William Delbert Gann or popularly known as W. D. Gann was a very successful trader during 1910 to1955. His ingenious forecasting methods of trading were rooted in astronomy, astrology, geometry and ancient mathematics and were very accurate in predicting the market turns. It is said that he once took 286 trades in the presence of representatives from a renowned financial publication of his time out of which 264 were profitable!
Some of his famous trading methods such as the Gann angles, Square of Nine, Circle of 360 and the Hexagon Chart are still being used by many traders around the world.
Here we will have a look at 12 trading principles of W.D. Gann that could transform your trading for the better:
- Stocks trading above the 1×1 Gann angle (45 degrees) are in a strong uptrend. Trade only from the long side.
- Stocks trading below the 1×1 Gann angle (45 degrees) are in a strong downtrend. Trade only from the short side.
- The 50% retracement level of the previous advance or decline is an important level to enter into a new position.
- If a correction is greater in magnitude both in terms of price and time than its previous correction, it indicates that the trend is changing.
- If on Friday an instrument achieves its highest price, expect the bullish momentum to continue in the next week as well.
- If on Friday an instrument achieves its lowest price, expect the bearish momentum to continue in the next week as well.
- Tuesdays often mark the weekly lows when the market is in a strong uptrend.
- When price breaches the highs of the last four weeks, it indicates further higher prices ahead.
- When price breaches the lows of the last four weeks, it indicates further lower prices ahead.
- A 5 day continuous advance would correct for no more than 3 days.
- A 9 day continuous advance would correct for no more than 5 days.
- If price crosses the high for the last 3 days, the 4th day would see even higher prices.
- When in doubt, close a trade, and don’t get it back again when you are still in doubt.
- Don’t trade using limit orders. Trade at the market.
- Distribute your risk equally among various asset classes.
We hope the above 15 principles of W.D. Gann would help you immensely in your trading. However, without proper trading strategies in place, all your efforts could go in vain. To gain mastery over trading strategies and trade successfully, you can attend our Qualified Market Trader (QMT) stock market course.