William Gann's 12 Trading Rules

William Delbert Gann was one of the most colorful traders in history. He had a lot of interesting viewpoints. He was a trader, an educator, and an author. He believed that the market would always repeat—that everything would happen again and again. He used geometry, ancient mathematics, the Bible, and even astrology to predict events in the financial markets. He studied Greek and Egyptian cultures in his quest for knowledge on cycles. He was a 33rd degree Freemason in the Scottish Rite Order, a distinction that may have aided his quest for ancient knowledge. Some nuggets of wisdom have survived thousands of years.

Gann wrote a book called “How to Make Profits Trading Commodities” in which he talked about planetary combinations with different commodities. There were astrological patterns that would match up with the charts. It seems purely absurd. But Gann impacted a lot of people with what he’s written. So why not consider it? Some traders swear by his techniques to this day. His strategies are effective and widely used nearly a century after his death! He is considered a founder of modern-day technical analysis. What can we learn from him? Find out in this episode of How To Trade It!

In this special Trading Legends Edition of the How To Trade It Podcast, we look at the life of William Delbert Gann. Don’t miss it! #stocks #stock #trading #StockMarket #Investing #DayTrading #StockPicks #strategy Click To Tweet

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You’ll want to hear this episode if you are interested in…

  • [1:21] William Delbert Gann
  • [4:50] The early life of William Gann
  • [9:17] 12 of William’s trading rules
  • [19:38] Gann’s trading education courses
  • [24:26] Gann’s market cycle theory
  • [27:34] Gann’s tools: The Gann Fan + Box + Square

William Gann’s backstory

William Gann was born on June 6th, 1878 in Texas. He was the oldest of 11 children born to a poor cotton family. His Christian family didn’t have the time to send their kids to school, so they learned to read by reading the Bible. He helped his father work in the fields and he never went to high school. Gann was working in a cotton warehouse when he was introduced to commodities trading. He launched as a stock market guru at 24 and worked at a brokerage firm in the early 1900s. He began to develop his personal strategies and eventually moved to Wall Street and started a brokerage firm.

In 1919, he started the “Supply and Demand” newsletter in which he made a lot of forecasts and predictions based on 60 and 90-year cycles. In 1923, he started the “Busy Man Service” newsletter in which he gave trading recommendations for stocks and commodities. He was one of the first people to sell trading signals. He made great predictions over the years. He continued to write books, such as “45 Years in Wall Street,” that give deep insight into his theories (with a lot of wisdom to take in).

William Gann’s 12 trading rules

William Gann shared his trading rules in his book. What are they?

  1. Determine the trend. Trend trading is powerful and you can do really well.
  2. Buy at double and triple bottoms. Those chart patterns are powerful to this day, especially in conjunction with a trend.
  3. Never risk more than 1/10th of your capital on one trade. Nowadays, the risk margin is far more conservative—even as low as 1%.
  4. Always use stop-loss orders.
  5. Never over-trad. Over-trading can lead to mistakes and emotional decisions. So define what over-trading is for you.
  6. Never let a profit run into a loss. If a trade is starting to go against you, get out. If you still like the trade, get back in later.
  7. When in doubt, don’t get in—or get out.
  8. Don’t close your trades without a good reason. Make a plan and follow it.
  9. Never average a loss. I also believe in dollar-cost averaging. If you’re long-term investing, you want a dollar-cost average with a stop-loss. Listen to hear how this works.
  10. Never buy just to get a dividend: You need a company that is always moving up.
  11. Don’t get out because of impatience or anxiety.
  12. Don’t cancel your stop-loss order. You set it for a reason.

He would buy and sell on three weeks, advancing or declining. He’d look at the market and identity waves and cycles. He studied volume to determine the change in trend. He would also buy on higher tops and bottoms. The idea is if it makes a high it can make another new high. He noticed that a change in trend often occurs just before the holidays. When prices are at high levels there are several swings up and down, which indicates a reversal in the change or the trend.

Have you seen any trend changes on the holidays? I’ve seen markets change around Christmas, but haven’t noticed around other holidays.

Want to understand William Gann more? Check out Henry W. Steele’s YouTube Channel.

In this special Trading Legends Edition of the How To Trade It Podcast, I’ll talk about William Gann’s 12 trading rules. Don’t miss it! #stocks #stock #trading #StockMarket #Investing #DayTrading #StockPicks #strategy Click To Tweet

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Gann’s trading education courses

Gann started selling trading courses later in his life. He used his reputation to sell high-dollar educational courses—we’re talking around $5,000. That’s a lot of money in the 40s and 50s, equating to almost $50,000 per course nowadays. Some people knock him and claim that he just sells products. Others say he was a great trader and made a lot of money.

In his book, “Trading for a Living,” Alexander Elder said that there was an interview with William’s son, John. John was quoted as saying his father couldn’t support his family by trading but earned his living by selling courses. Elder took issue with that. What do I think? His rules are solid. It appears some of his strategies are solid. Perhaps he wasn’t a good trader because he couldn’t follow his own rules. But that doesn’t mean the rules aren’t valid.

Alexander Elder is a great writer and he’s made a lot of money selling his books and courses, yet we have no idea what his trading success looks like either…

Gann’s market cycle theory

One of Gann’s time cycles was based on the book of Ecclesiastes, 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.” Even now, people live through life and death cycles. Gann was quoted as saying, “To make a success you must continue to study past records. The market in the future will be a repetition of the past. The more data you have the better off you will be.”

He used a lot of mathematical cycles to make predictions. He even used his cycle to match market movements related to the civil war. He predicted the roaring twenties and the great depression. In his view, that proved the accuracy and the value of his cycle strategy. Coincidentally, he predicted the stock market crash in 1929. But I wonder how many predictions he made that didn’t happen? But based on his reference point, COVID-19 was exactly 90 years after 1929, which is on-point with his cycle analysis of every 90 years.

Listen to learn more about the tools Gann developed in this episode of How To Trade It!

In this episode of How To Trade It, I share some information about William Gann’s market cycle theory and why it’s so interesting. Check it out! #stocks #stock #trading #StockMarket #Investing #DayTrading #StockPicks #strategy Click To Tweet

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