Only trade markets that are active.
  6. Never close trades without a good reason.
  7. Don’t average a loss.
  8. Avoid getting out of the market because you have lost patience or get in because of anxiety from waiting.
  9. Don’t take small profits and large losses.
  10. Never cancel a stop-loss after placing the trade.
  11. Don’t get in and out of the market too often.
  12. Be willing to earn from both sides of the market.
  13. Don’t buy or sell just because the price is low or high.
  14. Pyramiding should happens once it has crossed resistance levels and broken distribution zones.
  15. Don’t change your position without a good reason.
  16. Avoid trading after long periods of failure or success.
  17. Never guess tops or bottoms.
  18. Never follow advice from a blind man.
  19. Reduce trading after your first loss; don’t increase.
  20. Don’t get in and out wrong.

Conclusion

What’s amazing is that after several decades, these rules are just as applicable today as they were then. This shows that some of the most simplistic forms of technical analysis such as price action are here to stay. The same way the most basic rules of trading psychology are timeless.

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