An underlying theme of much of Gann's work is in determining trends. Whether a Gann fan line of 1 x 1 works or not is due to other considerations. It is generally accepted that Gann was open to any ideas, some of which still seem esoteric to me. However, I am not in a position to discount them since whenever I ask people whether they trade them, the answer is "yes." Putting aside the reasons why Gann seems to work at times, the other question is can you trade Gann?
For this you need to consider that there are generally three types of markets to trade: trending, choppy, and volatile. Trading a trending market means going long on uptrends and short on downtrends. A choppy market moves sideways and you attempt to pick highs and lows as best you can, and buy on the bottom and sell at the top - support and resistance play a major role as well as indicators. Trading a volatile market means trading prices only and not indicators. The best example is looking for patterns and then for breakouts, gaps, dead-cat bounces, etc. (a volatility trader might even boast that they don't use indicators).
Trending market traders loathe chop. The reason is that to trade trending markets you usually use moving averages. Try as you might, moving averages always lag. Which means in a choppy market -- one that moves up and down -- you are late getting in and when the market reverses you are late getting out. To be successful as a trending market trader you need to find a market that trends - some stocks and especially some commodities tend to trend. There are also helpful money management schemes that can be employed in a trending market but would have problems in other markets. So Gann didn't just come up with Gann fans, he also had to be concerned about determining if the trend changed and if prices are moving up or down while in trend. Gann is best used in conjunction with trend-trading systems. Gann's rules of trading also contain advice that fits a trend trader.
An approach attributed to Gann for determining whether a trend changes is the use of swing points: peaks or valleys. To visualize a swing peak or valley think of price action in a trend channel. Swing peaks occur when prices touch the upper channel line and valleys are the points where prices touch the lower channel line. A swing point marks the point at which a trend could change direction. More generally, swing peaks form intermediate peaks (valleys) when subsequent price changes fail to rise above a previous peak or fall below a previous valley. If a subsequent price move rises above a previous peak, the trend is up. If price falls below a previous valley the trend is down.
Arnold (see "Gann" by Curtis Arnold, Stocks & Commodities Magazine, March 1983) defines swing points by saying that in a downtrend a swing occurs when there are three days of higher highs, and for an uptrend when there are three days of lower lows, except for reversal days. A reversal is a temporary retracement and has not created a swing point. The giveaway to a reversal is the reversal day. In the context of a downtrend Curtis states, "a reversal day top occurs when prices move higher but then close near the lows of the day, usually below their opening and below the midpoint of the day's range. An even stronger reversal is indicated if the close is below yesterday's close." (See Figure 1 for an example). Just the opposite is true for uptrends.
Figure 1: Trends and reversal days.
Graphic provided by: Technical Analysis Inc..
Arnold trades Gann by going "short on a close below the 1 x 1 from a previous swing bottom." If you go back to Figure 1 in Part II of this series, and examine grid line G1, you will see a low on October 30, 2000. This is a swing valley. The grid line G1 forms resistance/support for the upswing which ends on Novmber 3, 2000. Using Arnold's rule, since you are still in a downtrend, you would short when the close drops below G1 (a 1 x 1 line since I made the grid using a 32 x 32 rise over run) which is around November 3, 2000.
Robert Krausz in his article "The New Gann Swing Chartist" (Stocks & Commodities Magazine, March 1998) writes about this subject as well. He was fortunate to have bought a copy of Gann's course from someone who had purchased the course from Gann. There is a notation on one of Gann's charts that says, "Use 2 day charts and rules better than 3 day." What is the implication? Krausz explains the use of a HiLo activator, which is a three-day average of highs along with a three-day average of lows. Using the HiLo activator looks a little like envelopes that move along with the price. It is used as a filter to test the validity of the swing. Krausz makes an important distinction between swing direction and trend direction. Currently the Nasdaq is in an overall downtrend, but has swings that temporarily carry prices higher.To be technically correct when I discussed manually creating G4, the Gann fan line whose origin is O3 (see Figure 1 in "Gann and Fibonacci Part II of III"), went through the upswing not the uptrend, of prices. It also suggests that Arnold's article may want to change, except Arnold still would give you a strong signal, although maybe not quite as fast.
Arthur A. Merrill in the article "Swing Expectations", (Stocks & Commodities Magazine, December 1988) makes an extremely valuable observation. He asks: if the price has already gone up by X%, how likely is it that it will go up Y% more? The idea is to make a distinction between noise and something significant happening. To determine trend change, Krausz uses swing points and asks is the price higher than the nearest swing peak or vice versa. Merrill has a different slant that I like even more, because using ZigZag (an indicator that filters out changes less than a chosen percentage) allows me to see the volatility it took to create a trend with a bunch of swing points defined by percentage change. This also gives me a chance to change the percentage when a downtrend is established so I can take advantage of the fact that stocks come down faster than they go up. For example using a 5% change on the Nasdaq Zig Zag shows five swing points in the uptrend going from October 1999 to the peak in March 2000, while the downtrend from September 2000 to the present shows 19 swing points (so shorting on a downtrend requires more margin - cash flow).
J.R. Davis ("Swing Charts", Stocks & Commodities, August 1998) writes that Gann did not use daily charts and suggests the creation of swing charts by counting up days and down days - a bit of a simplification of Arnolds' approach.
So how do the pieces fit together? David Lammar ("Trading with Elliott Wave and Gann", Stocks & Commodities, June 1988) writes that Elliott waves provide price targets based on the ratios of .618, .5, .382, and 23.6, which you will recognize as Fibonacci numbers. Lammar writes that he was able to significantly improve his performance using Gann in connection with Elliott wave determination. So there appears to be a connection between Gann and Fibonacci numbers. Gann would have been very familiar with point and figure charts, which require that you write a new X or O on your chart only if the price change is significant enough, so for Gann it looks like the determining factor was also two or three days in time.
Warning and Disclaimer:
Trading involves risk of loss and may not be suitable for you.
Past performance is no guarantee or reliable indication of future results.
This message is of the nature of general information only and must not in
any way be construed or relied upon as legal, financial or professional advice.
No consideration has been given or will be given to the individual investment
objectives, financial situation or needs of any particular person,
The decision to invest or trade and the method selected is a personal decision
and involves an inherent level of risk, and you must undertake your own investigations.
W.D. Gann used charting paper that lent itself to use equal rise and run when charting price and time. The alternative to this is to create a grid superimposed on a computer software generated price/time chart, which is sized to fill the window you have created on your screen. The superimposed grid, as you might expect, will not be square if the visual picture you start with is not square (equal rise and run). Following the rule of attaching a fan to a major or intermediate top or bottom I attached the grid origin, labeled as point O1 on Figure 1, to the September 1, 2000 peak.
From practice I have found that stocks with a 100-point range seem to work best on my 17-inch screen. Figure 1 shows a Gann grid (green) superimposed on a standard arithmetic price/time chart. The grid size is 32 x 32.
Figure 1: QQQ (AMEX: Nasdaq top 100 stocks) price annotated with Gann grid (green), Gann lines (blue).
Graphic provided by: MetaStock.
Graphic provided by: Data vendor: eSignal<.
Points A and B happen to coincide with grid intersections. Point C almost does as well. The coinciding of A, B, and C with grid intersections are a result of picking a cycle of 32. The fact that at points A, B, and C the grid lines form trend support and resistance is due to making the rise equal to the run, or due to a Gann approach.
If you attach a Gann fan from the September 1, 2000 peak you will have the Gann fan lines of resistance and support for downtrends. You can't see any uptrend resistance or support unless you find a bottom to attach Gann fan angles -- or use an alternative. The alternative is to draw a vertical line through the peak at September and then find an intersection of a major uptrend, using Gann angles, and the vertical line. Hopefully that line is the Gann 1 x 1. Grid line G1 seems to be a candidate, although a weak one, since there is so little uptrend to match (not much of a surprise in this bear market). I next attach a single Gann fan line at O2. O2 is the point of intersection of the vertical line with a Gann angle line (which happens, in this case, to be grid line G1 as well that shows resistance support to an uptrend).
The math I am using for Gann uptrends is the lower Gann angles of 45, 26.25, 18.75, 15, and 7.5 degrees. I take the tangent of each angle and multiply by 32 to get rise. Rise values for a run of 32 are therefore 1, 15.78, 10.86, 8.75, and 4.21.
I now manually attach and draw two Gann angle lines. By coincidence the downtrend comes to a momentary retracement at point D, which is on the 16.75 degree Gann angle line (Figure 1: Gann angle line G3) and then meets resistance at point E, which is on the 26.25 degree Gann angle line (Figure 1: Gann angle line G2).
G1 is a weak choice because the uptrend is so short. Line G4 is a stronger candidate since there are more price tags of resistance for this longer uptrend. Line G5 is drawn from origin O3, which is the intersection of G4 with the vertical line going through the September peak. This predicts that around March 26 or so that QQQ will hit 40 or so and then meet some support.
Warning and Disclaimer:
Trading involves risk of loss and may not be suitable for you.
Past performance is no guarantee or reliable indication of future results.
This message is of the nature of general information only and must not in
any way be construed or relied upon as legal, financial or professional advice.
No consideration has been given or will be given to the individual investment
objectives, financial situation or needs of any particular person,
The decision to invest or trade and the method selected is a personal decision
and involves an inherent level of risk, and you must undertake your own investigations.
Trader William Delaware Gann (1878-1955) reportedly had trading successes that would be the envy of anyone. Perhaps his observations are a by-product of point and figure charting back when charting techniques were most easily accomplished with charting paper. Gann fans, one of the techniques employed by Gann, use a predetermined set of angles and can be easily seen when using charting paper. They are used on charts where one unit of price equals one unit of time. Like Gann, Fibonacci numbers are also predetermined but their use does not require special charting techniques. Gann himself seems to have favored the use of Fibonacci numbers to find retracement levels.
Progressive Ohio [PGR], (top chart Figure 1) is representative of the charts I happen to pick at random (including Microsoft, QQQ, and AOL). The distinguishing features of PGR are an intermediate high followed by a gap down and then a downtrend to a low. There is an uptrend followed by downtrend, a gap up and then a peak in January 2000. The trends (Figure 1-top chart: U1 vs U2 and D1 vs D2) are somewhat parallel at times but in general if there is a pattern it's difficult to see.
Figure 1: PGR (NYSE) price chart without Gann and Fibonacci annotations (upper chart), and PGR with Gann and Fibonacci annotations (lower chart).
Graphic provided by: MetaStock.
Graphic provided by: Data vendor: eSignal<.
Now examine the bottom chart for the same time period. I have attached three Gann fans (Figure 1-bottom chart: red and green lines) to highs and lows. The fans have an equal rise and run. My choice was 32 x 32, because of work done by J. M. Hurst - and will be more evident in Part II. Gann fans provide trend resistance and support. The red Gann fan attached to the peak on the left, July 1999, shows resistance and support to downtrends. The coincidence of the price downtrend with one of the Gann fan lines is not unique to PGR; it happens on a number of charts. I have labeled the matching downtrend and fan line as A.
Gann fans use the angles of 82.5, 75, 71.25, 63.75, 45, 26.25, 18.75, 15, and 7.5 degrees using a grid that has equal rise and run. Each grid unit of the x-axis is equal to a unit of the y-axis. In order to see these angles, take a piece of graph paper and mark off a section that is eight units high by eight units long. Let the lower left hand corner be the origin. Drawing a line from the origin to the upper right hand corner makes a 45-degree angle with the horizontal.
Gann considered this the most important angle in terms of trend resistance and support. Forty-five degrees is alternatively referred to as the 1 x 1 and corresponds to the point that is eight units from the origin to the right (run) and eight units up (rise). Starting at the origin, 2 x 1 is eight squares to the right and four squares up (26.25 degrees), and 1 x 2 is eight squares up and four units to the right (63.75 degrees). Get the 3 x 1, and 1 x 3, lines by going just 1/3 of the way up or 1/3 of the way to the right. They (1 x 3 and 3 x 1) are the exception in drawing the lines from the origin to a grid coordinate along either the top or right edge of the eight by eight square.
The next event is that the downtrend remains in tact and when it reverses it does so with a gap up. By coincidence, a Gann fan line marks the break in downtrend resistance. I call that event B. Now the price action is in the adjacent fan wedge to the right of the one where I started. It is a broad fan wedge. There are not many options at this point to see how uptrend U1 (see upper chart for label) will progress and end. You can attach a fan at the low point and the prices do trend up along the fan lines.
By mid-September 1999 it's probably fair to say that PGR had hit a low at the beginning of September. Suppose at mid-September you were to attach Fibonacci retracement lines to the peak in July and the low in the beginning of September. The result is a series of horizontal lines showing levels of retracement starting with 0% at the peak in July and going to 100% at the low in the beginning of September. The significant levels of Fibonacci retracement are 23.6%, 38.2%, 50%, 61.8%, and 100%. Now notice that the point where price deviates from the Gann fan line coincides with the 61.8% Fibonacci retracement level. I label this as event A1.
Using Fibonacci time zones (corresponding to 1, 2, 3, 5, 8, 13, etc. trading days), which start at the PGR peak in July 1999, there is coincidentally a match with the September intermediate peak and the Fibonacci retracement at 61.8%. I call that event C. Now PGR retraces back down to the 100% Fibonacci retracement line. I call that event D.
As it turns out, PGR is going through a double bottom. As price rises from the October low it takes an enormous gap up and lands close to the intersection of the Fibonacci 61.8% level and one of the Gann fan lines. I label this as event E. Attaching a Gann fan at the second double bottom, again using 32 x 32 for rise and run, one of the Gann fan lines acts as resistance, event F, and then moves sideways to the adjacent fan line and continues on up, all of which I call event G. Price moves sideways using the Fibonacci retracement level of 23.6% as support, which I call event H (which also has two retracement lows at the intersection of two Gann lines). Finally, in February 1999 five events coincide: a Fibonacci time zone line, a Fibonacci 61.8% retracement level, a fan line from the peak in July, a fan line from the low in October, and a turning point in price, which I call event I.
Are events A, A1, B, C, D, E, F, G, H and I all just coincidences? You could say that with enough lines you could hit a barn. But I always use 32 x 32 or 16 x 16 and see similar results. I always attach the fan origins to an intermediate or major high or low. You could say that you don't know ahead of time which fan line to choose. No, but it's clear that a fan line can "accidentally" act as a resistance or support line for a price trend. Or is "accidentally" just a little too patronizing when it's a price trend that's being followed? Clearly there are lines that don't count, so does that mean you would expect an event for every line? In other words, if you argue that there are some lines that don't come into play, then you are essentially saying every line and intersection has to have a significant event; that seems extreme in the other direction. I think the compromise lies in realizing if Gann fan lines work as support and resistance trend lines then some fan lines will offer little support/resistance while others offer more.
You can't dismiss all the events as just coincidences because using the same rules give similar results. The issue is reliability. The fact that some events don't take place would make a trading system based on Gann and Fibonacci alone difficult to trade. So perhaps the answer is to use Fibonacci and Gann in conjunction with other indicators.
One factor worth mentioning is that one of the Fibonacci time zone lines (12/6/2000 line) for the Fibonacci time zone started with the July 1999 peak happens to nearly hit a peak (12/11/2000) for PGR in December 2000. Also a Fibonacci time line (4/4/2000) for a time zone started at the low in October 1999 exactly hits an intermediate high (4/4/2000). Given that Fibonacci time zone lines get more spread out as time moves out and therefore the number of lines gets less and less, the chance of coinciding with a significant event becomes less and less.
For Part II, I'll go through QQQ and show another option in attaching fans. Elliott waves anyone?
Warning and Disclaimer:
Trading involves risk of loss and may not be suitable for you.
Past performance is no guarantee or reliable indication of future results.
This message is of the nature of general information only and must not in
any way be construed or relied upon as legal, financial or professional advice.
No consideration has been given or will be given to the individual investment
objectives, financial situation or needs of any particular person,
The decision to invest or trade and the method selected is a personal decision
and involves an inherent level of risk, and you must undertake your own investigations.
As you examine articles that attribute their approach to Gann, common themes recur: retracement zones and trends. Retracement zones are characterized by price swings, and trend changes are initiated with price swings. When will the trend turn direction or when will the price go into a continuation pattern and then resume its current trend?
What is the most common continuation pattern encountered while in a trend? The answer is a wedge. The top chart of Figure 1 shows an idealized price history going through a peak followed by a downtrend. Given that you want to characterize a wedge continuation pattern, what will you use? As the top chart shows, you will use a pair of lines that slant upwards (to form a rising wedge). In order to create the pair of lines that show the uptrend resistance, which will form the wedge, you have to move the origin of the Gann angle down the vertical line because you need two lines, each with a different origin. By sliding the origin for the Gann angle down the vertical line, you are doing nothing more than saying this equity is still going down, but that's exactly what a wedge is saying; the trend is still down.
The general rule is that a rising wedge (formation shown in Figure 1) is bearish and a falling wedge is bullish. A succession of falling wedges are created by Gann angles created at successively higher origins, implying rising price, and a succession of rising wedges are created by successively lower origins, implying falling price.
The other theme that recurs is 50% retracement. Gann is reported to have said that 45 degrees was the most important angle. Recall that Gann used square grids. Suppose you create a square grid of 8 x 8. Now draw a line from the lower left corner to the upper right corner. The line is at 45 degrees. Next draw a line between the other two corners, upper left down to lower right. Another 45 degree line. Where do they intersect? In the middle, at 50%.
Figure 1: Idealized downtrend price behavior (top chart) with wedge continuation patterns, QQQ (weekly data) analyzed in a similar fashion (middle chart) and QQQ (daily data) analyzed using a 50% retracement (bottom chart).
Graphic provided by: MetaStock.
Graphic provided by: Data vendor: eSignal<.
To create the bottom chart I have not shown the Gann angles, but have attempted to analyze QQQ using Gann-like techniques. I have noticed for some time now the daily downtrend price behavior of QQQ contained wedges. In view of the way that Gann might have approached the problem, this means creating a series of Gann angle origins, with the origins sliding down a vertical bar going through the September 1 peak. What I have noticed is a downtrend, interrupted by a series of wedge continuation patterns, and then a downtrend that is still continuing.
The start and end of each wedge could be confirmed by using swing points. I used ZigZag with an 8% filter (recall that Gann preferred two-day changes - which is a way of filtering out noisy little dips, not unlike point and figure techniques to only plot Xs and Os after a predetermined amount of change). ZigZag is a technique that allows you to filter a change in direction based on either percentage or point change.
At 5% I was seeing every little up and down in price, as well as those in the bottom chart of Figure 1. Much to my comfort the way I had hand drawn the wedges matched with the swing points --- so you don't need ZigZag --- although I admit it's a handy little tool. By the way 5% ZigZag shows only five downswings in the uptrend from October 1999 to the March 2000 peak, and shows 14 upswings when applied to the downtrend from September 1, 2000 to the current date. The fact that an 8% filter still shows significant price patterns for a downtrend, while 5% is needed for an uptrend only confirms that prices move faster for a downtrend than for an uptrend.
Next I drew support and resistance lines to match the tops and bottoms and of the wedges - seen as blue dashed lines on the bottom chart. I wanted to see the bottom of the wedge above act as resistance to the uptrend of the wedge below - and it did. I wanted to confirm that price was in fact going through zones of resistance and support, but maybe a more appropriate phrase would be zones of distribution. Each wedge is characterized by buying on decreasing volume - in other words, a weak accumulation. The downtrend is resumed with selling on heavier volume - distribution. I checked the volume at the swing points that are the wedge "ends" and they are marked by lowered volume.
What to do now? I don't try to pick downtrend bottoms because I think it's guesswork. Gann also didn't try to find bottoms either, so it is not surprising his techniques didn't either. If Gann couldn't, or didn't want to, figure out a way why should any of us? But curiosity has gotten the better of me. What did they say about curiosity and the cat? So for what it's worth, and this is a bit scary, looking at the area where the wedges occurred was definitely a period where the market was trying, without much enthusiasm, to just say no to more downtrend. It failed. So I went through the drill. I declared a large area as a distribution zone. It marks the 50% point. So is the bottom at QQQ=36? If it is, this is not going to be pretty.
To see if I could confirm this bottom I brought up the QQQ weekly data, which resulted in the middle chart. To create the middle chart I use Gann angles to define a rising wedge. I used swing points defined by ZigZag with a 5% filter to help see the wedge. The bottom of the wedge suggests an origin point on a vertical line drawn through the peak on September 1, 2000. Drawing a 1x1 from that same origin point suggests support at QQQ=31.5. Almost the same story, only worse.
Gann was an impressive trader. Even if I only understand some of his techniques, I can certainly agree with his trading rules. If you have been trading for a while, these rules will jump out at you - they are that good. If you are just starting, do your best to incorporate them. I have incorporated my comments in parenthesis.
GANN'S 28 TRADING RULES
(Sidebar - "The Gann Method", John J. Blasic, Technical Analysis of Stocks and Commodities, June 1992)
1. Never risk more than 10% of your trading capital in a single trade. (Good risk management rule.)
2. Always use stop-loss orders. (Good risk management rule.)
3. Never overtrade. (Avoid getting whipsawed - don't try to catch up.)
4. Never let a profit run into a loss. (Don't try to hit the top if long, or the bottom if short.)
5. Don't enter a trade if you are unsure of the trend. (Never buck the trend. If a trend has developed and you are trading trends then make sure through setup and entry the trend is established. Going long in a downtrend or bear market is a way to see your capital get eaten away. Conversely going short in an uptrend or bull market will also see your capital get eaten away.)
6. When in doubt, get out, and don't get in when in doubt. (Patience, patience, patience - it will pay to be patient and sure. I have learned this the hard way.)
7. Only trade active markets. (Never short a dull market, and pile of other rules come from this.)
8. Distribute your risk equally among different markets. (Asset allocation still works.)
9. Never limit your orders. Trade at the market. (In a trend trading system, limit orders do not confirm the direction of the market for entry - they are countertrend because they want a better price, which would be against the trend. If you are trading support and resistance in a trading channel, then give this a shot.)
10. Don't close trades without a good reason. (Know your exit criteria. Exit because your trading systems says you should and not your intuition. Non-professionals often get out too early because their intuition says to get out.)
11. Extra monies from successful trades should be placed in a separate account. (Don't expose your profits to the same winner of the moment.)
12. Never trade to scalp a profit. (Scalpers can to do this through Nasdaq, but at Gann's time this was not available. You also have to worry about slippage in a big way.)
13. Never average a loss. (Your biggest drawdown is your biggest worry.)
14. Never get out of the market because you have lost patience or get in because you are anxious from waiting. (Gee - does he have to tell me twice? Hmmmm.)
15. Avoid taking small profits and large losses. (Know your risk- to-reward ratio and use stop-loss orders. For a trend trading system stop limit orders are a way to enter with a confirmation of trend direction.)
16. Never cancel a stop-loss after you have placed the trade. (One in the hand is worth two in the bush. Always have a stop-loss in place. Don't remove a stop-loss before you place another.)
17. Avoid getting in and out of the market too often. (Hmmmm - this is the second time you've told me. I wonder if you are hitting me up again about being patient, in which case this makes the fourth time.)
18. Be willing to make money from both sides of the market. (Learn how to short.)
19. Never buy or sell just because the price is low or high. (Fundamentalists eat your heart out - sorry, I just couldn't resist - probably goes to my problem with being patient.)
20. Pyramiding should be accomplished once it has crossed resistance levels and broken zones of distribution. (Gann recognized that price swings seen in trend channels are a series of accumulation and distribution zones - they are most easily seen as patterns, such as wedges. "Trend changes most often occur outside the retracement zone after the initial support resistance levels are tested" ("The Gann Method", John J. Blasic). Retracement zone and consolidation zone are used interchangeably in this article. It would appear that QQQ has passed through its retracement zone and now we are waiting for the bottom.)
21. Pyramid issues that have a strong trend. (Pyramiding uses the unrealized profits in your margin account to buy even more - thus leveraging yourself while riding the trend.)
22. Never hedge a losing position. (For example - trying to trade long in a bear market is a good way to see your money slowly but surely eaten away by hedging via protective stops and buying options - the better choices for a bear market are (1) buying bonds - Greenspan must really like the bond traders- (2) selling calls (3) buying puts (4) shorting.)
23. Never change your position without a good reason. (Watch out for three-day reversals - use swing points to assure that the trend has changed - in other words, don't switch from long to short unless you have backtested data that says you should switch.)
24. Avoid trading after long periods of success or failure. (Successes can make you overconfident and stop using a system, while losses can make you hesitant to pull the trigger when you should.)
25. Don't try to guess tops or bottoms. (Guessing is gambling - Vegas will pay better than the market. Gann's techniques were aimed at support and resistance relative to trends, not sideways trading channels with chop where support and resistance pick the tops and bottoms of the chop within the channel.)
26. Don't follow a blind man's advice. (If someone tells you about a good trade opportunity - ask them why it's good - those who see, usually have a number of reasons - as part of seeing is seeing a lot; ask them what the setup and entry is for example.)
27. Reduce trading after the first loss; never increase. (If you have a trend trading system that contains setup and entry conditions and you take a loss, it could be that market is going into chop. A trend trading system will lag price moves and your losses will grow faster if you don't pull back on the amount you trade or the number of times you trade. Since Gann didn't use daily charts he avoided buying on dips and thus reduced the number of trades by avoiding trading on dips.)
28. Avoid getting in wrong and out wrong; or getting in right and out wrong. This is making a double mistake. (Did you notice he didn't say that getting in wrong and getting out right was a double mistake - paying too much for something can be corrected by waiting for the price to return higher - and selling too low can be corrected by waiting for the price to go lower - still each is a mistake just not as bad as the first pair.)
Professional traders are following the above rules. If you aren't, then you need to consider more of an investment slant versus trading for a living. If you are going to have an edge you need to do or at least understand all of the above and then some more.
Warning and Disclaimer:
Trading involves risk of loss and may not be suitable for you.
Past performance is no guarantee or reliable indication of future results.
This message is of the nature of general information only and must not in
any way be construed or relied upon as legal, financial or professional advice.
No consideration has been given or will be given to the individual investment
objectives, financial situation or needs of any particular person,
The decision to invest or trade and the method selected is a personal decision
and involves an inherent level of risk, and you must undertake your own investigations.