WD Gann Patient Studies
Finally Paid Huge Rewards
Mr Gann, mentions that he started out trading exactly like the rest of speculative traders. He lost thousands of dollars and experienced the usual ups and downs incidental to the novice who enters the market without preparatory knowledge of the subject... After many years of patient study in the subjects of science and nature his unconventional approach lead him to become one of the greatest trading masterminds the world has ever known.
William D Gann's Background
He was born in Lufkin, Texas. Called a gifted mathematician with an extraordinary memory for figures and expert chart reader.
1878 - 1955
William D Gann has recognition as one of Wall Street's leading operators. His life size picture hangs in the entrance of the New York Stock Exchange.
Advocate of Time Cycles
An advocate of using time cycles to predict trend of commodities, stocks and business. He believed that TIME CYCLES repeat because human nature does not change. He gives an example of why wars occur at regular CYCLES. Old men do not want wars, neither do they want to go into war after they have been through one. Young men fight the wars because they read history and want to be hero's. Leaders of nations appeal to the young men who have no experience, and induce them to fight. The same desire in men that urges them to risk their lives in war, caused them to take a chance in business and in speculation. They take too many chances and get too optimistic after a long period of success in business and after prolonged advances in stocks and commodities.
Old men in business, after a prolonged period of prosperity become too hopeful and get over extended. It is easy to borrow money after a long period of business prosperity. People who borrow money on hope have to liquidate when fear overtakes them and conditions are at the worst. That is why CYCLES in business and the stock and commodity markets have always repeated and always will. From 'Annual Graphic Market Forecasts' April 5, 1954 WD Gann.
The Morning Telegraph, 1922
Excerpts for 'The Morning Telegraph' Sunday, December 17, 1922. Article entitled “Gann Foretold Run of Stocks”. Wall Street Scientist Forecast Top of Bull Market Year in Advance. By Arthur Angy. Mr Angy writes that Mr Gann is no “Wall Street tipster” sending out market letters and so-called “inside information”. Mr Gann's results are obtained by profound study of supply and demand, a mathematical chart of money, business and commodities. He determines when certain cycles are due, and the order and the time when market movements will follow.
Mr Angy goes on the say that during the past thirty years many men have proclaimed discoveries and theories to “beat the Wall Street game,” most of which resulted in loss to their followers. They could always tell by the chart just why the market did it after it happened. Mr Gann's theory differs from the others in that he tells months in advance what stocks are going to do.
William says the trouble with most chart makers is that they work with only one factor – space movements or charts that record one to two points up or down – whereas there are three or more factors to be considered, space, volume and time. THE MOST VITAL IS TIME, and back of that is the cause of recurrence of high or low prices at certain intervals.
Mr Angy asked Mr Gann : "What is the cause behind the time factor?"
He smiled and said : "It has taken me twenty years of exhaustive study to learn the cause that produces effects according to time. That is my secret and too valuable to be spread broadcast. Besides, the public is not yet ready for it".
"Water seeks it's level," continued Mr Gann. "You can force it higher with a pump, but when you stop pumping it requires no force to cause it to return to its former level. Stocks are the same. They can be forced above their natural level of values to where lambs lose all fear, become charged with hope and buy at the top. Then stocks are permitted to sink to a level where hope gives way to despair and the most rampant bull becomes a bear and sells out with a loss. My discovery of the time factor enables me to tell in advance when these extremes must, by the law of supply and demand, occur in stocks and commodities."
The Ticker and Investment Digest December, 1909
The magazine The Ticker and Investment Digest ran an article on William D Gann with the heading , An Operator Whose Science and Ability Place Him in the Front Rank - His Remarkable Predictions and Trading Record.
A few excerpts are as follows;
The magazine mentions that Mr Gann gave them in advance forecasts of exact points at which certain stocks and commodities would sell, together with prices close to the then prevailing figures which would not be touched.
For instance. when New York Central was 131 he predicted that it would sell at 145 before 129. So repeatedly did his figures prove to be accurate, and so different did his work appear from that of any expert whose methods we have examined. that we set about to investigate Mr Gann and his way of figuring out these predictions, as well as the particular use which he was making of them in the market.
The Ticker Digest mentions that the results from their investigation are remarkable in many ways. They go on to explain that it appears to be a fact that Mr Gann has developed an entirely new idea as to the principles governing stock market movements. He bases his operations upon certain natural laws which though existing since the world began, have only in recent years been subjected to the will of man, and added to the list of so-called modern discoveries.
It is also interesting to note that the author of the article near the beginning wrote; "We submit this in full recognition of the fact that in Wall Street a man with a new idea – an idea which violates the traditions and encourages a scientific view of the proposition – is not usually welcomed by the majority, for the reason that he stimulates thought and research. These activities said majority abhors".
Mr Gann, mentions that he started out trading exactly like the rest of speculative traders. He lost thousands of dollars and experienced the usual ups and downs incidental to the novice who enters the market without preparatory knowledge of the subject.
William decided to devote a decade of his entire time and attention to the speculative markets. After some time he began to notice the periodical recurrence of the rise and fall in stocks and commodities. This lead him to conclude that natural law was the basis of market movements.
Law of Vibration
William decided to focus in on studying this natural law as applicable to the speculative markets and devote his best energies toward making speculation a profitable profession. After exhaustive researches and investigations of the known sciences, he discovered the the Law of Vibration enabled him to accurately determine the exact points to which stocks or commodities should rise and fall within a given time.
Mr Gann goes on to say that it is impossible here to give an adequate idea of the Law of Vibration as he applies it to the markets, however the layman can grasp some of the principles when he mentions that the Law of Vibration is the fundamental law upon which wireless telegraphy, wireless telephone and phonographs are based. Without the existence of this law the above inventions would have been impossible.
William also mentions that he obtained information from Mr Henry Hall's book 'Cycles of Prosperity and Depression' which he found recurring at regular intervals of time. William says that the law which he applied will not only give these long cycles or swings, but the daily and even hourly movements of stocks. By knowing the exact vibration of each individual stock William was able to determine at what point each would receive support and at what point the greatest resistance would be met.
Mr Gann viewed stocks as live electrons, atoms, and molecules which hold persistently to their own individuality in response to the fundamental Law of Vibration. Science teaches 'that an original impulse of any kind finally resolves itself into periodic or rhythmical motion, also just as the pendulum returns again in its swing, just as the moon returns in its orbit, just as the advancing year ever brings the rose or spring, so do the properties of the elements periodically recur as the weight of the atoms rises'.
From William's extensive investigations, studies and applied tests, he finds that not only do the various stocks vibrate, but that the driving forces controlling the stocks are also in a state of vibration. These vibratory forces can only be known by the movements they generate on the stocks and their values in the market. Since all great swings or movements of the market are cyclic they act in accordance with periodic law.
Science has laid down the principle the 'the properties of an element are a periodic function of its atomic weight.' A famous scientist has stated that 'we are brought to the conviction that diversity in phenomenal nature in its different kingdoms, is most intimately associated with numerical relationship. The numbers are not intermixed, chaotically and accidentally, but are subject to regular periodicity. The changes and developments are also seen to be in many cases undulatory.'
Thus, Mr Gann affirms, every class of phenomena, whether in nature or in the stock market, must be subject to the universal law of causation and harmony. Every effect must have an adequate cause.
If w wish to avert failure in speculation we must deal with causes. Everything in existence is based on exact proportion and perfect relationship. There is no chance in nature, because mathematical principles of the highest order lie at the foundation of all things. Faraday said : "there is nothing in the Universe but mathematical points of force."
Vibrations is fundamental : nothing is exempt from this law; it is universal, therefore applicable to every class of phenomena on the globe.
Through the Law of Vibration every stock in the market moves in its own distinctive sphere of activity, as to intensity, volume and direction; all the essential qualities of its evolution are characterized in its own rate of vibration.
Stocks like atoms, are really centers of energies, therefore they are controlled, mathematically. Stocks create their own field of action and power; power to attract and repel, which principle explains why certain stocks at times lead the market and 'turn dead' at other times. Thus to speculate scientifically it is absolutely necessary to follow natural law.
Mr Gann also explains that after years of patient study he has proven to his entire satisfaction as well as demonstrated to others that vibration explains every possible phase and condition of the market.
Mr W.E Gilley, an inspector of Imports, New York was the man whom encouraged Mr Gann to study the scientific and mathematical possibilities of the subject. Mr Gilley, mentions that he has followed William Gann's predictions and operations closely for years. He says that Mr Gann's calculations are based on natural law. "I know that he has a firm grasp of the basic principles which govern stock market movements, and I do not believe any other man on earth can duplicate the idea or his method at the present". Mr Gilley goes on to say that he once saw Mr Gann take $130, and in less than one month run it up to over $12000. "He can compound money faster than any man I ever met".
During the month of October, 1909, in twenty-five market days, Mr Gann made in the presence of a representative of 'The Ticker Digest' two hundred and eighty-six transactions in various stocks, on both the long and short side of the market. Two hundred and sixty-four of these transactions resulted in profits : twenty-two in losses.
The capital with which he operated was doubled ten times, so that at the end of the month he had one thousand percent on his original margin.
In our presence, Mr Gann sold Steel common short at 94.88, saying that it would not go to 95. It did not.
On a drive which occurred during the week ending October 29, Mr Gann bought Steel common at 86.25, saying that it would not go to 86. The lowest it sold was 86.12.
The results for the month showed Mr Gann achieved over ninety-two per cent profitable trades.
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.
Mr Gann has refused to disclose his method at any price, but to those scientifically inclined he has unquestionably added to the stock of Wall Street knowledge and pointed out infinite possibilities.
During his lifetime Mr Gann ran a market advisory service, wrote nine books, produced two trading manuals (Commodity market trading course and Stock market trading course) as well as lecturing for large investment organizations all over the world.
It is known that William used technical analysis with price patterns formations at tops and bottoms to determine direction of trends. Formations such as Single “v” or Sharp Bottom, “U” Bottom or Flat Bottom, “W” Bottom or Double Bottom, “W V” Bottom or Triple Bottom and “W W” Bottom or 4-Bottom Formation. Also, same opposite formations for Tops.
He also recognized common price movements for ranges such as fifty percent and hundred percent. ie Price movements that halved or doubled.
Also, recognized that prices move according to seasonal changes.
Natural Square Calculator
Mr Gann also made a special tool to assist with his trading known as the Natural Square Calculator or Square of Nine, derived from ancient civilizations. (A number chart used by ancient Indians and Egyptians as a special calculator). He over-laid a transparent circle of 360 degrees on top of the number chart. He used the divisions of the circle as support and resistance to match the support and resistance levels on the number chart. It is believed that he was the first person to modify the ancient chart and use it as a trading tool.
Learn more about how Gann used natural square numbers in his day trading to find support and resistance. Visit here.
Mr Gann also used mechanical swing trade methods in a number of ways.
One was to determine the general direction of a trend, using 7 day or greater periods along with 2 day swing charts.For a closer look at this method of swing trading, go here.
The other swing trade method was what he called "trading the overnight chart". Mr Gann writes "that the overnight chart and the method for operating it is purely mechanical. You use no judgment but simply follow rules and reverse your position when the overnight chart indicates it. If you buy and sell and use stop loss orders according to the rules, this method will make a large amount of profits over a long period of time". The trading funds were always invested in the market.
Included in Mr Gann's writings are a wealth of knowledge, some golden nuggets still left waiting to be discovered by the patient student.
Current Day Analysis
Take a look at some of Gann's analysis techniques, applying them to the Euro vs Usd currency pair here.
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