Gann Simplified by Clif Droke

Gann

Simplified

II

M AR A R KE K E TP TP LA LA C

O OK OK S

Simpl Simplifi ified ed Series Series Technical Analysis Simplified Simplified by O i f D r o k E l lili o t W a v e S i m p lili fifi e d b y O i Droke Movin

A v e ra ra g e s S i m p lili fifi e d by Oi Droke

G a n n S i m p lili fifi e d by Oi Droke

O t e r g r u n - br br e k i ok Mark Market etpl plac ac Book Book Seri Series es

in th

T h e P r e ci ci s io io n P r o fifi t F l oa oa t I n di di c at at o r P o w er er fu fu l T e ch ch n iq iq u e t o E x pl pl oi oi t P r ic e a n d V o lu lu m e by Steve W o o d s T ra ra d er er ' G u id id e t o T e ch ch n ic ic a l A n al al ys ys i by Colburn H a r d y C o mm mm o di di t O p t o ns ns : S pe pe ct ct ac ac u a r O p titi on on s w itit h L im im i te te d R i s by Larry Spears T re re n F or or ec ec as as t n g U nl nl ea ea sh sh in in g t h H id id de de n P ow ow e r o f I nntt er er ma ma rk rk e A na na ly ly si si s t o B ea ea t t h M a rk rk e by Louis 8. Mendelsohn C h ar ar t P at at te te rn rn s T ha ha t C o ns ns is is te te nt nt l by Ed D o w n s T ra ra d n g S ex ex , a n

Mak

D y n g T h H ea ea r o f

M o ne ne y G am am b e r

b y J ue ue f E . A n d er er so so n

T h A RM R M S n de de x by Richard A r m s , I r . T h N e w M a rk rk e W iz iz ar ar ds ds : C o nv nv er er sa sa t o n w itit h hw a ge ge r A m e riri ca ca ' T o p T ra ra d er er s b y J a c k D . S c hw M c Mi Mi l a

o n O p titi on on s by Lawrence

th r y T h A r o f S ho ho r S e n g by K a th

McMillan S ttaa l e

P o in in t a n d F ig ig u r C h a rtrt in in g : E s se se n titi a A p p li ca ca titi on on s f o F or or ec ec as as titi n a n T ra ra ck ck in in g M a rk rk e P r c e b y T o m D o rs rs e y T h e T r ad ad e r'r' s T a x S o l u titi on on : M o n e S a vi vi n S trtr a te te g ie ie s es s e f o t h S e riri ou ou s I nnvv es es to to r b y T e d T es

"If y o

m a k s pe pe cu cu la la t o n o r n ve ve s m e n b us us in in es es s y o p ro ro ba ba b w i b e a b to accumulate o rtrt un un e o ve ve r n um um be b e r o f y ea ea rs rs , bu if y o g o n t it g am am b a n e xp xp ec ec t to m a k e it a l o n o n d ea ea l y o w i o s a l y ou ou r mo ey an a v o th th iinn g b u h op op e -W.D -W.D

Ho

Ma

P ro ro f

Gann Gann

in Commodities

M AR A R KE K E TP TP LA LA C

O OK OK S

Simpl Simplifi ified ed Series Series Technical Analysis Simplified Simplified by O i f D r o k E l lili o t W a v e S i m p lili fifi e d b y O i Droke Movin

A v e ra ra g e s S i m p lili fifi e d by Oi Droke

G a n n S i m p lili fifi e d by Oi Droke

O t e r g r u n - br br e k i ok Mark Market etpl plac ac Book Book Seri Series es

in th

T h e P r e ci ci s io io n P r o fifi t F l oa oa t I n di di c at at o r P o w er er fu fu l T e ch ch n iq iq u e t o E x pl pl oi oi t P r ic e a n d V o lu lu m e by Steve W o o d s T ra ra d er er ' G u id id e t o T e ch ch n ic ic a l A n al al ys ys i by Colburn H a r d y C o mm mm o di di t O p t o ns ns : S pe pe ct ct ac ac u a r O p titi on on s w itit h L im im i te te d R i s by Larry Spears T re re n F or or ec ec as as t n g U nl nl ea ea sh sh in in g t h H id id de de n P ow ow e r o f I nntt er er ma ma rk rk e A na na ly ly si si s t o B ea ea t t h M a rk rk e by Louis 8. Mendelsohn C h ar ar t P at at te te rn rn s T ha ha t C o ns ns is is te te nt nt l by Ed D o w n s T ra ra d n g S ex ex , a n

Mak

D y n g T h H ea ea r o f

M o ne ne y G am am b e r

b y J ue ue f E . A n d er er so so n

T h A RM R M S n de de x by Richard A r m s , I r . T h N e w M a rk rk e W iz iz ar ar ds ds : C o nv nv er er sa sa t o n w itit h hw a ge ge r A m e riri ca ca ' T o p T ra ra d er er s b y J a c k D . S c hw M c Mi Mi l a

o n O p titi on on s by Lawrence

th r y T h A r o f S ho ho r S e n g by K a th

McMillan S ttaa l e

P o in in t a n d F ig ig u r C h a rtrt in in g : E s se se n titi a A p p li ca ca titi on on s f o F or or ec ec as as titi n a n T ra ra ck ck in in g M a rk rk e P r c e b y T o m D o rs rs e y T h e T r ad ad e r'r' s T a x S o l u titi on on : M o n e S a vi vi n S trtr a te te g ie ie s es s e f o t h S e riri ou ou s I nnvv es es to to r b y T e d T es

"If y o

m a k s pe pe cu cu la la t o n o r n ve ve s m e n b us us in in es es s y o p ro ro ba ba b w i b e a b to accumulate o rtrt un un e o ve ve r n um um be b e r o f y ea ea rs rs , bu if y o g o n t it g am am b a n e xp xp ec ec t to m a k e it a l o n o n d ea ea l y o w i o s a l y ou ou r mo ey an a v o th th iinn g b u h op op e -W.D -W.D

Ho

Ma

P ro ro f

Gann Gann

in Commodities

Contents

Copyright Publ Publis ishe he

A l r ig ig h t C ha ha r

2 00 00 1

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R e pr pr od od uc uc titi o o r t ra ra n ssll at at io io n o f a n p a r o f t hi hi s w o r k b e yyoo n d t ha ha t p er er m itit te te d b y S ec ec t o n 1 0 o r 1 0 o f t h e 1 97 97 6 U n e d S ta ta te te s C o py py r g h A c w i h ou ou t h e p e rm rm is is si si o o f t h c op op yr yr ig ig h o w ne ne r i s u n la la w fu fu l R e qu qu es es ts ts f o r p er er mi mi ss ss io io n o r f ur ur th th e n fo fo rm rm a titi o s ho ho ul ul d b e a dd dd re re ss ss e t o t h P e rm rm is is s o n D e pa pa rtrt me me n a t T r a d er er s ' L i b ra ra r y . T h i p u bl bl ic ic a titi o i s d e s ig ig n e t o p ro ro v id id e a c cu cu ra ra t a n d a u th th o riri ta ta titi v i nf nf or or m a on e ga ga r h e s ub ub je je c m a e r c ov ov e e d so wi h e u nd nd e s ta ta nd nd in in g t ha ha t n ei ei th th e t h a ut ut ho ho r n o r t h p u b i sh sh e i s e n ga ga ge ge d i n r en en d eerr in in g l e g al al , a c c o u nt nt in in g , or o th th e p ro ro fe fe ss ss io io na na l s er er v c e I f l eg eg a a dv dv ic ic e o r o th th e e x pe pe r a s si si st st an an c e i s r eq eq u irir e d t h e s e rv rv ic ic e s o f c o m pe pe te te n t p ro ro f es es s io io n a p e r s o s ho ho u l b e s ou ou g hhtt . From D e cl cl ar ar a i o o f P ri ri nc nc ip ip le le s j oi oi nt nt l o f t h A m er er ic ic a B a r A s so so ci ci at at io io n a n

a do do pt pt e b y C o mm mm it it te te e C o m m itit te te e o f P u bl bl is is h er er s

W .D .D . G a

h a m ak ak e r t r e a i s i c

p ro ro v d e t he he m a s g i t s

l on on g --ll as as titi ng ng , c o sstt -e -e ffff ec ec titi v

p re re m iu iu m s

y ou ou r o n t he he s

p le le as as e c a l J o h B o ye ye r

o r e -m -m ai ai l [email protected].

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27 Chap Chapte te Gann's Chart-Reading Technique

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I S B N 1 - 9 3 16 16 1 1 -2 -2 4 - 6 P r n te te d

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c us us to to me me rs rs . c lili en en t a n s ta ta ffff . F o m or or e i nf nf or or ma ma titi o a t 8 00 00 -2 -2 72 72 -2 -2 85 85 5

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R u e s fo fo r D e e rm rm in in in in g

C ha h a ng ng e

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85

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G a n n A n g le le s Chap Chapte te

97

12

Conclusion

10

Appendix

D ic ic titi on on a r o f T e rm rm s Gann's Gann's Works Works Trad Tradin in

Foreword

11

G a n n ' T w e nt nt yy- F oouu r " N ev ev e rr-- F a l in in g " R u le le s Chap Chapte te

91

10

131

Reso Resour urce ce Guid Guid

S u g ge ge s ttee d R e a di di n U s t I m po po rtrt an an t I nntt er er ne ne t S itit e

37 47

ha h a m ak ak e h e w r n g o f W D G a n n s o f as as ci ci na na titi ng ng , y e t s titi l c o nntt ro ro v eerr s a l s o m aann y A r h e e , c on on ta ta in in e w i h i h i w r t in g s s pe pe c d ea e a s t ha ha t u n o c h e H o l G ra ra i o f h e s to to c m a e t a n h an an g h e w a y o o o a t p r c e a n v o u m e c ha ha r s ? C a h e r ea ea l h e y o b ec e c om om e b e tttt e n ve ve st st o o r t ra ra de de r

All seriou

M a n d ee e e p l b e e v s o I n f a ct ct , G a nn nn ' w r t in g s a n c o nncc e pptt s a r e m b ra ra c e b y s co co r es es o f s e rrii ou ou s i nv nv e sstt or or s a n p ro ro fe fe ss ss io io na n a l t ra ra de d e rs rs , t o t h d ay a y . A n d s om om e o f

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f lo lo a n g s up up p o f s ha h a re re s. s. T h e m p ac ac t o f t h d e wa ke cl he et wi of b r c ks ks " a n h er er e w h y h a o bs bs e v e s ev ev e a l d o zzee n h ig ig h --ff ly ly in in g s to to c k a s t h e y c a m e c ra ra s hhii n d ow ow n e a h . w a G an a n n e ac ac h n g h a m ad ad e m e e a z e t ha ha t t he he r w a s e ct ct an an gu gu la la r d is is ta ta nc nc e o n c ha ha r w h c h h e c um um u a t v e v o u m e qu qu a e d t h f lo lo at at in in g s up up p o f s ha ha re re s, s, t h e t ha ha t e ct ct an an g r ep ep re re se se n e d p ro ro x f o c ha ha ng ng e o w ne ne rs rs h t ha ha t c om om p an an y 1 th th e e as as on on e h a c ha ha ng ng e o wn w n e s h m os o s t k e w ou o u l o cc cc u gh at he op a n h a h e e c a ng ng l c ou ou l a lw lw ay ay s b e s e e a s t h p la la c e o f f in in a l d is is trtr ib ib u titi on on . T h e i m pl pl ic ic a titi o o f t he he s e d ea ea s l e m e e a z e t ha h a t h e w ou o u l a ls ls o b e e ct ct an an gu gu la la r a re re a a t o ng ng -t-t er er m b ot ot to to m s w h ic ic h c ou ou l b e s e e a s t h p la la c e o f i ni ni titi a a c ccuu m u la la titi on on .

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A t h a m e I d i n o w n c om om p a n c ha ha r s to to c k e n titi re re l b y h an an d . W i t G a n n i de de a s r es es o nnaa t ng m y h ea ea d b eg eg a h e a bo bo r o u a s o f a ck ck n g h e o a u rn rn ov ov e o r a rg rg e n um um be b e r o f s to to ck ck s A d d n g v o lu lu m e n u m be be r c u m ul ul at at iv iv e l a n d c o m pa pa r ng he s to to ck ck ' o a w a q u d i c u a n c ou ou l a k h ou ou rs rs , e ve ve n w i h an an dh dh e c a c u a to to r B u t h e n r es es u o f t h n te te ns ns e s tu tu d c on on v n ce ce d m e h a m y h ou ou gh gh t o n h e s ub ub je je c w e e xa xa c g h I t he h e n p u c ha ha se se d c om om pu p u te te r a n h i e d s ys ys t em em s a n aall ys ys t t o w r itit e t h c u m ul ul at at iv iv e --vv o lu lu m e f lo lo a t n d c at at o t ha ha t d oc oc um um e nt nt e m y b oo oo k Th P r e ci ci s io io n P r o fifi t F lo lo a t I n di di c at at o r I n s ho ho rtrt , W .O .O . G a n h a a n e no no rm rm ou o u s m pa p a c o n m y a pp pp ro ro ac ac h he s to to c m a rk rk et et , a n w a s h i d i e c n f u en en c w h ic ic h ed me c on on c u d h a h e n um um be b e r o f s ha ha re re s a v aaii la la b l f o t ra ra d in in g w a s a s i m p o rtrt a n a s p riri c a n d

v o u m e a n t ha ha t v ie ie w in in g s to to ck ck s t h w a y c ou ou l r ev ev e a a c ccuu m u la la titi o b o tttt om om s a n d d is is trtr ib ib u titi o t op op s . W h e 1 f r s e a C l D ro ro ke ke ' m a nu nu sc sc r p t f o h i b oo oo k 1 ha h a d n o e a a n o f G an an n m a e r a l q u s om om e m e . o un un d h e e xp xp er er ie ie nc nc e o f r ev ev is is itit in in g G a n n ' w o r k m o r e t ha ha n e nj nj oy oy a bbll e T h eerr e i s s o m e t h n g a bo bo u G a nn nn ' m a te te r a l t ha ha t a k t o e ad ad in in g a n a nc nc ie ie n m a nu nu sc sc r p t t ha ha t t a k s o f t u n in in g o rd rd in in ar ar y s to to ne ne s n t g o d . I t a s t h ou ou g o n h a d is is co co ve ve re re d t h a ct ct ua ua l w r t in in g o f M e r n . t ru ru l b e e v t ha ha t m a n o f G a nn nn ' d ea ea s a r t im im e s s an an d s t n d es am m a w h s pe pe n h i l ifif e s t ud ud y in in g t h e m a r k et et s , s u c c es es s fu fu llll y t ra ra d in in g t he he m , a n s ha ha r n g h i d ea ea s w i t o th th e s . H i t ea ea ch ch n g h av av e s to to o h e e s o f m e a n a r e ga ga rd rd e a s o n e o f t h o un un da da t o n o f f in in an an c a l e se se a c h A ftft e r ea ea d n g h i w o rk rk , o n g et et s t h m p re re ss ss io io n h a G an an n h a s ee ee n i t a l a n u nd nd e s to to o h e i m po po rtrt an an c e o f s h aarr in in g h i d is is c oovv e riri es es . Y e t t he he r i s a ls ls o t h f ee ee l n g t ha ha t h i most i m p or or ta ta n t d i sc sc o v er er ie ie s w e n o u l e ve ve a e d a n m a s t b e s h o ud ud e s om om e s ec ec re re t c o de de , w h c h h a y e b e u nc nc ov ov e re re d P e rh rh ap ap s n e w s tu tu de de nt nt s o f G an a n n e ch ch n q ue ue s w i na be bl unoc c od od e - a n v ea ea l e ve ve n m o r o f G an a n n m p re re ss ss iv iv e b od od y o f w o rk rk . T ho ho s n e

G a nn nn ' m e th th od od s s ho ho u f in d G a n n f as as c in in at at in in g i nt nt ro ro d uucc titi on on . C lili f D r ok ok e h a s d on on e a n e xc xc e e n o b o f d e v er er in in g h e e ss ss en en ce ce " o f W .O . O . G a nn nn ' w r t in in gs gs . H e n o o n g iv iv e t h r ea ea de de r t h b es es t o f Garms i de de a s i n G a nn nn ' o w n w o rd rd s b u a ls ls o e la la bo bo ra ra te te s o n G an a n n t ea ea ch ch in in g c l ea ea r a n d e a s yy- to to - fo fo llll o w s t yl yl e .

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me w.o. G a n n h a s b e co m e l eg e nd a r a m o n t ra d er s a n d m a rk e t t ec h ni ci an s t od a y T a le s o f h i p h en o m en a l s u cc e ss i n t ra d in g a n d h i a rc a ne , y e t h ig h l a c cu ra te , t ec h n c a l t he o r e s a r w id e k no wn . N o s o w e l k no wn , h ow ev e a r h e p ar t c u a r a bo u G a n a n h i m e th od s W h o w a s h i m y s e r o u m a n w h c la im e d h av e d is co ve re d t h e s e c re t s o f c o n si st e nt l a n d a c c ur a te l f o re c a st in g t h m a rk e s ? W h a d is co ve r e s e n a b e d h i do t hi s D o h i t he o ri e a n d t ec h ni qu e s s ti l a p p t od a y m a rk e ts ? M o r m p o rt an t y , t he y d o s t l l a p p y , c a n t he y b e e x p a in e d i n s tr ai gh t- fo rw a rd , s im p l s ti c m a n ne r w it ho u t t h e s ot er i j ar go n a n d a b st ru s e m a th e m at ic a l c o nc e pt s t ha t e n sh ro u d m u c h

W.O.Gann.

Phot courtesy of Lambert Gann

Publishing. Pomeroy,

Washington

o f h i w o rk ? T o b e gi n l et ' e x pl or e l it tl e o f G a n n b a ck g ro u nd . W i a m D e b e G an n w a b o o n c o o n a nc h o n J un e 6 , 1 87 8 L u k in , T e xa s. H e d is p a ye d s tr on g a p ti tu d e m a th e m at ic s d u ri n h i e a r y e ar s c o m pl et e h ig h -s ch o o e d uc a t o n , a n d s ta rt ed adng 1 90 2 a t t h a g 4. Byhi wn a d m is si on , G a n n e a rl y t r ad in g w a s b a se d o n " ho p e

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he the

'square' of pric andtlme.

" Af te r o si n s ig n if ic an t s u m o f m o ne y , w ri te s James H ye rc zy k h i e xc e e n w or k o n G a n theor entitled P a t te r n , P r i c e Time,2 " Ga n b eg a o bs er v h a m a rk e o l o we d m a th em a t c a a w a n d c e rt ai n t im e c yc le s . H e w a s p a rt ic u la r n te re st e h e c on ne c o n b et we e p r c e a n t im e , r e a t o n s h h e e fe r e d a s t h s qu ar e o f p r c e a n m e . H e b e ga n s tu d y n g t hi s n te ra c ti o d it ig e nt ly , e ve n t ra v el in g t o E n gl an d , I nd ia , a n d E g yp t t o r es e ar c m a t he m a ti ca l t h eo r y a n d h is to r ic a l p r ic e s " I d e ve lo p in g h i t he o ri es , G a n w a s u n do u bt ed l o n e o f t h m o s i nd u st r o u s t ec hn ic a l a n al ys ts . H e m a d t ho u sa n d o f c ha rt s d is pl ay in g d a il y w e ek ly , m o nt h a n y ea r p r c e o r w id e v ar ie t o f s to ck s a n d c om m o di ti es . H e w a s a n a v i r es e ar ch e r, o c c a s io na l c ha rt in g p r c e b ac k h un dr ed s o f y ea rs . A t t im e w h e m o s m a rk e t a n a y s w a s s tr ic t f un d a m e nt al , G a nn ' r ev ol ut io n ar y t he o ri e r el ie d o n n a tu r al l aw s o f m a th e ma ti cs , t im e c yc le s , a n d h i u n sh a ke a b l c o nv ic t o n t ha t p a s m a rk e t a c t v it y p re d ic te d future activity. "3

I n c on d uc ti n h i m a rk e r es e ar ch , G a n d is co ve re d u l h a w ou l b e o m h e b ed ro c o f h i a d n g m e h od o o gy , ul he ca ed he La of V ib ra t o n w h c h h e c la im e d a pp l e d he ea of n a tu ra l s c e n c a s w e l l a s t h e f in a nc ia l r ea lm . G a n n so efne

h i a w h a o nc e

s to c s ta r e d

m ov e

h ig he r o r o we r h e w a a b to p in po in t h e e xa c l ev e t o w h ic h s to c w ou l r is e o r a l a n o ft e t h e xa c t t im e r eq u ir e

t o r ea c h t h

o b je c ti ve . H e

a mo us , o f c ou rs e o r b e n g o n o f h e e w a cc u r a e l o re ca s h e s to c m a rk e c ra s o f 1 92 9 a n s ub se q ue n t d e pr es s o n . I n f ac t h e w ro t d e ta il e m o n h -b y- mo n o ve rv ie w a n o re ca s o r h e en t ra d n g y ea r 1 92 9 o n u l y ea r a dv an c a s p ar t o f h is " A nn ua l S to c F or ec as t s er v c e t o h i n e ws le tt e s ub s cr ib e rs ) t h v a s m a jo r t y o f w h ic h was accuratel fulfilled. G an n w a a s v er sa t r ad e a s h e w a s uc ce ss fu l o ne . U n k e r ad er s o f o da y w h e n s pe c a l z e s in g l a re a ( li k s to ck s o r p a rt ic ul a c o mm o d i t ie s) , G a n m a d m o ne y r ad in g e ve ry th in g H e wa m em be r o f h e N e Y o R ub be r E xc ha ng e N e Y or k C om m od i E xc ha ng e N e O r e an s C o t o E xc ha ng e a n C h c ag o B oa r o f T ra de . I n h i v ar io u s b o ok s h e d e sc ri be s h i m e th o d f o a cc u ra te o re ca s n g p r c e t re nd s o f w id e v ar ie t o f c om m o d it ie s , i nc lu d in g c o ff e e s u g ar , c o co a , r u bb e r h id es , h og s e gg s c o o n w he at , r ye , c or n s oy b e an s w o ol , a rd , a n d b u tt er . If h e w a a n e x ch a ng e f o i t G a n p ro b ab l t ra d e t , r eg a rd le s o f w ha t w as . T h g oe s t o s ho w h e u n e rs a of G a nn ' p h en o me n a t ra d in g a n d f or ec as t n g t ec h n iq ue s w h c h c a b e a pp l e d a n m a rk e

Gann so refine i s " La w Vibration. once ta te

that

stock

to

ov

pinpoint the exact leve to

which ul

stock i s o r fall,

and often the

exac time required to reach thi objective

B y a l l i nd ic at io n s G a nn ' t ra d in g s u cc es s w a i m pr es s iv e . A c co rd in g t o H y er cz yk , a n a n al ys i o f G a n n t ra d in g r ec or d o ve r 25 m a rk e d a y r ev e al e t ha t G a n m a d 286 trades, 264 o f w h c h w e p ro f i ta b le . H i s uc ce s r at e o f 9 2 .3 1 t ur ne d a n i ni ti a i nv e st m e n o f $450 into $37,000. I t h a s b ee n r um o re d h a o ve r t h s pa n o f h i t ra d n g c ar ee r G a n n a c q ui re d c u m u la ti v p r of it s t o ta li n $50 mili on , f ig u r w h ic h h o we ve r u n su b st an ti at ed .

GAN

S IM P LI FI E

13

Overall,

B ro ke ra g e s ta te m e nt s i nd ic a t t ha t h e t ra d e a n a cc ou n w i b a a nc e e xc es s o $ 2 m i o n a n h a u po n h i d ea t h e e f a n e s a t a lu e a t a ro u n $ 5 m i l io n .

w.o.

G an n w a arguably on th

of

mos success-

fu an

accurate

t ra de r

in th

a nn al s o f W al l Street history. He se worl

record

f o l ev er ag e a n tradin

profit

on mo

ha

Ai

one occasion, an

4 5 Y ea rs i

peers, he neve to share

his knowledge w it h a n e ag e tradin

public..

desirou

of

learnin

th

p ro pe r w a a cq ui r

p ro fi t

the markets.

14

GAN

O r; L o ok in g B ac k o m 1 94 0 N e

I nd ic a to r H o w t o M a k

u nl ik e m os t

of his successfu failed

D u r n g h i i fe ti me , G a n g e ne ro u sl y s ha re d h i k no w e dg e a n d ea s w i t o th er s p en n n g o ta l o f s ev e b oo k a n n um e ro u t ra d n g c ou rs es . M o s o f h i m o r c o mp le x , n tr ic at e t ec hn iq u e w e r r ev ea le d h i c om m od i t ra d n g c ou rs es , s u c a s t h " Ma st e E g C ou rs e a m on g o th er s B u t h b as i o f h i t he o ri e w a s r ev e al e i n m o r d o wn -t o- ea rt h p e rp e tu a l y p o pu la r v o lu m e s s uc h a s T ru t o f h e S to c k T a p a n d i t c o m p an io n , W a l l S tr e e S t oc k Selector. O th e r w o rk s i nc lu d e T h T un ne l T hr u h e

in

P ro f t s

S to c T re n

C o m mo d it ie s ; an

W a l S tr ee t

O ve ra l W .D . G an n w a a rg ua b o n o f h e m os t s u cc e ss fu l a n d a cc ur at e t ra d er s t h a n na l o f W a l S tr ee t h is to ry . H e s e w o rl d r ec or d f o l ev e ra g e a n d r ad in g p ro f o n m o r t ha n o n o cc as io n a n u n li k m o s o f h i s uc ce ss fu l p e er s h e n e ve r f ai le d t o s ha r h i k no w e dg e w it h a n e ag e r ad in g p ub l c , d es ir ou s o f e ar n n g t h p ro pe r w a a cq u r e p ro f h e m a rk e s . H e w a a s p ro l a n s uc ce ss fu l a e ac he r a s h e w a r ad er , e ga c w h c h e nd ur e e ve n o da y a s m a n o f h e w or ld ' o p r ad er s a n n ve s o r c on t n u t o p or e h ro ug h h i w o a n a d ap t G a n m e th o d t o m o de rn -d a y i ns tr um e n ts . Le usno ak oo at om of he ba prnc p le s o f G a n T he or y w h c h c on t n u n f u en c m o d e rn - da y i nv e st o rs .

S IM P li FI E

NOTES

T im e : U s in g G a n H ye rc zy k J am e A.. P a tt er n , P r ic e S on s 1 99 8 pg T h eo r i n T ra di n S y st em s , J oh n W il e l bi d. , pg

l bi d. , pg

I bi d. , pg lbid., pg

G AN N S IM PL I E D

15

Foundation of Gann Theory

Th

B as i

P a e rn , P r

By "pattern"

n d T im e

h re e b as i c on ce rn s o f G a n h eo r a r p at e rn , p r c e a n m e B y p a e rn " G an n m ea n I de n ti fi ab l a n d r ec u rr en t p r c e f or m at io n s i n c ha r o f s to ck s a n c om m o d t ie s G a n a ug h h a h es e p at te rn s c ou l b e r ec og n z e m e a n a ga in , a n c ou l b e u se d f or ec as t p r c e m o ve m en t s in c t he s e v a ri ou s p a tt er n a lw a y t en d t o r ep e at . G a n a ls o p la ce d s pe c a l e m p ha s o n " pr ic e b y w h ic h h e m e an t t ha t r ad e s ho u c on s a n o cu s o n h e p r c e o f h e s to c o r c om m od i se G an n h a s ev er al w ay s o f d o n g h is . H e t au gh t h i s tu de n c om pa r h e c u e n p r c e o f s to c o r c om m od i p re v o u h ig h o r o w p r c e o rd e g e a n n d c a o n o f w he r wa he ad ng a ng e r ad in g r an g s a c on ce p h a w i b e m o u l e xp la in e a te r c ha pt er ) H e a ls o a ug h h a c ha r s ho u b e d iv id e u p n t p er ce n a ge s f ro m o n s ig n f ic an t t o t o s ig n c an t b ot to m , p la c n g s pe c a l e m p ha s o n t h 5 0 p or t o n o f h e d iv id e r an ge . P er ce nt ag es w e r a ls o b i p ar t o f h i t ec h nique. s tu de n o f g eo m e r y G a n e ve n t au gh t

Gann meant identifiable and recurrent price formations in charts of stocks and commodities. Gan als placed special emphasis on "pric;e. by whic

he mean

that

trader

shoul

constantl

f oc u o n t h p ri c o f t h s to c or commodity

itself.

GANN SIMPLIFIE

17

Gan

emphasize

" ti me R i n t h stud

of market

He considered th

t im e e le me n

greatest lmportanc

since time

isth

l ea s corn-

man denominao r i n t h e qu a ma k et pl ac e a n th

is

only constant

study

of

al kind

of markets.

h a h e g eo me t a ng l a t w h c h h e p r c e o f s to c o r o mm od i p os i o ne d o n c ha r h a m e an in g ( an ot he r c on ce p w e ' d is cu s a te r o n ) F in a y , G an n e mp ha s z e " t m e h e s tu d o f ma ke a c h e o n d e e d h e m e e le me n b e o f h e g re a e s m po r a nc e s in c m e h e e as t c om m o d en om in a o r h e e qu a o n o f h e m a k e p la c a n s t h e o n c on s a n a c o r h e s tu d o f a l k in d o f m a rk e s . g re a d ea l o f G an n w or k w a c en te re d o n h e s tu d o f m e c yc le s s ea so na l t re n ds , a n h is to ri ca l d a te s G a n g av e s pe ci a w e g ht in g a n c on s d er a o n e ac h o f h es e h re e b as i f ac to r a t d if fe re n t im e s d e pe nd in g o n t h m a k e e nv i o nm en t whch he wa adng He b e e ve d h a e ac h o f h e h re e a c o r d om in a e d a t various times,

m a rk e m o ve m en ts , A ft e e xh a us t v e r es ea rc he s a n d n ve st ig at io n s o f t h k no w n s ci en ce s d is co ve re d h a h e L a o f V ib ra t o n e na b e s m e a cc u a te l d e e rm in e h e e xa c p o n t w h c h s to ck s o r c om m od i e s s ho u seand al wi hi g iv e t im e . T h w o k in g o u o f t h a w d e e rm in e h e c au se , a n p re d c t h e e ff ec t o n b e o r h e S t e e a wa r o f e i h e M o s s pe cu la to r c a e s f y he ac ha o ok in g a t h e e f e c a n g no r n g h e c au s t ha t h a p ro du ce d h e

o ss e

m po ss ib l g iv e a n a de qu a de of he aw o f V ib ra t o n a s a pp l h e m ar ke ts ; h ow ev er , t h a ym a m a b e a b g ra s o m o f h e p r n c p le s w he n a t h a h e L a o f V ib ra t o n s t h u nd a m e nt a a w u po n w h ic h w ir e e s t el eg ra ph y w ir el es s e le ph on e a n p ho no gr ap h a r b as ed , W i h ou t h e e x s te nc e o f h e a w h e a bo v n ve nt io n w ou l h av e b ee n m p os s b le ,

G an n c on s d er e h e k e h i s uc ce ss a t he or y h e o rm u la te d b as e o n h i s tu d o f s c e n aw an h i o bs er va t o n o f h e a w g ov er n n g h e m o t o n o f b od ie s w h c h h e a l e d h e L a o f V ib ra t o n He i ns is te d t ha t t hi s s ci en ti f a w g o ve rn e d t h m o t o n o f e ve ry th in g r o h um an s p la ne ts , a n c ou l a ls o b e s ee n h e m ar ke tp la ce . H e d es cr ib e h i d is c ?v e o f h i a w de ai a n n te r e w h e g a R ic ha r D . W y ck of f e d it o o f T h M ag az in e o f W a l h e e a 1 90 0s , P ar t o f h a n te rv ie w Street, e x ce r pt e b e lo w : " I s oo n b eg a h e r is e a n d f a me c on c u d

18

GAN

S IM P LI FI E

n o h e p er io d c a e cu rr en c o f s to ck s a n c om m od i e s T h e d h a n a u ra l a w w a h e b as i o f

g o n g o ve r h e h i o r o f m a k e a n h e g re a m a s o f r e a te d s ta t s t c s s oo n b ec om e s a pp a re n t h a c er ta i a w g ov e h e c ha ng e a n v ar ia t o n h e a lu e o f s to ck s a n h e e x pe od of c yc l a w w h a t h e b a o f ll t he s m o ve m en ts . O bs er va t o n h a s ho w h a h er e a r r eg u a r p er io d s o f n te ns e a ct iv it y o n t h E xc ha ng e f ol lo w e by pe od of na y.. Th aw wh ha a pp l e d w i n o o n g iv e h es e o n c yc le s o r s w n gs , b u h e d a a n e ve n h ou r m o e me n o f s to ck s B y k no w n g h e e xa c v ib ra t o n o f e ac h n d v id ua l s to c I a m a b d e e rm in e a t w ha t p o n t e a w i e ce i u pp o a n a t w ha t p o n t h e g re a e s

Gann considered

succes

theory

he formulated

based on his study

scientifi

laws

and his observa-

governin

th

motion of bodies, which he

called the of

"Law

Vibration.

e s s ta nc e s t o b e m e

GAN

S IM P LI FI E

19

Afte exhaustive researches an

investigations of the kn wn

sciences. discovere th

tha

Lawof

Vibratio

enables

me to a«urately detennin

th

exact points to hic stocks commodities sh ul fall

ris an ithi

given time.

" Th os e c lo s o uc h w it h h e m a rk et s h av e n o c e h en om e of eb an w, or an h e v a u e o f s to ck s A t c e t a m e s s to c b ec om e s i nt en se l a ct iv e l ar g t ra n sa ct io n s b e in g m a d e it a t o th e r t im e s t hi s s a m s to c w il l b e co m e p ra ct ic al l s ta t o na r o r n ac t v e w it h v er y s m a v o u m e o f s a e s h av e o un d h a h e L a o f V ib ra t o n g ov er n a n c on tr o h es e c on d o ns . h av e a ls o o un d h a c er ta i p ha se s o f h i a w g ov er n h e r is e s to c a n e nt ir e d if fe re n r u e s o p e ra t o n h e d ec l n e h av e o un d h a h e s to c s e e x s t h ar mo n o r n ha rm o n r e a t o ns h h e d r v in g p ow e o r o rc e b eh in d " Sc ie nc e t ea ch e t ha t a n o r g in a m p u s e o f a n k in d f in a l r es o lv e s i t se l i nt o p e r o d i o r r hy th m ic a m o t o n a ls o u s a s t h e p en du lu m r e u rn s a ga i s w n g u s a s t h m oo n e tu rn s o rb i u s a s h e a dv an c n g y ea r e ve r b r n g h e r os e t o s pr in g s o d o t h p ro p er ti e o f t h e le m e nt s p e ri od ic al l r ec u a s t h w e g h o f h e a to m s e

The working this la detennines the cause and predict the effec long before the Stree is awar of either.

" F ro m m y e x h au s ti v i nv e st ig a ti on s , s tu d ie s a n d a pp l e d e s s , I f in d h a n o o n d o h e v ar io u s to ck s v ib ra te , b u t t ha t t h d ri vi n f or ce s c on tr ol li n t h s to ck s a r a ls o h e s ta t o f v ib ra t o n T he s v ib ra to r o rc e c a o n b e k no w b y t h m ov e m e n h e g en er a o n h e s to ck s a n t he i v a u e h e m a rk e S in c a l g re a s w n g o r m o ve m en t o f h e m a rk e a r c yc l h e a c a cc or da nc e w i t h p e ri od i l a . . we wi a ve r a i u r s pe cu la t o n w e m us t d e a w it h c au s es . E v e ry th in g i n e xi st en c i s b a s e o n e x ac t p ro p or t o n a n d p e rf ec t r el at io n sh ip s T h er e i s

20

G A N N S IM P LI FI E

n o c ha n c i n n a tu re . b e ca u s m a th e m at ic a p ri nc i p le s o f h e h ig he s o rd e a t h e o un da t o n o f a l t h n g s F a ra d a s ai d T h er e i s n o th in g t h U n iv er s b u t m a th e ma ti ca l p o in t o f f or ce . . . " Th ro ug h h e L a o f V ib ra t o n e ve r s to c th m a rk e m o ve s o w d is t n c v e s ph er e o f a c v i t ie s a s t o i nt en s it y v o lu m e a n d d ir ec ti on ; a l t h e s se n ti a q u a li ti e o f i t e v o lu t io n a r e c h a ra c te r iz e d i n o w r a o f v ib ra t o n S to ck s k e a to m s a r r ea l c e nt e r o f e n e rg ie s , t h er e fo r e t h e a r e c o n tr o ll e m a th e m at ic a l y S to ck s c re a t t he i o w n f ie l o f a c o n a n p ow er ; p ow e a tt ra c a n r ep e w h c h p r n c ip l e xp la in s w h y c er ta i s to ck s a t t im e s l ea d h e m a k e a n u r d ea d a t o th e m es . T hu s s p ec u la t e s c ie n ti fi ca ll y i t i s a b s o lu t el y n e c es s a r t o f o l low naturallavvs."l

Stocks, like atoms, are really centers of energies. theretore they ar controlled

mathematically. Stocks create

their ow field actio an po er po er to attract an

repel.

which in principl explain wh

Gann Th Mathematician

certain stoc;ksat

G a n p o ss es se d a n e xt ra o rd in a r g if t f o m a th e m at cs He wa m a th em a t c ia n b y n a u re , s o o n o l o we d h a m u c o f h i e ch n c a h eo r s ho u b e c on ce rn e w i n um b er s a n w it h m a th em a t c a r e a ti on s hi p i n t h m a rk e ts . C e rt ai n n u m be r t oo k o n s pe c a l s ig n c an c h i w or k n am e ly , 1 6 2 5 3 6 4 9 6 4 1 21 , a n 1 44 . H i n um e c a h eo r o f h e m a e t w a b as e o n h i s tu d o f h e B ib le , a lo n g w it h a n ci en t E g yp t a n n u m be r t he o ry . H e f ou nd , o r n s a nc e h a h e n um be r h a s pe c ia l s ig n if ic an c i n t h B ib l a n d t he re b y u se d d ev e o p s ev en -d a c yc l t he or y f o h e s ho rt e r s tu d o f h e m a rk e H e c on s d er e h e n um b e t o r ep re se n t c o mp le te n es s t he re fo re , s e ve n t o h i

ti es lead th marke an 't rn de d' at other times. Thu to speculate scientifically it is absolutely necessary to follo

natural

'aws~"

G A N N S I M PL IF I E

21

s ym b o z e m e a n h y h m , a s w e l a s t h c om p le t c yc le - h e b as i o f G an n h eo r

Gann possessed an extraordinary gif fo mathematics. He

as

mathematician bynature soit only followed that

ch

hi

technical theory shoul

be

concerned with numbers and with mathematical relationships in the markets.

H e a ls o c on si de re d t h h a lf -c yc l o f t o b e v it al l m po r a n h i s tu d o f h e m a k e T h n um be r h a m on i o f 3 % T h n um be r s a ls o q u p ro m in en t h e B ib l a n m e nt io ne d a m on g o th e p la ce s a s b e n g h e m e fr am e o f D an ie l vision ( 3 Y 2 y ea rs ) t h t im e o f C h ri st ' p u bl i m in is tr y on ea 3 % y ea rs ); a s w e l a s t h h id in g o f h e C hr is t c h E gy p o r 3 % y ea rs . T h us , G an n u se d th o rm u la t h eo r d em o ns tr a n g h e e x s e nc e o f 3 % -d ay , - we ek , - mo n h , a n - ye a c yc le , H e a pp l e d t h k no w e dg e r ad in g h e m a rk e s , T h n um b e 1 2 a ls o o o o n s pe c a l s ig n c an c o r G an n a s i t d en o e d o r h i h e c on ce p o f p ac e T w e v e a ls o c on s d e e d b e h e e fe re nc e p o n t o f t h c yc le , s in c c yc l g e om e tr ic a l y r ep re se n te d c ir c e , w h ic h c om p os e o f 3 6 d eg re es , S in c h er e a r 1 2 d iv is io n o f h e c ir c o f m e ( i. e h e c lo ck ) 1 2 m o n h s y ea r 1 2 h ou se s h e z od ia c e tc . h e n um be r 3 6 d iv id e b y 1 2 y ie ld s 3 0 n um be r w h c h b es id e b e n g h e n um be r o f d ay s i n m o n h , w a m p or ta n G a nn ' r ad in g s tr a e gy , G a n p o si te d t h e xi st en c o f 3 0 -d a y 3 0 -m o n t a n 3 0- ye a r ad in g c yc l b as e o n h e s tu d o f h i number. T h n um b 1 4 w h o du c o f 1 2 m e 2 ) w a a ls o m p or ta n o r G an n h e n um b e a ls o r ep re s en t n g h e n um be r o f m in u e s d a 1 44 0 w i z er o a t h e e n b e n g d is re ga rd ed ) T h n um b e 1 4 a ls o r ec u r t hr ou g ho u t t h B ib le , a n d t he re fo r t oo k o n a n e ve n g re a e r s ig n c an c o r h im .

22

GAN

S IM P LI Fl E

·······c

...j....

+-"

::1',-.'

[--r'i"

....... ,,

--++

",

....,.

···.~··

,"'i

...

-r

Certain numbers for example

i l ff . " ,. .

..·rl2#

...

-.:,

......

t~~lJf .i

-2

~-

"H-t..

12an

14

(144 bein

product of 12 times 1Z).

to

specia

significance in hiswork, Thi grid isan

-H

rl'

example of tH-rl-h-tl

1-++

'i-'-"'_'

the type of mathematical

B as e o n h i m a n y ea r o f s tu dy in g n um b e h eo ry , h en , h e c on c u de d h a m a rk e a dh e m a th e m a t c a a w F ro m t h c on c u s o n h e w a a b d e ve lo p h i t ra d in g t he o ry . T h i t he o r b a si ca l s ta t e d h a m a k e m o e me n g ov e n e b y h e o rc e

relati nship he ul

us in

developin trading strategy.

o f p a t er n p r c e a n t im e .

Time Th Stronges Market Influenc A c co rd in g t o G a nn , t im e h a d t h s tr on g es t n fl ue n c o n h e m a k e b e a us e w he n m e u p h e e n changes. C o nc er ni n t h i mp o rt an c G a n a s s g n e t o h e t im e f ac to r c on s d e h e o l o w n g G a n q uo te , r ef er en c h i a na ly s s o f h e O c o be r E gg s futures contract:

GAN

S IM P LI FI E

23

ccurs

hen

move in price an

tim

overextends an travel to

fa

in on direction. Whe this happens, the arke ca be expected to react in the directio th

pp sit with

same forc

and magnitude, including the tim factor. Thi confers

certai

amount of predictability in the movement of prices once

thi concep ha bee

mastered.

" Th e g re a e s m e p er io d r o J an ua r 2 4 February wa 11 m ar ke t d ay s A n h e a s a dv an c r o A pr i 1 8 w a 1 1 m a rk e d ay s t he re o re , w he n h e m a k e d ec l n e m o ha 11 da s, w i o ve rb a a nc e t h g re a e s m e p er io d W he n d ec l n e m o r h a 7 5 p o n t w i o ve rb a a nc e h e l as t p ri c d e cl in e s o r s p ac e r e ve r sa l a n d i nd ic a t l ow e r p r ic e s N o c e h a G an n u se d h e e r o ve rb a a nc e o f me Th wa c om m o e xp re ss io n o f G an n h i m a rk e w r n gs , a n o rm s a n n te g a l p ar t o f h i t h eo r y o f t ec h ni ca l a n a ly s is . O v e rb a la n c o c cu r s w he n m o p r c e a n m e o ve re x e nd s a n r av e o o a r o n d ir ec t o n W h e h i h ap pe ns , h e m ar ke t c a b e e xp ec te d e ac t h e o pp os i di ec on wi h e s am e o rc e a n m a gn it ud e n c u d n g h e m e a c o r T h c on fe r c er ta i a mo un t o f p re di ct ab il it y i n t h m o ve m en t o f p r c e o nc e t h c on ce p t h a b e e m a st er ed . C om b n in g m e a n p r o rm s h e b a s f o m u o f G an n h eo ry . W r e s J oh n M ur ph y Technical A n al ys i o f h e F ut ur e M a rk et s G an n s a de n i p ro po r o na l e la t o ns h b e w ee n t h w o O n o f h i m e h od s o r n d n g o p o r b o o m b as e qu nd me ,wh u n o f p r c e e qu a u n o f m e F o e xa m p e , G an n w ou l a k p ro m n en t h ig h m a k e c on ve r ha do ar gu nt c a e nd a u n ( da ys , w e ek s m on th s o r y ea rs ) a n p ro je c h a t im e p er io d o rw ar d W he n t ha t m e p er io d r ea ch ed , m e a n p r c e a r s qu a e d a n m a k e u r d ue . As an us ra on m ar ke t h i p ro m in en t h ig h a t $ 10 0

G an n c ou n e d 1 0 d ay s w ee ks , m o n h s o r y ea r f or wa rd . T h os e f ut ur e d at e d e nt if ie d p o ss ib l t ur n

A mo n h e m in g o o G an n u se d s a c on ce p h e r ef er re d t o a s " an ni ve rs ar y d a te s. " T h i t er m r ef er s t o h e h is to r c a d a e s h e m a rk e m ad e m a jo r t op s a n b o tt om s . T h e i nf or m at io n c o l ec te d e ff ec t r ef le ct s h e s ea so na l o f h e m a rk e b ec au s o f e n a n a nn iv e s ar y d a e pe a h e f u u re . c lu s e r o f a n ni ve rs ar y d at e n d ic at e t h s tr on g t en d en c o f ma et ma bo ac h e s am e r ne , T h d a e s a n t im e s pa n b e w ee n h es e a nn iv e s a d a e s o p op op bo om m, d am e nt a f ac to r h i t h n k n q . A n t he s r el at io n sh ps ur he ed h i d ev e o pm en t o f h eo r e s o f t im e c yc le s i n h i q u es t t o a cc ur at el y f or ec as t p r c e m o ve m en t h e m a rk e I n h i b o ok , P a tt e rn , P r ic e Time, J a m e A . H y er c zy k w ro t c on ce rn in g G a nn ' t im e c yc l s tu di es , " W he n o ok in g a t a nn iv e s ar y d a e s h e s a s er ie s o f o ne y ea r c yc le s I n g e om e tr i t er m s t h o ne -y ea r c yc l r ep re se n te d c ir cl e o r 3 6 d eg re e s B u il di n o n t h g eo me tr i r e a t o ns h o f h e m ar ke t G an n a ls o c on s id e e d h e q ua r e r d iv is io n o f h e y ea r be i m po r ta n t t im i n p e ri od s . T h e s q u a rt e rl y d iv is io n s a r t h 9 0 -d a y c yc le , t h S O -d a y c yc le , a n d t h 2 7 0 d a c yc le . u s n g h e o ne -y ea r c yc l a n h e d iv i s io n o f h i y c e , y o w i n d d a w he r n um b e o f h es e c yc le s l in e u p ( pr e e ra b h re e o r m or e s in g p o n t me h e u tu re . d a w he r n um be r o f c yc le s l in e u p c a e d t im e c l u st e r

Combining time an

price form

th

basi fo

much of Gann theory. Som of the methods an timin se

to ls

in hi

analysis for finding tops or bottoms included: squarin price an time. anniversary dates tim clusters. and tim cycles.

T h i t im e c lu st e u se d p re d c t m a jo r t op s a n d b ot to m s T im e c yc le s a r m a jo r p ar t o f G a n a n a y s is , a n s ho u b e c om b in e w i p r c e n d ic a o r t o d e ve lo p v a li d m a r ke t f or ec a st . I n t h e c ha pt er s h a t f o o w w e w i e xp la i t h s p ec if ic s o f a p pl y n g G a n n m e th o d s f o p re d ic ti n p r c e m o ve m en t t er m s o f t im e , p r c e a n p at t er n H o we ve r o n e m u s f ir s u nd e rs ta n t h c on c ep t o f a p r ea d n g w h c h G an n e l w a v e m p or ta n a n d h i t h s ub je c o f o u n ex t c ha pt er .

H ye rc zy k J am e s A., P a tt er n , P r ic e T im e : U s in g G a n S o n s I n c. , 1998, T h eo r i n T ra d in g S y st em s , J o h W il e T h W O . G an n T ec hn ic a R ev ie w pgs. 9-11, a s r ep ri nt e vol. 1, no 11, p. 1, November 12,1982. I bi d. , p g . 13

G an n W .O . T ru t o f t h S to c T ap e L am b er t G a n P u b li sh i ng , P o m e ro y , W a s h in g to n , 1923, pg 61 M u rp h y J oh n , T ec h ni ca l A n al ys i o f t h F ut ur e N e Y or k I ns ti tu t o f F in an ce , 1986, pg 538 H ye rc z k , p g 1 6 l bi d. , pg

16

l bi d. , pg

16

G A N N S IM P L IF IE D

Volume

a n a i h ea v e m ph as i o n b e n g a b r ea d t h t ap e c or re ct l a s a p re re qu is it e f o s p ec u la ti v s u cc e ss . M u c h o f h i e a rl y w o r o cu se s o n h e e ch n q u o f w ha t w a h e c a e d " ta p r ea d n g, " e . t h s c e nc e o f n te rp re t n g p r c e a n o lu m s to c o r o mm od i o n m in u e b y -m i nu te , h o ur -b y -h o ur , o r d a y- by -d a y b a si s M o s t t ra de r a n n ve s o r p a a tt en t o n o n t o p r c e m o ve m en ts , g no r n g t ra d n g v o u m e G a nn , h ow e v

NOTES

26

Interpreting Pric

M a rk e ts ,

r ad in g v o u m w a h e o th e h a a n h e b e e ve d h a r ad in g s uc ce ss h in ge d o n b e n g a b pu he w o o ge th e n t o n c om p re he ns iv e p ic tu r be ab n te rp re t h e b a a nc e o f s up p a n d em an d g iv e s to c o r c om m o d y , T h a p s t h g re a al whch he wegh of a l b uy in g a n s e n g s w e ig he d a n h e b a a nc e o f u pp l a n d em an d h ow n b y t h o ss o r g a p r c es , w ro t G a n h i s em in a w o rk , T r ut h o f h e S to c T ap e " W he n s up p l e xc ee d d em a nd , p r c e d ec l n e e ve l w h e r s up p a n d e ma n

Most trader an Investors pay attentio

only

t o p ri c mevements, ignoring tradin

volume

Gann believed tha tradin succes hinged e in g a b put th tw together into one comprehen s iv e p ic tu r t o b e able to interpre t h b al an c

of

sup ly and

d em an d g iv e

s to c

or

commodity.

G A N N S IM P L If iE D

27

"Market

meve-

ments depend o n u pp l d em an d

an It

requires volume o f r ad in g i n proportionate l ar g

o r s ma l

a mo un t

to

m ov e s to ck s u p o r d ow n T h v ol um e o f s al e to th

s to c; k

m ar ke t I s t h s am e a s t h s te a

isto he

locomotive or th

g a o li n

isto

the automobile Th sale ar th

mative

owe

which

drives prices u p o r d ow n

a r a b ou t e qu a l A t h i s ta g f lu c u a t o n b ec om e na ro an m a r eq u w ee k o r m on th s d e e rm in e w h c h w a h e n ex t m o v w i b e W h e d e m a n e x ce e d s u pp ly , p r ic e s a d va n ce ,

" Th er e o re , w ro t G a nn , " i o rd e t o u nd er s a n d h e m ea n n g o f v o u me , o u m u n o h e o ta l

V o u m e o f a d a lo n w a s ub je c G an n a ss ig ne d g re a m p or ta nc e o , " M ar ke t m o ve m en t d ep en d o n s up p a n d em a nd , h e w ro te . r eq u e s v o u m e o f t ra d n g p ro po r o na t a rg e o r s m a a mo un t mo o ck s u p o r d ow n T h o lu m o f s a e s t h e s to c m a rk e s t h s am e a s t h s te a h e o co m o v e o r h e g as o n e s t o h e a u o m o b i e . T h e s a e s a r t h m o t v e p ow e r w h ic h d r v e p r c e u p o r d ow n . "2

T h i c on ce p o f c om p ar in g t o a l s to c o u s ta n d n g ad ng vo um wa u n q u c on ce p h a G an n w a s f am o u o r M o r r ec en t y , t h e c on ce p h a b ee n r ev is e a n d is cu ss e g re at e d et a b y S te v W o od s h i b oo k P r e c is i o n P r o fi t F l oa t I n d ic a t o ( M a r ke t p la c e B o o k s )

G a n u se d U .S . S t ee l, w h ic h w a s o n o f h is f a vo r t e s to ck s t o t ra d n , a s a n e xa m p us ra hi t ru th . I n h i d a y U ,S . S te e l o f te n h a d f iv e -m i ll io n s ha re s o f c om m o n s to c o u ts ta nd in g a n r eq u r e v e a rg e v o lu m e o f s a e s t m ov e h i s to c u p o r d ow n a n n o t c ea b l d eg re e . G e ne ra l M o to rs , a n ot he r o f G a n n f av o ri t t ra d in g s to c ks , f re q ue n tl y h a d f if ty -m i ll io n s h ar e s o f c o m m o n s to c k o u ts ta n di n an u du a o n w e c on f n e ve na ro a ng e G an n p o n te d o u h a h i w a b ec au s h e b uy in g o r s e n g o f 1 00 ,0 0 s ha re s w i n o m o v mo ha pont h a m uc h d u h e e no r m o u a m ou n o f s ha re s o u ts ta nd in g Y e a no th e r s to c p op u la r a m on g t ra de r G a nn ' d a w a s B a ld w i L oc om o t v e w h ic h h a f a f ew e r s ha re s o u t s ta nd in g h a G en e a l M o to rs -o n a bo u 2 00 ,0 0 s ha re s. T h e b uy in g o f 1 0 0 0 0 0 s ha re s o f B a ld w i L oc om o t v e w a o f e n s u c ie n mov up or d ow n v e o r e n p o n t d u he hi voume

h e s to c y o a r

ad ng n.

A n ot he r t h n g G a n f e w a s n e ce ss ar y fo r a pe r ea d in g s uc ce ss w a k no w h e n an c a l p os it io n of he oc ou we a d n g n , w he th e wa w ea k o r s t o n p os i o n " I n o e as y t gh en n ve s o r a n r ad er s a n s ta r se ng mov s to c w h c h g en e a l k no w be ve s tr on g f in a nc ia l p o s o n, " h e w ro te , " Ne it he r e as y t o o rc e s to c b y m a n p u a t o n v er y h ig h e ve ls t h a g en er a k no w n h a v v er y t t intrinsi value. "4

T im e C yc le s G o ve r

P r c e M o ve me n

T im e w a s a no th e e le m en t G a n d ee m e e ss en t a l t o s u cc e ss fu l s p e c ul at io n . W a t ch in g t h t ic k e h o u a f e r h ou r e nd s o c h e a de r n t h e h ab i o f v ie w n g p r c e a n v o u m e m o ve m en t a s t h o n v ar ia b t h s up p y /d em a n e q ua t o n h e o f e n f or ge t h a h e o n c on st an t v ar ia b a n s to c o r c om m o d t im e , a n d h a f ur th er m or e p r c e m o ve m en t a r g ov er ne d b y m e c yc le s " I r eq u r e me bu a rg e a mo un t o f o c w he n a cc um u a t o n t ak in g p la ce , a n r eq u r e t im e t o d is tr ib -

Anothe

thin

G an n e l w a necessary for tape-reading succes wa

to

know th

financial position of th

s ta c y a

w er e t ra di n w he th e

in

it wa

strong position.

ut

a rg e a mo un t o f o c a t t h o p O n d ay , we mo on no b i m o ve . S om e t m e s r eq u ir e s ev er a m o n h s o r e ve n y ea r, t o c om p le t a cc um u la t o n o r d is tr ib u o n W h i h e p ro ce s g o n g o n y o c a k ee p u p c ha r o f h e s to c y o a r n te re s e d a n u dg e m u c b e e r w he n h e b i m ov e s ta r s , t ha n y o c a b y w a tc h n g t h t ic ke r e ve r d ay .

Eventhough Gann believe th ta

to

contain all th infonnation necessary to confer enonnou pr fit to th se wh learne

to

read it. he also believe that incessantly watchin

th

tape. readin its quotations constantly tends

to pr vid misleading picture

th

overall supply/demand balance to most traders.

30

a l u l o r e ad in g h e a pe : T h b es t w a ea h e a p c or re c s t o s ta y a w a o m rr Even h ou g G an n b e e ve d h e a p c on ta i a l h e n fo rm a t o n n ec es sa ry t o c on fe r e no rm o u p ro f t s t o h os e w h e ar ne d ea h e a ls o b e e ve d h a i nc e ss a nt l w a tc h in g t h t ap e , r e ad in g i t q u ot at io n s c on s a n t y , t en d p ro v d e m is le ad in g p ic tu r o f h e o ve ra l s up p y /d em a n b a a nc e t o m o s r ad er s T ra de rs w h o s pe n a l h e m e h un ch e o ve r h e c ke r ( o c om p u e r s cr ee n a s h e c as e m a y b e h e i z ea l t o r ad e e ve r m in o u c u at io n o f e n b ec om e c on fu se d a s t h e m u c m o m po r a n a rg e e nd , w h c h s w h e r h e b i m o ne y u su a m a de . G a n k en e t h f a n g s om e on e r y n g a dm ir e p a n t n g b y R e na is sa n ce m a s e r ookng c lo se l a n t o h ar d a t e ve r t t b ru s s tr ok e o n m is se s th e t ru e b e au t a n e le ga nc e o f h e p ic tu re , w h c h c a o n b e s ee n r o d is ta nc e T h e c lo se r o n s ta nd s t o h e p a n t n g h e e ss l ik e h e s t o c ap tu r h e o ve ra l s ym m e r y o f ke m an ne r h e m o r o f e n o n p o e s o ve r h e c ke r o b se s se d w i t e a c m i no r f lu c tu a ti on , t h e s s l ik e l he wi be ab d en t h e a rg e p a e r he s u p p ly / de m a n d p i ct u re .

G A N N S IM P L IF IE D

G an n o f e n s a h a h e a p u se d o o r ad e s , o r o f e n w he n s to ck s o o h e w ea ke s o n h e a pe , h e y a r t h s tr on ge s a s a cc um u la t o n s t a k n g p la ce . A t o th e m e s w he n h e a r b oo m in g a n v er y a c v e a n a p pe a t h s tr on ge s h e a r r ea l a t t he i w e ak es t p o n t b ec au s h e n s d e r a r s e i n w h il e e v er yb o d e ls e i s e n t hu s ia s ti ca l b u yi ng . co olar h i u t s t h a h e b ig ge s m is ta k c hr on i t ap e w a tc he r m a ke s t ha t h e t ra de s o o of en ge ng a n o u s om e t m e s d u n g h e d ay , a n e ac h m e p ay in g c om m is s o n h e b uy s o r s e h ig he r o r o we r e ac h m e e ve n h ou g h e h a m a d p ro f o n h i t ra de s h e n cr ea s n g t h p e r c e nt ag e a g ai ns t h im .

Gannfelt tha ne shoul

have

patience and ait until ther is

real justifica

tion before takin

position.

Bytryin to catch every minor swing, the

w a a ls o e mp ha s z e b y G an n h a h e m or e e q ue nt l o n e r ad e s t h m o r o ft e o ne ' u nd er ly in g o p n io n m us t c ha ng e a n a s a e su l h e g re a te r p ro ba b t ha t h e r ad e w i b e w ro ng . E ve n i h e m os t d ra m a b u o r b ea r m a rk e t he r a r s ig n f ic an t m o ve s a ga in s t h m a i r en d b u d ay -t o- da y r ad in g no he way c ap it a z e o n t he s m o ve m en ts . n s e ad , G a n e l t ha t o n e s ho u h av e p a e nc e a n w a u n h e ea u st i c at io n b e o r t ak in g p os it io n B y t ry in g t o c a c h e ve r m in o s w n g h e a de r w i o f e n m is s h e m a jo r m o v w h e o cc ur s D a i f lu ct ua t o n s a r g en e ra l o f t l m p or ta nc e h e m a jo r t re n

trader will often miss th ve

majo he

it

occurs. Daily fluctuations are generally

little

importance to th

majo trend th

market.

o f h e m ar ke t " Th i s am e r u a n r ea so n n g s ho u b e a pp l e d a n o th e s to c y o w is h d e e rm in e h e e n o f D u r n g h e p e r o d o f a cc um u la t o n o r d is tr ib ut io n he ma wh es ea he ap mu ge ooed

GAN

S IM P L If iE D

31

Th

d oz en s o f m e a n m a k m is ta ke s y in g ol o w m in o m ov e w h c h d o n o m ea n a ny th in g T he re fo re , h e c o r ec t w a ea he ap sto ee up h a s ho w n g m ov e o f o m h re e d ay s o n w ee k a n h e a mo un t o f v o u me . O f c ou r e , y o m u s c on s d e t h o ta l o u ts ta nd in g s to c a n t h f lo at in g s up p y . A g a n , I e m p h as iz e h e a c h a t h e c o r ec t w a e a h e a p a n n te rp re t

ra

investor keep

should dail

weekly. anello monthl th an

"6

char p ri c

volume

hist ry hateve

st ck

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it

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he

hist ry "tape"

successful speculation.

T h p o n t G an n w a m a k n g e m ph as iz in g a l o f hi h a h e a de r o r n ve s o r s ho u k ee p d a y , w ee k y , a nd /o r m on th l c ha r o f h e p r c e a n v o u m h is to r o f w ha te ve r s to c o r c om m od i h e h ap pe n t o b e r ad in g n . T h i p ic to r a l h is to r o f t h " ta pe " th ke s uc ce ss fu l s pe cu la t o n B e in g a b t o p ro pe r r ea d f in an c a l c ha r s , m o r h a n a ny th in g e ls e, w a s t h s ec re t o f G a nn ' t ra d n g s u cc e ss . F o rt un a te ly , h e r ev e a e d m a n y o f h i s e cr et s f o n te rp re t n g c ha rt s h i b oo ks , m a n o f w h ic h y o w i e ar n h er e

B e n g a bl e t o pr perl

read

Th

financia

charts

I n r ev ea l n g h i s ec re t f o a p r ea d in g G a n o f e n u se d t h p h a s u t o f h e s to c a pe , o r e p ea te d h e o l a da ge , " th e a p e l a l H e w r o h a h e s to c m a rk e a n a cc u a t b a o m e e r o f b u si ne s s c o n d it io n s w it h s to c k p ri ce s b e in g n e a rl y a lw a y s i w e lv e m o n h s a h ea d o f g en er a b us i n es s c o nd it io n s H e n o te d t h f o o w in g h ie ra rc h o f f in a nc ia l d e ve lo p m e nt s f ir st , b o n p ri ce s r is e ; s e c o n d , s to c k a d va n ce ; t hi rd , c o m e b u si ne s s b o o m . T h s am e o rd e ru d ec l n e S to ck s w i b e

more than anything

else

as th

secret

of Gann's tradin

success

pe Te

Al

d ow n s i e ig h m o n h s w h b us in es s i b oo m n g b ec au s s to ck s a r d is co un t n g t h u tu r b us i nessdepression. M a rk e m ov em e n s , w ro t G an n " th a s , th e m a i s w n gs , a r t h r es u o r e f e c o f c au se s w h c h a s a u le , e x s t o n b e o r h e e f e c k no w h e g en e a l p ub l c . m os t c as es , ne w d is co un te d b e o r c om e s o u a n s e d o h a m u c e ff ec t a f e r g en e ra l k no w n E it he r g o o o r b a n e w h a t e xp ec te d u su a a l a t a s a r a s t h e f e c o n h e m a rk e c on ce rn ed . " Fo r n s a n ce , a n e xt re m e g oo d o r b a q ua rt er l o r a nn ua l e po r o n s to c c om e s o u a n h e m a rk e no wn he n o n ew s h os e o n h e n s d e T he y k ne w t h r t t o n in e d ay s b e o re ha nd . T he re fo re , w h e h e p ub l g e h e n ew s a n a c o n s t o a te , o r h os e o n h e n s d e w h k no w h av e a l e ad y d is counted it. d is c us s io n o f G a n n t ap e -r e ad in g t ec h ni qu e w ou l n o b e c om p le t w i h ou t e xp la in in g h i m e h o o f k no w n g w he n b u o r e ll a s to c b as e o n n d c a o n o m h e c ha r o r a pe . T h k e hi k no w n g h o d en t p o n t o f a cc um u l at io n o r d is tr ib u ti on . G a n n c o nt in u al l e m p h as iz e d h a h e u t h a h e s to c a p h a e l c an no t be ol o n d a , o n e w ee k o r o n m on th . b eg in s el s to r h e r s d a h a s to c r ea ch es t h e b uy in g o r s e n g z on e b u t r eq u ir e me c om p le t h e s to ry , t o a ss em b l a l o f h e f ac ts , t o f in is h h e a cc um u la t o n o r d is tr ib ut io n a n g iv e h e n a s ig na l t h a n e m ov e o n

discussio

of

Gann's tapereadin

tech

niquewould no be complete without in

explain-

hi meth

of knowing

sell

stoek,

base

indica

ti ns fr

th

char

tape.

Th ke

to hi

iskno in

ho

to identify points of accumulatio or distribution

Accordin to Gann. th

length

of time. as weLl

as the total number of points th

!>tack has

moved up or down from

high

lo

levels must be considered in judging whether accumulation or distributio istakin

place

F or e x am p e , s to c m a k n g n e h ig h w ou l o rd i n ar i b e a n n d c at io n t ha t w a s g o n g h ig he r b u t a ft e s to c a d va nc e n t n e w e rr i o ry , g o in g h ig he r w i c on t n u u p w it ho u b re a k n g b a c b e o w h e o l o p e ve ls . G an n a ug h h a a f e r a n s to c k e x pe ri en c e a r g a d va n c o r l ar g d e cl in e , e qu ir es t im e e l w he n h e n ex t b i m ov e g o n g s ta r a n a de r w h s ta r a t h e a pe , d a b y d ay , w i g e f oo le d m a n t im e s T h er e o re , G a n s a d , r ad e s ho u w a i u nt i h e g e d ef in i n d ic a o n b e fo r d ec id in g h a t h b i r en d h a u rn e a n m a jo r m o v s ta r e d T h a rg e h e c ap t a s to c o f h e c om p an y o r h e m o r s ha re s o u t s ta nd in g h e o n ge r r eq u r e t o c om p le t a cc um u a t o n o r d is tr ib ut io n T h e e ng t o f t im e , a s w e l a s h e o ta l n um b e o f p o n t h a s to c h a m ov e u p o r d ow n o m h ig h o r o w e ve ls , m u s b e c on s d e re d i n j u d g in g w h e th e r a c cu m u la t o n o r d is tr ib u ti o i s t a ki n p la c e a c co rd in g t o G a n n G a n a ls o t au gh t h a h e m e a c o r w a a n m p o a n t c on s d er at io n w h e r y n g a nt ic ip a s to ck ' b e ha v o r H e w ro t t ha t w h e s to c u se s u p s ev er a m o nt hs ' t im e e it he r a cc um u la t o n o r d is tr ib u ti on , i t w il l r eq u ir e , t he n , s e ve r a m o n th s f o t h r u b et we e a cc um u la t o n a n d d is tr ib ut io n t o a k p la ce . A l o f h e s to c no so on he rs r a y , n o e ve n o n h e s ec on d o r h i d . S to c h a b e b ou gh t a n h e m a k e u pp o e d o n h e w a up un e ac he s a e ve l w he r h e s up p g re a e r h a n h e d em a n a n h e n s d er s a r e w i n g s e o u T he n h es i a te s a n m ov e u p a n d ow n o ve r a n ar ro w o r w id e a ng e a cc o d in g h e k in d o f s to ck , u nt i d is tr ib ut io n c om p le te d

SIMPLIFIED

" Th e s am e o cc u w he n s to c s ta r d ow n r eq u e s o n m e c on v n c p eo p h a a f e r s to c h a b ee n s e n g a t 1 40 , g o n g d ow n 1 0 p o n ts . S om e p eo p b u w he n sdow 10 p o n ts , o th er s b u o n 3 0 4 0 a n 5 0- po in t e ac t o ns , b e l e v n g h e s to c c he a b e ca us e t h e r em e m be r he prce at wh o rm e s o d -1 40 , wi he e su l h a w he n c on t n ue s d ow nw a d , h e a l g e s ca re d a n d a l s e o u c au s n g t h a s r ap i d ec l n e wh m a b e a n yw he r om 10 3 0 p o n t Its

Gann als taught that th ti f ad o important consideration he

tr in

to

anticipate

G an n c on c u de d p eo p w ou l o n e a wa ch an wa he ou ma o t m o m on ey , bu he ar oo bi hu ge h, an he e su l s t h e g o b ro ke . T he y b u o r s e o n h op e w i h ou t r ea so n "9 T o h e y o a vo i h es e a n s im i a r p it fa l w e w i n ex t m o v o n d is cu ss io n o f G an n v ie w o n c ha r e ad in g A s w e a l u de d e a rl ie r i n t hi s c h ap te r w a s e s se n ti a t o h i t ra d in g success.

stock's behavior. When

stock

uses up several months' tim either in accumulatio

or

distribution. it will require.

then, severa nths fo th run between accumulation

NOTES G an n w.o., T ru t o f h e S to c T ap e L a mb e r G a n P u b li sh i ng , P o m e ro y , W a s hi n gt on , 1923, pg 7.

and distributio to take place.

lbld., pg I bi d. , pg Ibid., pg Ibid., pg 67 Ibid., pg 82

lbid., pg 12 lbid., pg 86 lbid., pg 86

G A N N SIMPLIFIED

35

G an n

ann was c ha r

C ha r R ea d n g

b i b e e ve r

T ec hn iq u

u s n g n an c a l

u dg e h e s ou nd ne s o f c om m o

s to ck s a n c om m o d e s " A o f h e n fo rm s o n h a a f e c h e u tu r p r c e o f s to ck s a n c om mod es c on ta in e u c u at io n a n y o n ee d n o h in g m o r h a e co r o f p r c es , h e u se d s ay . M os t o f h i w o w a b as e a ro un d v ar io u w a y o f n te rp re t n g t h c ha rt , a n w it ho u i t h i f or e ca s ti n s u cc e ss w o ul d h a v b e e l ar g el y impossible. T h e u nd a me nt a p re m is e b eh in d h e u s o f c ha rt s y in g p re d c t p r c e e nd s he ol max ha h is to r e pe a s . G an n w a o n o f q uo t n g h e p a ss a g o f E c cl es ia s te s i t h B ib le , w h ic h s a ys , " Th e h in g h a h a b ee n h a w h c h s ha l b e an ha wh ch d on e s t ha t w h c h s ha l b e d on e an he n o n e h in g u nd e h e u n T h s ho w h a h is to r bu e pe t o n o f h e p a a n h a c ha r a r h e o n g u d e w e h a o f w ha t s to c h a d on e a n b y w h ic h w e m a d e e r m in e w ha t h e w i d o G an n w ou l ay

Gann's hlndamental premis h in d t h

us of

cnarts In tr in predict

to

price

t re n ol maxi

th that

Uhistory repeats.

Along

ith th

price indications provide

bythe

chart. Gan always paid special attentio to th tradin volume behind th

price

movements. Hepointed ou that

st ck

canno be distributed or accumulated with ut

large

volume of sales

38

GAN

A lo n w i t h p r c e n d c a o n p ro v d e b y h e c ha rt , G a n a lw a y p a s pe c a l a t te n t o n t o t h t ra d n g v o u m e b eh in d t h p r c e m o ve m en ts . " Th e v o u m e o f s a e s o n e ac h n d v id ua l s to c s ho w s t h p er ce n a g h a b e n g b ou gh t a n s o d . T ha t w h y t h a p e a n p r c e f lu ct ua t o n e l t h t ru th , p r ov id e d o n e n te rp r et s t h t ap e c o rr ec tl y. " G a n n p o n te d o u h a s to c c an no t b e d is tr ib u e d o r a cc um u la te d w it ho u a rg e v o u m e o f s a e s S om e on e m u s b u a n s e a rg e p e c en t o f h e c ap i a l s to c n ea r h e b o o m o r o p o rd e c au s bi mov e it he r d ir ec t o n . T h er ef or e G a n u rg e t ra de r t o s tu d v o u m e c lo se ly , a lo n wi h e m e e qu i e d s e l a a rg e a m ou n o f s to c a n h e n um be r o f p o n t w h c h m ov e u p o r d ow n w h i t h v o u m e o f s a e s i s a c cu m u a t n g S tu d h e v o u m o f s a e s a t e ac h m po r a n b o o m a n o p a n c on s d e h e n um be r o f h a e s o ut st an d n g e ac h s to ck , w a s h i r eq ue n a dm o n o n " Th i w i h e y o t o d e e rm in e w h et he r b uy in g b et te r t ha n s e n g o r n ot . O n o f G an n u le s c on ce rn in g v o u m w a h a s to c h a v er y a rg e v o u m o f s a e s i da an h a m ad e v e n a r o a ng e u c u a o ns , d o no bu or se un s ho w w id e r an g o f u c u a o ns , a n g o w i h e r en d w h c he ve r w a h e m ov e s ta r s . G an n u rg e h i s tu de n k ee p u p d a y , w e e k y , m o nt h a n y ea r c ha r s ho w in g t h h ig h a n o w o r e ac h e sp ec t v e t im e r am e B y d o n g h is , h e s a d , t ra de r o r n ve s o r c a o bt a a n a c cu ra t p ic tu r e o f t h o v er a l p o si ti o - st ro n g o r w ea k o f he oc he sfo owng Th sth p ro pe r w a r ea d h e s to c a pe , h e s a d .

S IM P LI FI E

G an n p ro v d e h e e xa m p o f U .S . S te e p op u a r s to c h i d a a n o n o f h i a vo r e s ad n - t o u st ra t o n e o f h i r u e s c on ce rn in g v o u m e " Su p po s U .S . S t ee l h a s a d va n ce d 2 0 o r 3 0 p o in ts , an r ea ch es a e ve l w h e r t he r a r 2 00 ,0 0 s ha re s o n d ay , b u h e s to c o n g a n s o n p o n t T h n ex t d a h e a r 2 00 ,0 0 s ha re s a n m a ke s n o ga n. Th p la i e no ug h h a a t h i p o n t h e s up p l o f s to c e xc ee ds t h e d em a nd , o r a t e as t t ha t b uy e a r a b g e a l h e s to c h e w an t w i h o u b id d n g p r c e u p c as e o f h i k in d h e w is e h in g d o s t o e ll o u w a an wa a ll t h s to c k a t t hi s l ev e l i s a b s or be d a ft e r ea s on a b l e ng t o f m e a n mo esup n e h ig h p r e s i t w il l t he n , o f c o ur se , n d ic a t s ti l h ig h er .

Gannurged hi students to keep daily weekly monthly an yearl chart showin

the

high an lo fo each respec-

"I b i b u m a rk e w he n s to ck s e ac h t h d is tr ib u t n g z on e h e w i u c u a o ve r w id e a ng e a n h e v o u m o f s a e s w i u n s ev e a l t m e s h e t ot a o u ts ta n di n c a pi ta l s to c k F o r i ns ta n ce : I n t h a t e r p a o f 1 91 9 a n s p n g o f 1 92 0 B a d w L oc om o t v e s a e s r a n f ro m 3 00 ,0 0 5 00 ,0 0 0 s ha re s p e r w e ek , w h i h e s to c w a s f lu ct ua t n g b e w e e 1 3 a n 1 56 . T h i w a s w h e d is tr ib ut io n w a a k n g p la ce , a n h e p ub l w a u l o f h op e a n d b u yi n r e ga rd le s s o f p r ic e .

tive tim frame Bydoing this, he said

trader

or investo can obtai

an

accurate picture th

verall

position-strong ea

of the

st ck he is following.

" A f te r h a t o n d ec l n e s ta rt e a n B a ld w i e ac te d 6 2 /8 d u n g h e w ee k e nd in g J un e 2 5 twa wn 1 91 9 D ur in g h e a s w ee k o f h e d ec l n e w en t 6 23 1 o ve r s ev e p o n ts , a n h e o ta l s a e s fo r h e w ee k w er e e ss th a 1 10 ,0 00 , w h c h s ho we d h a q u d a o n h a a bo u u n c ou rs e a n t ha t t he r w a s v er y t l s to c p re ss in g

GAN

S IM P LI FI E

39

o r s a e . T h e a mo un t o f s a e s a t h i m e on w ee k w e a bo u h a o f h e c ap i a l s to c a n p ro ba b a bo u a s m u c a s t h e o at in g s up p y , wh w he n h e s to c w a n ea r 1 0 p o n t h ig he r h e c ap i a l s to c w a s c ha ng in g h an d a bo u w ic e e a c h w e e k ." 4

Gan taught tha by studying past history an kn

in

that th

future isbu repetitio past

the

ne ca

T h e n or m a p a e r h e e ns ue d a s B a ld w i b eg a a l o m h e J un e 1921 o w o f 62 /8 o n l ig h t v o u m e T h i n d c a e d t ha t t he r w er e n o m a n s ha re s f o s a a n h a t h s to c h a p as se d f ro m t h w ea k h an d t o s tr on g o ne s T he re fo r w a s v er y e as y t o r a h i s to ck . T h e s to c a dv an ce d t o h ig h of 142 i n O c t ob e r 1922. A t h i p o n t a no th e d is tr i b u ti o p h as e t oo k p la c e O b s er v n g m a n y e x am p le s s uc h a s t h i r e n fo rc e G a nn ' v ie w t ha t v o u m e w a s o n o f t h k e n gr ed ie nt s r ad in g s uc ce ss .

determine the cause accordin to th

ti

conditions.

an

G an n a ug h h a b y s tu dy in g p as t h is to r a n k no w n g h a h e u tu r bu e pe t o n o f h e p as t o n c a d e e rm in e h e c au s a cc or d n g he m e a n c on d o ns . " Th e a ve ra g m a n m e m or y o o s ho r G an n w ro te . H e o n e me mb e w ha t h e w an t e me mb e o r w ha t s u h i h op e a n e a s . H e d e pe nd s o o m uc h o n o th e a n d oe s n o h in k o r h im s e T he re fo re , h e s ho u k ee p r ec or d g ra p o r p ic tu r o f p as t m a rk e m o ve m en t emnd hi a t w ha t h a h ap pe n he pa c a a n w i h ap pe n h e u tu re , a n s ho u n o a l o w h i e n h us ia s g e h e b e e r o f h is j ud g m en t a n b u o n h op e h in k n g h a h e w i n e ve r b e a n ot he r p a ni c. " G a n n p ro vi de d s e ve ra l u s ef u r ul e f o u s in g c h ar t a na ly s d e e rm in e w he n b ea r m a k e h a

e nd ed . H e t a ug h h a b ea r c am pa ig n m us t u n h re e t o f ou r s ec t o n b ef or e h e b o t o r ea ch ed . L oo k o ve r y ou r c ha r a n y o w i n d h a e ac h g ro u o f s to ck s a n e ac h n d v id ua l s to ck , w he n ar he ow e nd , n s o u h re e ou ec o ns . F ir st , i t h a s ha r d ec l n e h e r a e s a n d is tr ib u te d ; t he n h a s a n o th e r d e cl in e ; h e si ta te s r a l ie s a n d t he n h a s a n o th e r d e cl in e ; h e si ta te s a g ai n an he ha a l b i b re a o r o n w e a l h e c le a n- ou t w h e i nv e st or s a n d e v er yb o d g e t s ca re d a n d ec id e h a s to ck s a r n ev e g o n g u p a ga i a n s e l e ve ry th in g . W h e n t hi s f in a l c le a n- ou t c o m es , ha sth me uy or he on pu a no th e b u l c a m p a ig n .

Gan believed that th

best

charts to se ar the weekly monthly OIn yearly charts.

Th Best Charts to Use

Gann liked using

A n e xt re m e m p or ta n d is t n c o n G a n m a d w a w h c h k in d o f c ha rt s u se . F o n s a nc e G a n di no be ev u s n g s pa c c ha r s , a ls o k no w a s " po in t- an d- f g ur e c ha r s , b ec au s t he y d o n o c on t a t h c ri ti ca l t im e e le m e nt , i ns te a d d is p la y in g p r c e o n y . T h e o th e y p o f c ha r h a G an n s a was mos ke o o r ad er s b y p ro du c n g a ls e m ov es , s t h d a b a c ha r T h w ea k p o n t w i h es e c ha r h e a c h a h e s ho w h e m in o m ov es , w h ic h G an n k en e he ppes he o ce a c au se d b y p eb b e . T he y d o n o d is tu r o r d e e rm in e h e b i m ov e o r m a e nd . M os t a de r u s h i k in d o f c ha r G an n b e e ve d h a h e b es t c ha r us ar w e ek ly , m o n h l a n y ea r c ha rt s G a n k e o ng er - e r c ha rt s b ec au s h e s ho w m o r an he mo m e c ha r s ho ws , h e m o

he us ng me, elab

longer-tenn charts becaus the sho time an

more th

re ti chart shows the more reliable are its indications.

HTheweekly and dailyhigh an lo

charts ar

valuabl when th

arkets ar

ver active an re go

to se

ver highprice stocks at th ti

they re

I;Ulminatingor in th fina gran rush. because th

dail an

a r t s n d ic a o ns . " Th e w e ek l a n d a i h ig h a n o w c ha rt s a r v a u ab l w h e h e m a rk e a r v er y a c v e a n a r g oo d u s o n v er y h ig h- pr ic e s to ck s a t h e m e h e a r c u m in a n g o r he f in a g ra n r us h b ec au s t h d a a n w e ek l w i s ho w h e r s c ha ng e e nd , h e w ro te . " Th e ar be er u s a t t h o p o f a s m ov e h a h e a r a t h e b o o m . H ow ev e w he n m a k e h av e q u c k s ha rp , p an ic k d ec l n e , h e n t h d a i a n w ee k c ha r w i h e p , b u h e b es t g u id e on p u a d n g a n d e e rm in in g h e m a i e n a r h e y ea r a n m o n h l h ig h a n o w c ha r s . La er q u a rt er l m a rk e ow to had th

h i e , G an n u rg e h i s tu de n a ls o u s c h ar t i n t he i a tt em p t a t d e te rm i ni n e nd s o n o f h e a s b oo k h e w ro t M a k e P r of it s i n C o m m od it ie s ( 1 95 1 ) G a n n t o s a a bo u t h e q ua rt er l c ha rt :

weekly wil sho th first change i n tr e th

..

best guides

in long-pull tradin

an

detenninin ai th

tren

the ar

yearly an

monthl

high

an

charts...

42

lo

GAN

Th mo m e p e o d u se d c ha r h e m o mpo an o r d e e rm in in g c ha ng e e nd . B y q ua r e r c ha r o r s ea so na l c ha r w e m e a c ha r u s n g h e o u m e p e o d o r s ea so ns o f h e y ea r. W e u s h e r s h re e m o n h s o f h e y ea r J an ua ry , F e b ru ar y, a n d M a rc h T h e w e u s t h h ig h a n o w p r c e o f w he a s oy be an s o r o th e c om m o d e s o r t he s h re e m o nt hs , t h w in te r q ua rt er . N ex t w e u s A p M a y a n J un e c om p le t h e s p ri n q u ar te r A ft e t ha t J u ly , A ug u st , a n d S ep te m be r o r h e s um m e r q u ar te r L as t O c to b er , N o ve m be r a n D e ce m be r f o t h a l q u ar te r T h i m a ke s f ou r p e o ds , o f h re e m o n h s e ac h e ac h y e ar . S t u d q u ar te r l c h ar t c a re fu ll y a n d y o u w il l s e h o h es e q ua r e r p er io d s ho w w he n a n

S IM P LI FI E

m p or ta n c ha ng e r en d a ke s p la ce . O b se rv e h o m a n m e s a ft e p ro lo ng e a dv an c o r d e c n e h e s t m e p r c e b re a h e b o o m o f p re v o u q ua r e r n d c a e s c ha ng e e nd , a n b ea r m a rk e s ta r s . T h e f ir s m e t h p r c e o f o n e q ua r t e e xc ee d h e h ig h e ve l o f h e p re v o u q ua rt er , n ea r a lw a y n d c a e s c ha n g t re nd , a n bu m a rk e o l o w s I f y o u w i s tu d a n q ua r e r c ha r c a e fu l a n n o h e p os i o n o f w he a o r a n

Accordin to Gann

he

market begins declining

an

individual stock starts do n. it

h ig h a n o w h a a n h e w ee k h ig h a n o w c ha r y o w i n d v e h e p fu l d e e rm in in g c ha ng e he ma e nd . a dv is e k ee p n g u p q ua rt er l c ha r o n e ac h n d v id ua l c om m o d t ha t y o r ad e n ." 5

usually makes tw

thre

an

fou movements before it reaches final bottom.

G a n a i d ow n s ev er a r u e s f o r s tu dy in g t h d a i y , w e ek ly , a n m o n h l c ha rt s a n d e te rm in in g h e r es p ec t v e p o si ti on s . H e a d vi se d w a tc h in g t h a c t o n o f h e d a m o ve s h e r s s ec on d h i a n ou s ta ge . s to c b eg in s a n a dv an ce , h e h es t a e s a n d b e g n s s id ew a y o r a te ra l m o ve m en t a n d g oe s t hr ou g r es is ta nc e l e ve l o n h e u ps id e , h e a dv is e w a c h n g h o a c w he n h es i a te s a n s to p h e s ec on d h ir d a n o u m es . W h e e ac he s th e h ir d o r o ur t m o v u p h e a dv is e w a tc h n g o r c ha ng e r en d a s t h i r ep re se n t h e c u m in a o n p e o d o f h e m o ve . T h s am e u l a pp l e s h e s t s ec on d a n h ir d m o ve s o n h e w e ek l a n m o n h l c ha r s . I t a ls o a pp l e s th m a jo r a s w e l a s t h m in o s w n gs . A cc o d in g G an n w he n m ar ke t b eg in s d ec l n in g o r a n n d v id u a l s t oc k s ta r d ow n , u su a m a ke s t wo , h re e a n o u m o ve m en t b ef or e r ea ch e f in a b ot to m .

GAN

Ifth tren goin

is

to reverse

it will nly make th

firs

nd

second decline an then turn again. Bu after

prol nge

declin an fourth move down,Gann advised watchin fo

bott

to

fo change in trend

S IM P LI FI E

43

mor ha p o n t a bo v o r b e o w h e e x e m e h ig h o r o w p o n t a t w h c h h e s to c h a e d T h i r u e , h ow e ve r s ho u l n o b e a pp l e d p an ic s O n t h d ay s o f e x r em e u c u at io n a n a rg e v o ume n o n ec es sa ry t o w a w o o r h re e d ay s b ec au s h e m a rk e w i h a v s ha r r ev er s m o v u p o r d ow n . T h er ef or e G a n a dv is e t ak in g p ro f o n h e d ay s o f a s a d a n a nd , w he n h e a r b ig , p an ic k d e c n es , c ov e s ho rt s a n w a i t o s e w ha t h e m ar ke t d oe s t h e o l o w n g d ay s H e u rg e d r ad e r u dg e e a c s to c a cc or d n g po on an no e xp e olow he mo em en t o f o w g ro u u n e s g ra p h ow s h a p os i o n do o. he

FIGURJ 4-1

Two-year dally c ha r o f Anglogold (AU)

en

go ng

e ve rs e, i t w i o n

s t a n s ec on d d ec l n e a n Bu af er

p ro lo ng e

he

d ec l n e a n

d ow n G an n a dv is e w a c h n g o r an

c ha ng e

ur

mak

he

u p a ga in . ou bo om

mov or

e nd .

F i gu r e 4 - 1 N o t e t h e c l ea r ly - d ef in e d t h re e - se c ti o n

d ec l n e

th

a bo v s to c c ha r f o A n g o go ld , f ro m

N o ve m be r 1 99 9 h ro ug h J an ua r 2 00 1

D i f er en t T im e F ra m e F o r d a i t ra d n g o r s ho rt -s w n g t ra d n g G a n a dv is e n ev e b uy in g o r s e n g s to c u n ha ha ed or wo h re e d a a t h e b o o m o r o p w h c h w i s ho w h a b uy in g o r s e n g s tr on g e no ug h c he c h e a dv an c o r d ec l n e H e a dv is e b uy in g o r s e n g a n p la c n g s to p- lo s o rd e n o

G a nn ' m e r u f o u dg in g h e o ve ra l p o s o n o f w e ek l c ha rt s n vo lv e w a it in g o r r ea c o n o f t w h re e w ee k a n h e b uy . T h a pp l e s a c v e s to ck s a s m o s o f t h a c v e s to ck s w i n o r ea c m or e h a h re e o u w ee k b e o r h e mai en e su m ed . W h e b ea r m a rk e r ev er s h i r u e ; s e o n r a e s o f t w t o t hr e w ee ks . G an n n s u c e d a lw ay s w a tc h o r c ha ng e en h e h i w ee k u p o r d ow n G a nn ' w e ek l r u f o r ap i a dv an ce s a n r ap i d ec l n e s t o w a c h o r c u m in a o n h e s ix t o r s ev en t w ee k u p o r d ow n h e b u o r s e a f e r w a c h n g h e d a h ig h a n o w h a o r h e w ee k h a h e s to c e ac he s t o o r b o o m , h e p la c s to p -l os s o rd e r a b ov e o r b e lo w t h r es is ta n c l ev e l H i m o nt h me ru h a s to ck s t ha t a r

w a s b as e o n t h s up po s t io n s t o n p os i o n a n s ho w

Throughout his writings, Gann continually emphasize

th

importance of placin

protec

t iv e s to p o n l l trades remind in th ha

r ea de r

bi

losses

are prevented this

ay and

profits preserved.

Apart fro studying price movements along different time frames, Gan also advised paying close attentio to specific hours, days an months

th

year inorde to determine potential turnin point instocks.

n t h e e co n m on th . H i u l w a bu an p la c s to p- lo s o rd e r u nd e h e p re v o u m o nt h o w e ve l A lw ay s w a c h h e p o n t a t w h c h a dv an ce s s ta r w he th e r o h e o we s b o o m o r f ir st , s ec on d t h r d o r o u r h ig he r b o t om s . T h es e s ta r n g p o n t a r a lw a y b uy in g p o n t w i p ro s to c tective s to p p o n t u nd e n ea th . W h e d e c n e o r a dv an ce s a ft e m a k n g t o o r b o tt o a n h e m o ve m en t u n n t h e s ec on d m o n h , h e n ex t m po r a n m e w a c h o r c ha ng e en he hi or ou m o n h , a cc o d in g G an n

s o f o t h s t h a c us to m er s a lw a y r ec e v e t h e s ta te me n o n h e s t o f e ac h m o n a n k no w u s h o h e a cc ou n s ta nd . T he y o f e n s e o u s e cu r p ro f t s o r s e ll ou t b e ca u s t he i a c co u n t h av e b ee n w ea ke ne d b y d ec l n es . T h 1 O o f h e m on t w a a ls o m po r a n o r c ha ng e en or G an n T h 1 5 a ls o m po r a n b u n o a s m u c h a s th e 1 0 h , h e s a d . T h 2 0 23 s a n m po r an me wa ch or h an g en aswe s in c h ig h o r o w p r c e a r o f e n r ea ch e a ro un d hi me of he mon h.

A l o f h es e u le s w o b es t h e s to ck s h a a r very a c v e a n d a r f lu c u a t n g o n a rg e v o u m e o f s a le s . G a n n e n co u ra g e t ra d er s t o s tu d y d a i y , w e e k y , a n m on th l h ig h a n o w c ha r o f h e a c v e h ig h p r c e s to ck s o rd e ea ho we hi r u le s w o r k .

" M y e xp er ie nc e h a p ro ve n h a t h e above d a te s a r mpo an an of va ue a n a de r w h w i w a c h h em , a n w i m an y m e s h e d e e rm in in g o p or bo om w ro t G an n

A pa r f ro m s tu d y n g p r c e m o ve m en t a lo n d i f er e n t t im e r am e s G a n a ls o a dv is e p ay in g c lo s a tt en t o n t o s pe c h o ur s d ay s a n m o n h s o f h e y ea r o rd e t o d e e rm in e p ot en t a l t ur n n g p o n t s to ck s H e o b se rv e t ha t m p or ta n c ha ng e p r c e o f e n a k p la c o n M on da y h e s t h ou r o f a de . s to c o pe n o wa n M on da y a n d oe s n o s e o we r b y 1 2 o ' o ck , g oo d g n h e s a d . T h e n ex t m p o a n d a o f h e w ee k wa ch W e d n e s d a y e s p e ci a ll y W e d n e s d a y a f te r n o on . G an n a ls o a ug h h a s v e r m po r a n wa ch h o s to ck s a c t d u n g h e s t e w d ay s o f h e m o nt h m p or ta n c ha ng e o ft e o cc u b et we e h e a n h i o f e a m on th , h e n o e d O n e a

46

G A N N S IM P LI FI E

G a n a ls o a dv is e w a tc h n g o r a nn u a a n s ea so na l c ha ng e s to ck s m po r a n s tu d p as t m o e me n o f o ck s t o e e h o m u me u su a l e qu ir e c om p e t m o ve m en t h e w ro te . " Th er e a r s ev er al s e c o n m a jo r m o ve m en t o r s w n g T h er e a r y ea r a n s ea so na l c h an ge s al s to ck s a n y o m u s w a c h o r h es e s ea so na l c ha ng es . a ls o m p o a n w a c h o r c ha ng e e n e ve r h i d , s ix th , n in t a n 1 2 m o n h , b u h e m os t m po r a n m e wa or ma or c ha ng e en a t h e e n o f e ac h y ea r B y th i d o n o m e a h e c a e nd a y ea r F o e xa m p e , s to c m ak e b o o m h e m on t o f A ug u an h e e n c on t n ue s u p h e h e m o s m p o a n d a w ou l b e t h o l o w n g A ug us t o r o n e a a te r w he n y o s ho u w a c h o r a t e as t a c ha ng e h e m in o e nd , w h c h m ig h a s o n h re e m o n h s o r m or e

GAN

It is

important

to stud

past

movements of

stocn

to se

ho

much

tim

is usually

require

to

complet movement.

S IM P LI FI E

47

12,000 11,~

'~

u.eoe 10,~

B,ooo 7,~

7.000

600 400 200

FIGURE 4-2

Three-yea char

daily

th Do

Jones Indu5trial Averag

(DJIA).

.i:

F ig ur e 4 -2 : N o t c e t h s ea so na l te nd en c f o t h D o w J o ne s I nd u st ri a A v er a g t o d e cl in e i nt o a u tu m n , t he n r e ve rs e i n t h O c to b er -N o ve m b e r t im e f ra m e .

h i c ha p e r w e h av e o u n e h o c ha r r ea d n g c a b e a da p te d t o a cc ur a e l p re d c t a n s uc ce ss fu l r ad e d ur in g w id e v ar ie t o f m a rk e c on d o ns . E q ua l m p or ta n G a nn ' w o r w a s c or re ct l i de n ti fy in g p e r o d s o f a c cu m u la ti o a n d d is tr ib u ti on . H e s a h a " Th e b i p ro f a r m a d he un b e tw e e n a c cu m u la ti o a n d d is tr ib u ti on ." 6 I n t h n ex t c ha p e r w e w i a k m o r c om p le t o o a t h e m e th od s G an n u se d t o e co gn iz e m po r a n p a t er n o f a cc um u la t o n a n d d is tr ib ut io n t ha t c ou l h e d et er m in e y ou r n ex t r ad in g m o ve .

NOTES G an n W .D . T ru t o f t h S to c T ap e L a mb e r G a n Publishing Pomeroy, Washington, 1923, pg 52. lbid., pg. Ibid., pg 82 Ibid., p g M a k P ro fi t C o mm od it ie s Lambert G an n W .D . H o G a n n P u b li s hi n g P o m e ro y , W a s h in g to n . 1951, pg 30.

48

G A N N S IM P LI FI E

I de nt i y in g A c c u m u la t o n and Distribution

G a nn , a re a o f c on g es t o n t ha t s , s i de w ay s m o ve m en t o n c ha r w h ic h u c u at e a ir n ar ro w r an g e o ve r

c on s d er ab l

e ng t

of

t im e , w e r e x r em e l m p or ta n f o b e n g a b l oc a t a re a s o f a c cu m u la t o n a n d d is tr ib u ti on . M o r e mpo an y, he pa w he th e u pw a o r d ow n wa h a p r e s to o a f e r b re ak in g o u o f h e a te ra l z on e u su a d e te rm in e w h e h e h e z on e r e p re s e n te d a c c u m u la t io n ( b u yi n g o r d i st ri b ut io n ( se il in g ) T h e re fo r e b y o b se r vi n t h p a t t ha t p ri ce s a k a f e r b re ak in g o u o f

a d n g a ng e

c a p ro f b y o l o w n g h e e nd , e xp ec t n g e m a n ta c o r w h e . A f e r g re a a c v i

COngestion areas are sideways m ov em en t

on

charts which f lu c u at e i n fairly narrow

r ad e

a ng e o ve r considerable

an

me wi op om hewro e, bi mo o lo w whch ou c a n m a k e p r of it s r ap id ly . T h i t ec hn iq u o f b e n g a b t o n te rp re t a cc um u la t o n a n d is tr ib ut io n b y h e u s o f c ha r w a h e e ss en ce o f G an n " ta p

l en gt h o f t im e an

a r extrem~

Iy important in

identifying areas of accumulation and distribution

r ea d in g " s u cc e ss . T o h i c h ar t a re a s s h ow in g e it he r a cc um u la t o n o r d is tr ib ut io n w e r t h e m bo d im e n o f s up p

a n d em a nd .

G AN N S IM PL IF IE D

51

Accumulation: Jhepathwhether IoIpward or downwardthat prices take iilfterbreaking thes lateral zone area

conge5

tion, u5ually determine5 hether th zon repre5ents accumulation (buying) or di5tribution (5elling).

Accumulation (buying)

DI5tribution (selling)

Foundatio

B e o r a n s to ck , o r g ro u o f s to ck s s ta r o n b i a dv an c o r d ec l n e on pe od of me r eq u ir e f o p re p ar at io n , o r a c cu m u la ti o o r d is tr ib T ru t o f h e S to c T ap e "I n , w ro t G an n r eq u r e t im e p re pa r a n a y t h e o un da t o n o r b u d in g T h e a rg e t h b u d in g h e m o r m e r eq u r e t o c on s r uc t h e o un da t o n I t t h s am e w i s to ck s T h g re a e r h e a dv an c o r h e d ec l n e h e m o r m e r eq u r e p re pa r n g "1 G a n p ro v d e u s t h e e xa m p o f h i o l f av or it e U .S . S t e e " T ak e U .S . S te e l w h ic h w a s i nc o rp o ra te d F eb ru a 1 90 1 wa n e s to c a n h e a rg es t co po aton of k in d he wo at ha me c om m o s to c w a a l w a e r a n a s w a e r s ee k l ev e l S te e l c o m m o n w it h i t f iv e -m i l i o s h ar e o f wa er ha s ee k e ve l e qu i e d m an y y ea r e ac h t ha t e ve l T h s to c d ec l n e om 55 1 90 1 /8 1 90 4 W he n e ac he d h e e ve l o f 1 2 r em a in e f ro m D e ce m be r 1903 t o S e pt em b e r 1 90 4 u c u a n g b e w ee n 1 2 a n 83/8. M o o f h e m e h e u c u a o n w e b e w ee n a n 1 0 w a a t v e o w e bb , s lo w n a o w u c u a o n w i v e s m a l v ol um e o f s a le s . T h i i s w h e r a c cu m u la ti o o o p la ce , w h ic h e qu i e d a bo u e n m on th s a n av ou mp me wa an e t ha t w a c e n g u pp o ou di no ha be hu a bo u b uy in g a s w a p re pa r n g o r on advance. W e w i o ve r o o h e o p a t 947/8 in 1909. H o w e ve r, y o c a o o u p o r y ou rs e a n s e h a h e e n ti r c a pi ta l s to c k c h an g e h a nd s s ev e ra l t i m e

between 88 a n 9 4 a n s om e d ay s th e a d n g h i s to c a lo n r a o ve r h a m i o n s ha re s, w h ic h o f c ou rs e s ho w e h a w a b e n g d is tr ib u e d "2 H e r a g ai n G a n n e m p ha s iz e t h s pe c ia l i m po rt an c e o f t ra d n g v o u m e d ec id in g w he th e c er ta i e ve l o n p r c e c h ar t r ep re s en t a c cu m u la t o n o r d is tr ib u o n " Th e r ea c o n o r d ec l n e w h c h m u s o l o w [ ac cu m u la ti o o r d is tr ib u ti on ] w il l b e i n p ro p or t o n t o he voum of saesan he he gh w hk h s to ck s h av e r is en . T h e v o u m e o f r ad in g s j us t t h s am e a s a rg e v o u m o f w a e r s t w o o r h re e m e g re at e t ha n n or m a m u s s pr ea d o ve r a rg e a re a b re a h e d am s a n d o g re a d am a ge ." 3 H e a dd ed , " Th e v o u m e o f s a e s a l wa y n cr ea se s w h e n s to c k a d va n ce . T h i a p p i e t o d a ys , w e e k s m on th s a n y ea rs . W h e qu da on gong on an h a a bo u r u c ou rs e t h v o u m e d ec re as es . T h y ea r o f b ea r m a rk et s a lw ay s s ho w s m a v o u m e a n h e y ea r o f b u m a k e a lw ay s s ho w v e a rg e v o u me . W he n m a k e s w o rk in g o we r h e v o u m o f s a e s i s ve r s ma l h e a st y e a o f b ea r c am p a g n w h c h s ho w s h a q u d at io n h a r u t s c o ur se . "4 G an n c on c u de d s tu d o f h e v o u m o r e ac h w e ek , m o nt h a n y ea r o n h e n d v id ua l s to ck s w i he yo d e e rm in in g h e r en d T h c ha r o r B AP o n h e n ex t p ag e F ig u 5 -1 , s h ow s d is ti nc ti v r ev e rs a ls o f t re n d w h e ne v e con s p ic u ou s s p ik e i n t ra d in g v o lu m e a p pe a rs . T h e t ra d e m u s d e e rm in e h e o ve ra l r en d a n t ec hn ic a p os i o n o f h e m ar ke t o rd e a sc e a i w he th e h e

Volume represent5 the nlolmber of 5hare5traded

Gann empha5ized the 5pecial importance of trading volum In decidin hether leve

certai pric

chart represent iilccumulation or di5tribution. Conspicuous 5pikes in trading volume. usually are indicative reversa in trendwhether upward or downward.

I,

i;i~.:.3

:"']"";,,i],,.,t] 1 1 1 , 1 ", "1I ",, , ,1 W l ,, I ;' :: " " I" I : ,, ,: , ,, : I. . II I I 'I : " ~ h l t . l E l lt t d ~ ~ I . ' 1 1 1 1 ' , ,, , 1 R"

R S

FIGURE5-1:

F "

Three-year w_kIy chart creditcorp (BAP)

R S

F M

v o lu m e s p ik e s r ep re s en t downward.

D 01 F

l ik el y r ev e rs a l u p w ar d o r

O n o f h i a vo r m e h od s o r d o n g h i w a a d u p h e o ta l v o u m o f s a e s th a s to c m ak e gong om an ex em a n e x e m h ig h G an n s ho w u s h ow : O n D ec em be r 2 2 1 92 8 h e o wa n u . s . Steel w a 1 49 % a n w o k e h ig he r a l h e m e o m t h e ve l u n t S ep te m be r 3 , 1 92 9 w h e r ea ch e 26 T h e t ot a s a le s d u r n g t hi s p e ri o w e r 1 8 ,8 9 5, 00 0 s h ar es . T h e t ot a o u ts ta n d n g s h ar e o f t l o ve r m i o n T hu s hi u . s . S te el a r e o n a d va n ce , t h t ot a o u ts ta n di n s h ar es c h a n ge d h a nd s w ic e F ro m M a 3 1 1 92 9 w he n h e s to c s o a t 162Y2 h e a st t im e b e n g d ow n 3 0 p o n t om he h ig h o f M a c h a dv an ce d 26 o n S e pt em b e r 3 , 1 92 9 b e n g u p n ea r 1 0 p o n ts . T h o ta l s a e s

54

GAN

S IM P LI FI E

d ur in g t h p er io d w er e 7 ,6 15 ,1 0 s ha re s, a l mo s a s m u c h a s t h e e n ti r c a p t a s to c k o u ts ta n d n g . T h en , d u n g h e p e o d o m S ep te mb e 3 , 1 92 9 w he n h e s to c m ad e o p a t 2 61 3A , t N ov em be r 1 3 1 92 9 w he n e ac he d o w o f 1 50 , h e o ta l s a e s w er e 7 ,3 65 ,3 0 s ha re s N o t h o n ea r t h es e w o o ta l v o u m e o f s a e s c am e t o b e n g e qu a T h w a s a no th e g oo d n d c a o n o r b o o m w he n h e n um b e o f s ha re s o n h e d ec l n e e qu a e d o r n ea r e qu a e d h e n um b e o f s ha re s o n t h a dv an ce . " I y o w i s tu d h e d a y , w e e k a n m o n h l v o u m e o f s a e s o n c u m in a o n o f e ac h d i f er en t s to ck , y o w i n d v e h e p fu l u dg in g w he n s t o n o r w ea k p os i o n G an n b e e ve d h a he ma ke wa u p o r d ow n a n

One simple metho

h e b es t w a y m ak e m on e o l o w h e e nd , w he th e a vo i a d n g a ga in s h e e n

fo

determining whethe th

a t a l m e s O n e s im p l m e th o f o d e e rm in in g w he th e h e e n u p o r d ow n s t o n o o ve r a l t ra je c to r o f t h p ri ce li ne , e s pe c ia ll y t h e p ro g re s s iv e t op s a n b o o m b e n g m ad e a lo n h e w ay . " Pr og re ss iv e t op s a n b o t om s w a a n o pe ra t v e e r u se d b y G an n d es c b e h o a r a pa r h e o p a n b o o m w er e s pa ce d a pa r o m e ac h o th e A s o n a s a s to c m ak e h ig he r b o o m a n h ig h op he en an ssa ol o w h e a dv an ce , h e w ro te . T h u l a pp l e s d a i y , w e e k y , m o n th l o r y e ar l m o v em e n ts . Th e xa c o p o s ue of be ma et as ng asa s to c m ak e o we r b o o m a n o we r o ps , h e en d ow n a n s t he re fo r s a o r o l o w n g o n

tren

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the overall trajector

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the priceline. especially the progressive top and bottom being made along th

ay

t h e d e c li ne .

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S IM P LI FI E

55

Swin

O n o f G an n' s mos important tradin nique

tech fo

forecasting price m ov em en t

an

determining t re nd s w a · sw in g

th

c ha rt .

Charts

T h e ad s u s o n o f G an n m o s m po r a n ad n g t ec hn iq ue s o r f or ec as t n g p r c e m o ve m en t a n d e e rm in in g e nd s h e s w n g c ha r M u c h a b ee n w r e n o n h i m e th o o ve r h e y ea rs , a n d G a n h im s e p ro v d e u s w i t c on s d er ab l c om m en t o n h e u b e c H e h a a r o u w a o f o n s tr uc t n g s w in g c ha r w h ic h b as ic a c ha r w h c h e x e m e o p a n b o o m s o f e ac h m e n c e m en t w he th e d ay , w ee k m o n h , o r y ea r d ep en d n g u po n h e y p o f c ha r u se d c on ne c wi nefo wo mo s in g d ir ec t o n G a n p re fe rr e h e 3 - n cr em e n s w n g m e th od , h ou g he e v d en c h a hi a te r y ea r h e r ev er te d t o 2 - n cr em e n s w n g r u e . H ow ev e s in c h e g re a b od y o f h i w r n g o n h e s ub je c d ea l w i h e 3 - n c e m en t s w n g w e w i o cu s o n h a h e e . T h b as i o f G an n u s o f h e w in g c ha r um ma ze h is " R u o f T h e e w h ic h h e e xp la in s II

as follows: " Th i o n o f m y d is co ve r e s o f m e th o o r m a k n g b i p ro f s ho r m e a d n g ac ve as m o v n g s to ck s h av e m a d o t o f m o ne y w i it, a n s om e a de r h av e p a m e a s m uc h a s $ 1 ,0 0 fo

h i m e th o . .. .

T h u l s t h s : s to c w h c h s ho w s t o n u p t re n w i n ev e c lo s c on se cu t v e d ay s w i o ss es . W h e n d oe s c lo s c on se cu t v e d ay s w i t o ss es . t he n n d c a e s t ha t t h t re n h a r ev er se d a t e as t t em p or ar i y , a n h e o ng e s to c r un s b ef or e

m a k n g d ay s r ea c o ns , o r c lo s n g d ay s a t o w e p r c e t ha n h e p re v o u d ay s h e s ur e n d c at io n wi be ha he mov o ve r. T h e s am e u l a pp l e s whe s to c d ec l n in g I t w i l n ev e c lo s m o r ha d ay s w i g a n s o r a t h ig he r p r c es . W h e it d oe s c lo s o r c on se cu t v e d ay s w i ga n, or b a a nc e o n h e c re d s id e h e n d c at e h a t h e r en d h a r ev er se d , a t e as t t em p or ar i y , a n m a y m ea n b i m ov e u p m a e s n o d i e re n ho h ig h o r o w s to c g oe s d u n g h e m ar ke t h ou rs ; he prce at wh ch c lo se s s ho w w he th e ha m ad e g a o r o s o ve r h e p re v o u d a a n w he th e s ho u b e p la ce d o n h e c re d o r d eb i s id e o f y ou r e dg e T h o n o f h e m os t v a u ab l r u le s f o t ra d in g i n h ig h -p ri ce d a c t v e s to c ks . I t w il l he yo g e h e b en e o f h e a s a dv an ce s o r d ec l n e a n e na b y o k no w w he n h e m in o e n s c h an g n g A pp l h i s am e u l h e w ee k a n m o n h l h ig h a n o w c ha r s ."9 A n e xa m p o f G an n s w n g c ha r p ro v d e F ig ur e 5 - o n h e n ex t p ag e N o t c ar ef u c on s tr uc t o n G a nr r r u f o d et er m in in g h e t re n

No ce ho

h e r en d l in e

c ha ng e f ro m s ol i

(u

to d ot te d ( do w n

trend)

trend) at points A, B , a n d C. I t i s at t h e s p o i n t

ha

h e r en d i n h a

penetrated peak

previous

or valley (circle

areas) o rm e

b y h e p ri c

SWing,

G A N N S IM P LI FI E

57

D O W J ON E

D A IL Y B A RS -C O M BI NI N

W E EK L Y

T h e f or m u f o c on st ru c n g s w n g c ha rt s p ro v d e t h p ar ag ra ph s o n h e p re v o u p ag es , a pp l o r d a il y w e e kl y a n d m o n th l c h ar t a li ke .

DAlLYSWJNGS

.~1IIIet!~Iy'(ja.n.

~vvil1~s..

ecocc

T h b i w id e s wi ng s labeled C. ar he We kl Ga Swings.

····N

T hi s d ai l c ha r d ea rl y s ho w t ha t b ot h the-Dail an ·Weekl ·Gann· Swings·are in·. d ow n r en d a n i nd i a ti o s el l h e a ll ie s u n i l h e w ee kl y t re n t u n s u p ~;;;o ;-"~ ..... ,,,;:-.

~03:0.'"

..

F I BO N A C C I T R A DE R

F IG UR E S -2 :

Do Jone daily bar combining Daily an Weekly Gann Swings

58

Robert Krausz

b as e o n h e s w n g c ha r w a h a prce ex eme ( pe a o r v a e y) , w h e p en et ra te d m e an s h e r en d h as t u rn e d ow n o r u p d ep en d n g o n w he th e h e p r c e e x r em e w a s m a d t h a sc en d n g p h as e o r d es ce nd in g p ha se . G a n a ls o o un d h a p r c e o b e c t iv e s c o u l b e f or ec a s b y m e a su r in g t h a m p li tu d e o f h e p re ce d n g s w n g w he th e u p o r d ow n a n a dd in g h i m e as ur em e n ( i e rm s o f p o n ts ) on h e b eg in n n g o f h e n ex t s w n g O f e n h e p re v o u s w n g w i f or ec as t h e a m p u d e o f h e o r h co m in g s w n g bo prce an me

G A N N S IM P LI FI E

Gann's "Rule of Five A no th e m p o a n r u h a G an n d e e rm in e o r u dg in g w h et he r a cc um u la t o n o r d is tr ib ut io n w a s a k n g p la c w a b as e o n h e n um b e 5 , w h c h G an n a ug h w a h e " nu mb e o f a sc en da nc y H e o bs e v e h a h e d ay , w ee k m o n o r y ea r o f ma et h c u m in at in g m o v b ef or e r ev er sa l s e t n , a n d ha e nd e b e h e m o d yn am ic . H e a l a pp l e d h i r u o f v e u dg in g w he th e a cc u m u la ti o ( bu y in g ) o r d is tr ib u ti o ( se l i ng ) w a s t ak in g p la c g iv e s to c o r c om m o d y . F o r e x am p le , h e a ug h h a h e s u s ig n o f a cc um u la t o n o r d is b u o n s a o c m o n g u p o r d ow n m an y m e o ve r h e s am e a ng e e sp ec ia l m ak in g m ov e o f p o n t o r m or e w i h ou t g e n g a bo v h ig h p o n t a n a t h e s am e m e n o b re ak in g u nd e essa nc e e ve l o n h e d ow n s id e G an n a dv is e h a w h e n p ri ce s b e ga n f lu c tu a ti n f ev e ri sh l a n d r ap id l a s t ra d n g v o u m e e xp an ds , h e g e o u w a c h a n wa h a s , s e l o u t y ou r o n p os i o n a n w a o r h e o pp or tu n selsho N ev e b e ou wi p ro f t , h e w a rn e d

Another important

rule

t ha t G an n determined

fo

judging whethe accumulation or distribution

wa

t ak in g p la c w a b as e

on th

numberS. He observed that th

f if t

d ay ,

w ee k m on t y ea r o f

or

ma ke

move -whether upor down-

f te n w a

he

culminating move before reversal se in, a n t ha t i t e nd -

mos dynamic

G an n n o e d h a w id e u c u a o n o cc u m u c m o r r eq ue n a t h ig h e ve ls t ha n a t o w e ve ls , m a in l b e ca u s d is tr ib u ti o i s t a ki n p la c e " W h e s to c k r ea c v er y o w e ve l a ft e f in a l d r v e t he y s lo w

G A N N S IM P LI FI E

59

Gan

taught

t ha t w he n stocks establish certai levels of accumu latio

or distribu

t io n o v

l on g

number of

month an

or year

t he n c ro s

t he m

i t i s a l mo s

s ur e s ig n t ha t t he y a r g oi n lo levels before t he y m ee t w it h resistance again.

d ow n n d o f wo or om me na ow r an g e w h il e a c cu m u la ti o i s t ak in g p la c e A c cu m u a ti o a n d d is tr ib u t o n a r e x ac tl y o p po s it e W h e n h e n s d er s w a n t s e l s t oc ks , t he y m a k a l h e n o s e p os s b l a n d o e ve ry th in g a t r ac t h e a tt en t o n o f h e p ub l a n c re at e a rg e p ub l b uy in g p ow er . W he n s to ck s d e d n e o w e ve l a n h e w an t a cc um u a t a rg e n e h e w o u s t a s q u ie t a s p o ss ib le . T h e u s e e v e r m e a n t o d is gu is e t h a c h a t he y a r b uy in g s to ck s a n d o e v er yt hi n t o d is c ou ra g e t h o u ts id e r f ro m b u y n g them."la G a n a ug h h a w h e s to ck s e s a b s h c er ta i e v e l o f a cc um u la t o n o r d is tr ib u o n o ve r o n n um b e o f m o h s o r y ea r n d h e c r h em , a lm o ur gn ha he ar go n e h ig h o r o w e ve l b ef or e t he y m e e w i r es is ta nc e a g a in . As u le , h e w ro te , a lw ay s s a bu or se s to c a ro un d o l b o o m o r o p w i s to p o s o rd e h re e p o n t a bo v o r b e o w p re v o u h ig h o r o w p r c es . H e a dd e h a w he n s to ck s a dv an c n ea r o l h ig h e ve ls a n d e ma i on me an ai g o h ro ug h d is t b u o n s t ak in g p la ce , a n a s s oo n a s t he y b re a o u o f h e d is t b u n g z on e h e s ho u b e s o s ho rt . Whe m a k e s ta r a dv an ce , w ro t G an n " i c on t n ue s u pw ar d u nt i r ea ch e e ve l w h e r s up p a n d em an d a r a bo u e qu a a n p r c e c om e t o s ta nd s T he n s up p n cr ea se s u n t e x ce e d d e m an d , a n d p ri ce s s ta r t o d e cl in e . "I o n d ec l n e o r o n a dv an ce , e ve l i s r ea ch e w h er e t h s up p a bs or be d a n p r c e g o

on h e n ex t e ve l w he r h e m ee t a no th e a rg e s up p a n a bs o an na e ve l w h e he s up p s o m uc h g re a e r h a h e d em an d h a d is tr ib u o n a ke s p la c a n p r c e s ta r o n on en o wn . T h s w h m an y w ee k a n me m e s ev e a l m on th s a r e qu i e d a t b o o m o r o p t o c om p le t a cc um u la t o n o r d is tr ib u o n b ef or e b i m o v e s ta rt s P eo p w h b u o r s e l t h s t o r s ec on d m e h a h e m a rk e h a a f e r h e r en d u rn s n va r a b o s m o ne y b ec au s s s i mp l h a n g p er io d a bs or b o f e r n g o r t o s up p d em a n a t h a e ve l a f e r wh ch he ma e n m ov e o n h e n ex t e ve l F or t h e as on , d oe s n o p a b uc k h e e nd a lw ay s g o w i y o a d a ga in s h e e n o r q u c k u r a n g e s ma l p ro f a cc ep t do no e xp ec t o o m uc h A t h e s am e m e p ro te c y ou r ad wi s to p o s o rd e a n d o n o e t un a ga in s y o w h e y o a r b uc k n g h e t re nd .

G a nn ' v ie w s o n a cc um u la t o n a n d is tr ib u o n a r d ea r e xp la in e hi man wr ng asare hi t ra d n g r u e s A pp ly in g h i m e th od s a n u t z in g h i s w n g c ha rt s o ve r t h o n r u c a S ig n f ic an t m p ro v o ne ' p er ce nt ag e o f w in n n g t ra de s ou n ex t c ha pt e w e w i d is cu ss h i s L a o f V ib ra t o n w h c h m a n m a rk e h is to r a n f e w a e f p ur po se f u v ag u a n r em a in s o p o f d is cu ss io n e ve n h i d ay .

CH

an wa asmuc d e o te d u de n o f n a tu ra l p h o so ph y a s h e w a s o f t h f in a nc ia l m a rk e s . H e s pe n y ea r s tu dy in g h e a w s o f p hy s c s a n d a pp l e d h a e ar n n g h i m a rk e f o re c a s ti n g m e t h o ds . NOTES G an n W .D . Truth of t h S to c T ap e L am be r G an n P u b li sh in g , P o m e ro y , W a s hi n gt o n 1923, pg 103. I bi d. , p g . 103 I b id . , p g . 104 I b id . , p g . 74 I b id . , p g . 73 I bi d. , p g . 165

lbid., pg 109

Vibration.

w a s r ef er ri n t o

Gann, WD., T ru t o f t h S to c T ap e L a mb e r G a n P u b li sh in g , P o m e ro y , W a s hi n gt o n 1923, pg 49

GANN SIMPLIFIED

wa an essential feat re

al

tha it governe the movement

of all physica bodies including planetary bodies Humans, animals, insects and planet

aUshare

this common

11 lbid ., pg 62

F t . L a u de r d al e , F l a. , 1998), R o be r K r au s u n ve il s l on g -l os t a d n g c ou r w r e n b y G an n h im se l o n o f h i s tu de n w h c h h e a l e re d h i r u o f h re e s w n g r ad in g p r n c p le , a d vi si n i ns te a d t wo -d a y (or two-week, -rnonth-, etc., d ep en d n g o n c ha r m e a me ) w in g u le .

62

O n o f h e m p o a n o bs e v a o n h e m ad e hi s tu d o f s c e nc e h e c a e d t he " L a o f V ib ra t o n G an n c la im e h a h i s c e n a w w a a n e ss en a l e a u r o f a l v in g h in g a n h a g ov er ne d t h m o ve m en t o f a l p hy s c a b od ie s n c u d n g p la n e ta r y b o di es . H u m a n s a n im a ls , i ns e ct s a n d p la n e t a l s ha re d h i o mm o e a u r o f h e L a o f

10 I b id . , p g . 61

W D . G an n T re as ur e D i sc ov er ed : S im p T ra d n g P l an s f o S t oc k s Commodities ( G e om e t ri c T r ad e r I n st it u te ,

scientifi law

livingthings an

W h a e xa c h i L a o f V ib ra t o n w as , G an n n e ve r m a d e c le a r. H i s w r i ti ng s m a k e f re q ue n t r ef er e nc e t o a n h e a lw ay s c la im e d h a h e c ou l m a k h ug e p ro f h e s to c a n c om m od i m a rk e b y a p p y in g t o h i c ha rt -r ea d n g e ch n q ue , b u h e n e v e r g a v e s p e c if i g u id e li n e f o r i t a p p li ca t io n . A f te r c a re fu ll y r ea d in g t hr o ug h G a n n w o rk s , h o w e ve r, o n e c a g a a i c om pr eh en s o n o f w ha t h e

I n h i b oo k

Gann claime that this

featur La

th

of Vibration.

GANN SIMPLIFIED

63

It ismyvie th

th la

Vibratio is metho

fo

isolatin char congestion zones and measuring th

psid

downside objective of the pricelin once it has broken ou tha zone

s m y e w h a h e L a o f V ib ra t o n s a m e h o f o i so la ti n c h ar t c o ng e st io n z o ne s a n d m e a su ri n h e u ps id e o r d ow n s d e o b e c v e o f h e p r c e n e o nc e h a b ro ke n o u o f h a z on e A pp a e n y , G a n n s a w i n t he s e c o ns o li da ti on s , o r c o ng e st io n z o ne s ( i. e. , l at er a t ra d in g c h an n el s) , n o t m e re l z ig za g o n c ha r b u s om e h in g a r d ee pe r m e an in g W h e p r c e b eh av e t h m a nn er , G a n s a h e a s r es t n g f ro m t he i p re v o u m o ve m en t a n b u d in g u p e ne rg y o r h e n ex t b i m ov e G an n e ve n h a w a o f m ea su r n g h e of he a n c ip a te d m o ve . B y s u bt ra ct in g t h e x r em e o w o f h e t ra d n g r an g w h ic h t h c on so l d at io n o cc u e d o m h e e x e m e h ig h e n o f h e a ng e h e m u p l n g h a n um be r b y a n 3 00 % 5 00 % ) G a n w a s a b t o f or ec as t a pp ro x m a te l h o h ig h o r h o o w p r e s w ou l m o o n h e b ro k o u o f h e z on e o f c on so l d a o n H e o bs e v e h a w a c om m o o r p r c e h av e r ap i m o ve s o f 3 00 % 5 00 % a f e r p ro lo ng e s id e ways consolidation. W h e n h e p r c e n e o n h e c ha r " co i s " o r f lu ct ua te s r ap id l n ar ro w , a te ra l r an g a ct ua l b u d n g u p e ne rg y o r n ex t b i m o ve . T h G an n d is c ov er e f ro m h i o bs er va t o n o f t h a w s o f n at ur e a n s c e nc e t o da y w o u c la ss i y t h i u nd e t h e x pl an a ti on s p ro v id e d b y v ib ra to r p h ys ic s . T h i r ul e w o rk s e x r em e l w e l a n m a rk e a n a cr os s m a n y d if fe re n t t im e f ra m e s w h e th e r y e ar ly , m o n th ly , w e e k y , d a il y o r i nt ra d ay . N o ti c t h c h ar t e x am p l p ro v d e o n h e n ex t p ag e

Figure6-1

Bo in (BA)

I n F ig ur e 6 - 1 B oe in g d a

FIGURE 6-1:

c ha r s ho w s

t ra d n g

z on e b e w ee n o ug h h e $ 3 a n h e $ 4 e ve l d is ta nc e o f $ 5 o m o p b o o m . M u p ly in g $~ b y ( t y ie l h e 3 00 % b re ak ou t o b e ct iv e y ie ld s $ 15 . A dd in g $ 1 h e o p o f h e a d n g a ng e a t a pp ro x m a te l $ 4 y ie ld s $ 56 , a n o b e c v e h a w a s q u c k r ea ch e o nc e p r c e b ro k o u o f h e r an ge . M u p ly in g $ 5 b y g e h e 5 00 % b re a o u o b e c v e y ie ld s $ 25 . B y a dd in g $ 2 he op of h e a d n g a ng e o f $ 41 , h e 5 00 % b re a o u o b je c v e o f $ 6 w a s r ea ch e t hr e m o nt h a te r A s t hi s c h ar t i ll us tr at es , t h a p p li ca ti o o f G a n n L a o f V ib ra t o n h ou g n o u se d p re d c t h e direction o f p r c e m ov em e n s , c a b e u se d a s a n a cc ur at e t oo l t o o re ca s h e amplitude o f h e m o o nc e g et s u nd er wa y T h e p r c e a rg e h a r es u

'JWo-year daily

chart (BA)

Boein

f ro m t h a na ly s c a m a k o ne ' r ad in g p la n m o r ef ec ve Le no ak o o a t h o G an n c ha r r ea d in g m e th o do lo g y a p pl ie s i n t od a y m a rk e ts .

Gan

Ana ys

Today

M a rk e

n o w e h av e e s a b s he d G an n m os t m p o rt an t r ul e f o f or ec a st in g p ri c m o v e m e n a n t ra d n g w it h s a e t a n a cc ur ac y m a b e w on de r n g h e m e h od s G a u se d 8 0 y ea r a g a r s t v a o da y S in c p ic tu r w or t t ho us an d w o rd s e t a pp l G a nn ' c ha r r ea d in g t ec h n q u e t o s ev e ra l o f t od a y a c t v e l a de d s to ck s a n c om m od i e s o rd e p ro v h e m e r o f t he s r u e s Figure 7-1.

Inte Corp (lNTC)

clear-cut buy

C ro s an o p w a v ie we d b y G an n a s a o f s tr en g a n t he re fo r b u s ig na l H er e n te l

signal is generat-

ed at the point when th

price-

line crosses

above the previ-

ou top.

sell

si!1nal is generated at the point when the price f al l

b el o

base

th

support

or previous

bottom.

66

GAN

S IM P LI FI E

GAN

S IM P LI FI E

67

FIGUR

7·1:

lWo-year «:hart of Intel Corp (INTQ

C o rp ' ( lN T C ) c h a r f la s he s c le a r- cu t b u y s ig n a i n J an ua r 2 0 0 w h e t s p r c e n e c ro ss es a b ov e h e p re v o u s t o p s e S ep te m be r t h p re v o u y ea r N T C c o n t n ue d h e m p re ss iv e r un -u p n t A ug us t 2 00 0 b ef or e r ev er s n g s ha rp l t o t h d ow n s d e T h e o la t o n o f u pp o a t $ 6 w a e a o n t o g o s ho r a s I NT C e ve nt ua l

d ro pp e d w e l b e lo w t h

$2

t ra de r s ho u l w a i o r t h p r c e n e t se l t o d e c a r n te n h e o l o w p r m e e xa mp l o f h i a vo re d G an n e ch n q u o un d h e c ha r o f Johnson J o hn s o ( JN J ). N o t t h p ro tr ac te d s id e w a y t ra d n g r an g e t ha t d ev e o p e b e w e e A p r 1 99 9 a n J an ua r 2 00 0 E a y i n 2 00 0 h e p r c e n e d ro p pe d b en e a t h o o o f t h r an ge , n d c a n g h a d is t b u o n h a b ee n u nd er wa y a n h a d ow n e n w a b eg in n n g T h r ad e s ho u h av e s o s ho r a t h i p o n t T h e d ec l n in g t re n c on t n u e d u n ti l A p ri l b e fo r r e ve r si ng . A f te r s p ik e b o tt om , o r V - e ve rs a Ap h e r ad e s ho u h av e c ov e e d h i s ho r p os i o n a n g on e o ng . A t h e o rm e a d n g a ng e o f $ 89 -$ 10 6 J oh ns o J oh ns o m e t w it h r es is ta nc e o n c a ga in . T h r ad e s ho u a w a r m s ig na l b ef or e n it ia t n g r ad in g p os it io n JNJ

FIGURE 7-2:

lWo-yea

«:hart

of Johnso

Johnso

UNJ)

110

---io-....... ...._ ...... -...;....! 105

level. F ig u

2.

o hn so n

J o n so n J NJ )

T o G a n n , s p ec ia l c o ns id e ra ti o

w a s a lw a y s g iv e n

p ro lo ng e s id ew ay s m ov em en t o n h e c ha r k no w n a s " co n so l d at io n " m o ve s D u r n g t he s p ha se s o f o w v o a t an a c o f d ea r d e n e t re nd , e it he r a cc um u la t o n ( bu y n g o r d is tr ib u ti o ( se ll in g ) i s t a k in g p la c e R a th e r t ha n t r p re d c t w h c h w a p r c e w ou l m ov e a f e r h e

70

30 20

An upward path of the price afte

breaking

lateral

or sideways consolidation, represents

ig

FIGURE 7-3:

One-year daily chart

Boeing

(BA)

ig

-3

oein

(B

B oe in g g oo d e xa m p o f s ho rt -s a c an d d at e b as e o n G an n p r n c p l o f w a n g o r h e m a rk e t o s ig na l t s i n te nt , t he n o l o w in g t ha t s ig n a B o ei n e n te re d s id e w ay s c o ns o li da ti o b e tw e e n N ov em b e 2 00 0 a n D ec em b e 2 00 0 b e o r b re ak ng beow he oo of a d n g a ng e a t $ 62 . T h a s u t a de r w ou l h av e s o s ho r o m h e a w a n g t h d e c n e h a w a s s ur e t o o l o w . A f e r a n ot he r b ri e c o ns o l d a ti o i n F e b ru a ry , B o e in g d i e v en tu a ll y d e cl in e t o e v e l ow e r l ev e ls .

d ow n a r

-4

vialinc.

accumulation or buying.

(A

T h c ha r o r A V s ho w d e n e r ad in g a ng e b e w ee n $ 7- $9 .7 5 b e w ee n N ov em be r 1 99 9 a n A p 2 00 0 W h e h e o o o f h i a ng e w a b ro ke n h e a de r s ho u h av e o l o we d h e e a a n s o s ho rt . A ft e y e a no th e e n g h y p er io d o f c on so l d a o n A V b ro ke n o u a ga i o f a d n g a ng e ( be tw e e $ 4. 50 -$ 7 J an u ar y, t h i m e th u ps id e N o h e a rg e n c e as e v o u m o n h e b re ak ou t T h r ad e w ou l h av e b ee n s a a ss um in g a n u pw a r t re n w o u olow.

FIGURE 7-4.

One-year daily chart of Aviall Inc (AVL)

20 18 16

10

p at h of the price

after breaking ou of

lateral

or sidftways consolidation, represents distribution

70

GAN

S IM P LI FI E

or selling.

GAN

S IM P LI FI E

71

44G 420

400 380 UO

340 320 300

zec 260 10

SO

FIGURE 7-5:

One-year dail char of Bergen Brunswig Corp. (BBC)

Figure 7~5. Bergen Brunswig Corp (BBC

I n t h e c ha r o f B er ge n B ru ns w C o rp . ( SS C ) w e n d h re e e xa m p e s o f h o G a nn ' r ad in g r u e s c a b e app ie r ap i s u cc e ss io n . N o ti c t h t hr e l at er a r an ge s h a d ev e o pe d b e w e e h e $ 5- $6 .5 0 e ve l i n A p ri l a n d J u ly ; th e $ 8 -$ 1 2 l ev e l i J u l a n d N o ve m b er ; a n h e $ 14 - 1 8 e ve l i n D e ce m be r 2 00 0 J an ua r 2 00 1 W h e h e p r c e n e b ro k a bo v h es e r an ge s wa me g o o n w i S Be . S ho r a f e r h e t h r d r ap i s u cc e ss io n , B B C m e t w it h r es is ta n c ( i. e. , s e n g p re ss ur e) a t h e $ 2 e ve l G a n t au gh t h a t ra de r s ho u a lw a y w at c r ou nd , w h o n um b er s k e 2 0 s in c m a n r ad er s k e s e a ro un d t he s l ev e l f o r p s y ch o lo g ic a l r e a so n s . S u r e e n o u gh , w h e n t h $ 2 e ve l w a s a pp ro ac he d t ra d n g v o u m e n cr ea se d a n t h u pt re n s ta l e d o ut -a n n d c at io n t ha t B s w a s m e e n g w i h ea v s e n g T h r ad e s ho u h av e s o l o u h i n e o f B B a t t ha t m e a n a wa i e d o r h e m a k e s ig na l n ex t m ov e

FIGURE 7-6:

Averag

(DJUA)

G a nn ' c ha r r ea d n g e ch n q u w or k a s w e l w i m a jo r s to c m a rk e n de xe s a s d oe s w i n d v id ua l s to c ks . N o ti c t h t hr ee -m o n t l at er a t ra d in g r an g e t ha t d ev e o pe d h e D o w J on e U t t ie s A ve ra g b e w ee n h e a s w ee k Ap an nd of 2 00 0 W he n h e o p o f a ng e w a p en e a te d A ug us t h e r ad e g o h i s ig na l t o b u u t s to ck s ( o m u tu a u nd s n de xe d o f t h D o w J on e U t e s A v er ag e ) a rg e r is e o f t h p r c e li n f ol lo w ed .

Daily one-year b a c ha r o f D o Jones utilities Averag (DJUA)

112

-.;ii~~~",~~11I L : " " " h ~ " ; u ~ 1 i l l l . i I' ! " ' - "· ! ' i I ± " " · · · · · · · · · " " ! t L 1 . k . . l . a 1 l 1 . . ; "

FIGURE 7·7: Weekly threeea char

Cisco Systems (CSCO)

U

"t~l

. . . .! 1 ~ l l l l * !I I a I L o !o ! l ! 1 ~ : I~ d . . . ud... .. T

F

T

.. · ! I o 6 [ , l ~ " ! _ · oIJj,t.~1LII!I··IIiI.!,...l#~ioiool[H U

T

Figure 7-7. Cisc System (CSCO)

Figure 7-8. IB

C is c o S y st em s ( C Se O ) w e e kl y c h ar t c o ve r s a lm o s t h re e y ea r o f a d n g a n g iv e y o d i e re n p e s pe ct iv e a ls o g oo d e xa m p o f a cc um u la t o n we 50 Ma b re ak ou t N ov em b e o f 1 99 9 T he n C is c o rm e d a no th e a d n g a ng e b e w ee n $ 22 ,5 0 a n $ 30 5 r o J an ua r J un e o f 1 99 9 b e o r s ta r n g su ge h e e ve n u a h ig h a bo v $ 80 .

G a nn ' m e th o o f a na ly z n g c ha rt s w o rk s e qu a we wi n t a -d a c ha r a s d oe s w i o th e m e f ra m es . I n t h e 1 -m in ut e n tr a- da y c ha r o r B M ( sp an n n g p e r o d o f 1 0 d a ys ) n ot ic e h e t ra d n g a ng e h a d ev e o pe d b e w ee n $ 11 7 an $ 11 9 7 5 W h e p r c e b ro k b e o w h e b o o m o f h i a ng e wa s ig na l f o r d a a de r se s ho r B M a n c ip a o n o f d ec l n e $ 11 2 b as e on he prce ob ec ve rue, BM di ac al hi e ve l o v e t wo -d a p e r o d

B et we e F e br ua r a n O c to be r 2 00 0 C is c S ys te m s s ho we d a d n g a ng e b e w ee n h e $ 5 a n $ 8 e ve ls , T h o o o f h i a ng e w a d ec is iv e b ro ke n e a O c o be r a t w h c h m e h e a de r s ho u l h av e s o s ho r e se o e ve n u a l d ro p pe d b e o w h e $ 1 e ve l

74

T

~.~,:',!I·•••

G A N N S IM P LI FI E

· - -. J I ; :

F

FIGURE7-8: Intra-day chart of IB

T h i s er ie s o f c ha rt s u st ra te s t ha t n o o n d o G a nn ' m e th od s w o r t od ay ' m a rk e s , u s k e h e d i 8 0 y ea r a go , b u h op e u l e nc ou ra g y o oo at ha d i e re n w ay . T h ou g G an n v er y w e k no w o r u nc an n p re d c t o n o r h e s to c m a rk e h e e qu a e ge nd ar y f o h i r ad in g a n a na ly s o f h e c om m od i m a rk e s , H e p ub -

G A N N S IM P LI FI E

75

l is h e n d iv id u a a n n ua l f or ec a st s f o t h g ra in s , c o t o n c o e e a n s ug a m a rk e o r w h c h h e c ha rg e h e h e e xo rb i a n p r c e o f $ 10 0 a nn ua l y , p e m ar ke he ne h ap te r w e w i e v e w o m o f h e m e th od s h a G an n u se d h e c om m od i m a rk e s .

C H AP TE R

The w . o . Commodit

mm his book, H o

ma

Tradin

Ga

M ak e P ro f

C o m m o d i t i e s , " o ff e r

g o o d o p p o rt u ni ti e s e ve r y ea r f o m a k n g p ro f b ot h a s a n n ve st me n a n d a s s p ec u la ti v p r op o si t o n . T r ad in g i n f ut ur e o p o n s j us t a s l e g t im a t a s b u y in g a n s e n g s to ck s n o n ec es sa ry t o b u t h s po t c ot to n o ut r g ht , c ar r n t t h w a re ho u se s p a n su ra n c a n s to ra ge , o r o r e xa m p e ] s po t c o o n go ng u p o r d ow n u tu r o p o n will u c u at e m o r h a n h e c as h a rt ic le , a n d t he r n o e xp en s c ar ry in g f ut ur e o u ts id e o f t h m a r gi n r eq u ir em e n ts . H e c on t n ue s " Th e c ou rs e o f [ co m m od i y ] p r c e b as e o n s up p a n d em a nd , a n m u c e as ie r or c o e c u dg m en t o n h e c om m od i e s ma et ha o n h e o c m a k e o n a c o un t o f h e b e n g s o m a n s to ck s a n d i e re n g ro up s o f s to ck s w h ic h c au s m ix e t re nd , s om e s to ck s d ec l n in g w h i o th e r a dv an ce . W i c om m o d e s d if fe re n t o n o pt io n [ i g iv e c om m o d y ) es mi

"The course of [commodity)

price is based on supply and demand

an

it

Is much easier to form ju

correc

m en t

on th

commodities m ar k

t ha n i t

Is on the stock marke .....

c e a i g ro u

Amanwho trades in commodities with the proper capital an uses stop-loss orders to pr tect hi capital an als to pr tect hi profits wil be able to make more money than he tradin whe

G a nn ' r u e s f o t ra d n g h e c om m o d e s m a rk et s w e s im p l a n c a b e a pp l e d a n a da b commodity: 1 . W he n o u h a n o h in g e ls e t b u h op e g e o u q u c k 2 . N ev e r ad e w i h ou t

il

Th

in

stocks, especially [certain

commodities]

o f s to ck s a n y e p ic k h e a gg a

b u a n n o m ak e a n m on e b u w i o mm od i esyou ou no mi ou we gh on he e n o u w ou l m ak e m on e ma wh a de s c om m o d e s w i t h p ro pe r c ap it a a n u se s s to p o s o rd e r t o p ro te c h i c ap it a a n a ls o t o p ra te d h i p ro f w i b e a b m ak e m o m on e h a h e w il l t ra d in g i n s to c ks , e s pe c ia ll y w h e n [ ce rt ai n c o m m o d i ti e s a r e a c ti ve . "2

go ng

me

5 . P ro f

swh

ma

y ou r a vo r a n n o a ga in s y ou . e t y ou r p ro f

m u s b e o l o we d u p w i

o rd e r a n y ou r c ap it a s ho u p ro te c e d b y o ne . G an n u rg e

on or

e as on .

4 . C u s ho r y ou r o ss es a n

ar active

ho

h e c om m od i

a de r

un

s to p- lo s a lw a y b e

ea

d is -

c ou n r ep or t w h ic h c om e r o a na ly s a n d b ro ke r a g o f c es . T he y a r h on es t h e w ro te , " bu t h e h av e c om m o d t ie s s e a n a r a lw a y h op in g f o h ig he r p r c es . T he y g o h e e x e m e i h e w ay . c ro p a r b ad , h e e xa gg e ra t h e d am a ge . I f c r op s a r g oo d h e a r k e b ec om e o o h op e u l a n e xa gg er a h e g oo d c on d it io n . .. y o u m u s d is co un t t he i r ep o rt s a n d o p in io n s

78

G A N N S IM P L IF IE D

T h m p o a nc e o f h e a pe , e . h e e ad in g o f p r c e a n v o u m e f lu ct ua t o n t h m a rk et , c an no t b e o ve r o ok ed , a cc or d n g G a nn . " Th e a p e l y o h e c on se ns u o f o p n io n a n r ev ea ls t h p re d om in an c o f h e o pp os in g o rc e a n s ho w h e t re n a cc or d n g s up p a n d e ma nd . I gn or e h e n ew s , r ep o r s , o p n io n a n v ie w s o f e ve ry on e d is ag re es w i t w ha t h e c ha r a n a p s ho ws , o r s up p a n d em an d m u g ov e h e e nd , a n t h s e n g p o we r g re at e h a h e b uy in g p r c e w i d ec l n e r eg ar d e ss o f b a n ew s o r a ny th in g e ls e O n h e o th e h an d h e d em an d o r b u n g p ow e e x ce e d t h s e ll in g , p ri ce s w il l a d va n c r eg a rd le s s o f g oo d n ew s O f c ou rs e h e g en e a l e n o f h e m a rk e d oe s n o c on t n u o r o n c on tr a na u ra l c on d t io n s b u t s up p a n d d em a n g ov er n t h p r c e a n t h m a rk e d is co un t u tu r e ve n s . T he re fo re , b e o r y o a c o o s tr on g o n a n g oo d o r b a n ew s b e u r h a o u h a w h c h bu h e r ea d n g o f h e t ap e a n t h c or re c n te rp re ta on of c on f m s h e n ew s a n h ow s h a sye t o b e d is c ou n te d . "4

Gann warned vigorously agains th dangers of overtrading. Heoften claimed that overtrading as th

ca se

of more profit losse on laSall Stree (o Wall Street fo that matter) tha an

the single

factor.

G a n w a rn e v ig or ou s a ga in s t h d an ge r o f o ve r r ad in g . H e o ft e c la im e d t ha t o ve r r ad in g w a s h e c au s o f m o r p ro f o ss es o n L a Sa l e S tr ee t ( o W a l S t e e o r h a m a t e r h a a n o th e s in g Ga factor, D o w a n ed . J um p n g an ou of he ma et on us e s y ou ; h e m o r a de s y o m a k h e m o r c ha nc e y o h av e o r g e n g w ro ng , a n n c e as in g h e p e rc en ta g a ga in s y ou . Y o c a a lw a y m a k p ro f y o w a o r h e o pp o u n e s yo mak wo o r t hr e c on se cu t v e t ra de s a n t he y g o a ga in s y ou ,

GAN

S IM P L IF IE D

79

a n y o h av e a k o ss es , be t e r q u o r w h a n o o o n W a i u n y ou r u dg m en t g e c le a a n h e m a k e s ho w de ni r en d Y o c a a lw a or b e e r u dg me n w he n o u a r o u o f h e m a e t h a w he n o u a r be au ou ar n o n f u en ce d b y y ou r h op e a n e ar s As always,

Gan

advi$e

commodity traders

to

use

stop-loss order whe

exearting

r ad e a n

to

f ol lo w u p p ro fi t b y r ai si n

or

lower stop

(accordin whethe

to th

t ra de r i s l on g o r s ho r contract).

gi en

A cc o d in g G an n o n o f h e m o s m p o a n h in g t ha t t ra de r o ve r o o t h a m ou n o f c ap i a l r eq u r e mak s uc ce ss t ra d n g c om m o d e s m a s ho u g o n t h e c om m od i e s m a e t h e a m a s h e g oe s n t a n o th e b u n es s ma s uc ce ss an d n o g am b n g p ro po s o n he w ro te . " I y o m a k s pe cu la t o n o r n ve s m e n b us in es s, y o u p ro b ab l w i b e a b a cc um u la t o r u n o ve r a n um be r o f y ea rs , b u yo go nt g am b a n e xp e m ak e a l o n o n d ea l y o w i o s a l y ou r m on e a n h av e n o h in g e f b u h op e G an n a dv oc a e d a d n g w i n o m o r t ha n 1 0 % o f o n e' s d is c re t o n a ry , o r s u rp lu s , c a pi ta l T h m on e hewro e, no b e u se d t o p u u p o n h e c on t a c a n h o s ta r g o n g a ga in s y ou . s f o h e p ur po s o f p ay in g s ev e a l s m a o ss es a n d s t h av e c ap it a e no ug h e f c on nu ad un ou hi g h a n b eg i m a k e b i p ro fi ts ." > a lw a ys , G a n a dv is e c om m o d t ra de r t o u s s to p- lo s o rd er s w h e e xe cu t n g t ra de , a n ol o w u p p ro f t s b y r a s in g o r o w e s to p ( ac co rd in g w he th e h e a de r o n o r s ho r gi en on a c G an n u r h e a dv is e h a o nc e y ou r m in d m a d u p a n y o h av e p la ce d y ou r s to p- lo s o rd er , d o n o a n e l i t o r h an g w he r o u h av e a g re a te r l os s i f it s c a ug h 9 9 c a e s ou t o f 1 00 ,

o u w i b e w r on g w he n y o p la c o u s e p os i o n t o t ak e g re at e o s h a y o f ir s d ec id e on m a b e w e l e no ug h s om e m e an el o rd e o r a k n g p ro f h e m ar ke t g o n g y ou r w ay , b u n ev e c an ce l a n o rd e s to p o ss . Th e s oo ne r o s s s to pp e h e b e e r b o o r y ou r c ap it a a n f o y ou r u dg m en t o n a s y o s ta y h e m a rk e a n a d g oe s a ga in s y ou , y ou r u dg m en t g e w o s e a l h e m e a c y o h av e n o u dg me n s im p b i h op e h a h e m ar ke t w i u r a n g o o u w a "6 A n ot he r e ch n q u G a nn us e r ap id l m u l p l c om m o d y - r ad in g p ro f t s w a s o n h e c a e d " py ra m id in g . T h i i s p e r fo rm e d m o s t s u cc e ss fu ll y s w i t -m o v n g m a rk et s A s r u e , G a n a dv is e a dd in g o ne ' a d n g p os i o n w he n h e m a rk e m o ve s y ou r a vo r b y 1 0 2 0 p e c en t E ac h n e w p os it io n s ho u b e f o o w e u p b y a d u s n g y ou r s to p - o s o rd e r s o t h a c on t n ua l r is es w i th , b u s ta y b en ea th , h e m a rk e T h a w a y s ho u t h m a rk e s ud de n r ev er se . a l o f y ou r p ro f w i n o b e w ip e o u

technique Go,"n u se d t o

rapidly multiply commoditytradin wa

profit

on

he called "pyramiding.

G a n w a rn e a ga in s h e o pt io n r ad in g s tr a e g k no w a s t h s t a dd le , o r " s a ng le " a de , w he r w o o p o ns -o n pu an on al ar h e o th e w i s ho w p ro f a n h a u r h e h e p ro f o m h e o n w i e xc ee d h e o ss f ro m h e o th e r T h i s tr at eg y . o f c o ur se , v io la te s G a n n ' f un d a m en ta l e ne t o f a d n g o n h op e a th e h a o n h e t ap e a n c ha r n d c at io ns . W r o G a nn , " M an y a de r g e h e d e h a h e c a s e o n o p o n

GAN

S IM P LI FI E

81

Gann wame agains the option trading strategy known as the "straddle," or "strangle trade wher tw ptionspu an

ne ne call

ar simultaneously pu~hased inthe hope that on or the other will

sho

profit,.and that further the profit from the ne will excee the loss fro

a n b u a no th e r t he re b m a k n g s tr ad d w h ic h w i w or k c lo se r t og e h e a n s ho w h e p ro f n in e c as es o u t o f t en , w o rk s e xa c o pp os it e a n n s e a o f p ro f h e e su l s a b i o ss . I y o c an no or u dg me n o f h e e n o f h e m a k e he do no p la y b o de atth am me S o m e th in g a lw a y s h a pp e n t o u p se t a l c a lc u la ti on s w he n a de r g u o u d ea d s u nc on s t a dd le . A s a de r o nc e s a m e , M y b ro ke r r ec om m en de d s om e th in g s a a n s u e g oo d ddeIgo an dl or bo my eg of Th sth wa mo s tr ad d le s w o r o u t

the other.

" An o th e g re a t m is ta k t ha t r ad er s m a k t ha t w he n h e b u o n o p o n a n s ta r go a ga in s h em , h e r e u s s e h a h e a r w ro n a n a cc ep t o ss , b u s e l a n o h e o p o n h ed ge . T he n h e a r b o on an ho of he ma ke an he ha ma w o g ue s e s as t o w he r he wi ge ou gh c an no t b e d on e T he y n va r a b c lo s h e t ra d t ha t s ho w s p ro f a n d h o h e o n h a s ho w o ss . I h i w ay , h e u nd o h e w ro n d e o f h e h ed ge . m a c an no t h av e a c le ar j ud gm e n y in g p la y w o s id e o f h e m a e t a t t h s am e m e b a e no ug h playn g o n s id e T he re fo re , k ee p o u o f h ed ge s a n "7 s t a dd le s d e e rm in e h e r en d a n o l o w T h e c om m o d e s m a rk e k e a n m a rk et , g ov e rn e b y h e o rc e o f s up p a n d em a nd , w h c h a r u dg e b y p r c e a n v o u m n d c a o n o n h e a pe . G a n o f e n s ta te d t ha t h e o n d i f er en c b e w ee n e ad in g h e a p o n g iv e c om m od i

82

GAN

S IM P LI FI E

a n e ad in g o n s to ck s s t ha t h e c om m od i ap d oe s n o s ho w h e n um b e o f c on t a c a de d o n e a c s a e . T h i m a ke s t t d if f c u a t t im e s d e e rm in e h e e nd , b u w h o n d oe s n o k no w h e a mo un t o f a d n g h a gong on he u ct ua t o n o n t h a p s ho w v er y p la in l w h e h e h e v o u m e h ea v o r g h a cc o d in g G an n " Th e m a rk e d oe s n o s ta n s t o n a rg e b uy in g o r s e n g h e w ro te . m o ve s o n w a o r h e o th e T h er e o r h e a c v it y e l u s w h e h e r o r n o t t he r b i b us in e s q o in q on . W h e f lu ct ua t o n a r v er y n ar ro w a n h e m a rk e d u a n n ac t v e s ho w h a h e b uy in g a n s e n g e du ce d s ma l s ca le , a n d n o b i m o v n d c at ed . T h er e o re , t h st wa wa ou a c ti v it y s t a rt, a n h e g o w i G a n a ls o p ro v d e s om e g oo d a dv ic e f o t ra d n g o p o n o n c om m od i u tu re s a lw ay s p ay s t ad h e a c v e o p o ns , a n n o a d w he n h e g e o o c lo s m a tu r y . T he r no us ak ng c ha nc e o n w i u c u at io n a n b a e xe cu t o n w he n y o g e n ea r d e v er y d a e s T ra d h e n ex t o p o n w he r y o c a g e g oo d e xe cu t o ns .

Inregard to th commodities tape Gann's advicewas the sa

as it

as

wit stocksdon'

atch It

to closely instead, he advise keeping char an reading the tap based on the high an

low

indic;atlonsof the char

al tim

fram

dail

weekly, monthly and yearly

I n r eg ar d h e c om m o d t ie s a pe , G a nn ' a dv ic e wa me wa wi swa o o c lo se ly ; n st ea d h e a dv is e k ee p in g u p c ha r a n e ad in g h e a p b as e o n h e h ig h a n o w n d ic at io n s o f h e c ha r o n a l t im e f ra m es -d a y , w e ek ly , m o n h l a n y ea r y . I n h i w a y r ad e c a b es t j ud g t h s ho rt - e rm , n te rm e d a te -t er m a n o ng -t er m t re nd s n f u en c n g p r c e m o ve m en t a n m a rk et . S p ot t n g h os e c ha ng e t re n he o p o f o u n ex t c ha p te r

GAN

S IM P LI FI E

83

C HA PT E

Ru

or De C ha ng e

mi Tr nd

D . G an n w a m a e r a t e ad in g h e c ha r a n h e a p a n w a a n e xp e s to c a n c om m o d e s t ra de r a s w e l H e s ha re d m uc h o f h i w is do m h ro ug h h i m an y w r n g o n t h s ub je c o f t ra d n g e ch n q ue , n c u d n g s om e o f h i r ad in g s ec re ts .

NOTES

G an n w.o., Ho to M a k P ro fi t i n C o mm o di ti es , Lambert G a n n P u b li s hi ng , P o m e ro y . W a s hi n gt on , 1951, pg 1. I bi d . p g . I bi d . p g . 15 I b id . p g . lbid., pg I b id . p g . 13 I b id . p g . 18 l bi d. , pg

23

O n o f h e m e th od s h e r e e d o n m o s s uc ce ss fu l f o f or e ca s ti n f ut ur e p r ic e m o v em e n t a n d p ro fi ti n ro he ma ke wa be ng ab u dg e a re a o f a cc um u la t o n a n d is tr ib ut io n o n t h c ha r s . T o h i m , h es e w e r v is ib l a re a s o f b uy in g a n s e n g a n d b y f o o w in g h e d ir ec t o n t h p r c e n e t oo k a f e r b re ak in g o u o f h es e a d n g r an ge s h e m ad e e no rm o u p ro f s . H e w ro t s ev er al r u le s f o d et er m in in g w he n e n b eg in s a n e nd s he co on m a rk e m a n o f w h c h w e w i s ha r h e e . G an n w ro t h a w he n h e m a e t s f lu c u a n g v er y n a rr o r an ge , t h c ot to n r ad e r s ho u l k ee p u p c ha r o f e ve r 1 O p o n t m o v m a d d u n g h e da hi wa h e w ro te , o u w i b e a b

On of the method

Gann

relied on most successfully for forecasting future

rice

movement

profiting

an

from

the market. wa bein

able to

judge a...as

of accumulation and distribution

the charts.

s e e w h e th e r a c cu m u la t o n o r d is tr ib u t o n i s t a k n g p la c e a n d d is ce r w h er e r es is ta n c l ev e l a r o rm ed . W he n b re ak s o u n t n e e rr i o r y o c a t he n o l o w h e t re nd . I n v e r a ct iv e m a rk e s , w h e p r c e a r h ig h a n r an g w id e u c u a o n o f 1 0 p o n t m ea n v e e , a n y o s ho u k ee p h a o f e ve r m o o f 3 0 40 po ma du he da hi wa wi be ab ca he r es is ta nc e e ve l a n e l w he n b re ak s o u o f h e z o n o f a c cu m u la ti o o r d is tr ib u ti on .

The value of chartsisto

c~;~,~~\:,r.D~l~~SG '40

F I G U R E 9-1:

IB

Daily

.0 40

.~~~~~~~~~

determin suppor an

wher is give

wher

it

is

withdrawn; also where resistance is me o n a n a dv an c it overcome

thus

e na bl in g y o bu an

to

F I G U R E 9-2:

IBM Weekly

s el l a n

o rd e a s c l os e a s possible fo your protection.

86

H e w ro t u rt he r " Yo u s ho u a lw ay s k ee p m o n h y , w ee k y , a n d a h ig h a n o w c ha r o n h e a c v e o p o n y o a r r ad in g n . w i o n r eq u r e f if te e w en t m in u e s e a d a do hi an yo wi b e w e r ep a f o y ou r r ou b e . T h v a u e o f c ha r d e e rm in e w he r s up po r s g iv e a n w he r w it hd ra w n a ls o w he r r es is ta nc e i s m e t o n a n a d v an c a n w he r s o v e rc om e , t hu s e na b n g y o b u a n s e a n p la c s to p- lo s o rd e a s c lo s a s p o s si b l f o r y o u r p r o te c ti o n "2

GAN

B M D a y , W ee k y , a n

Mon hl

B a C ha r

T h t hr e c ha r e xa m p e s- da i y , w ee k y , a n m on th ly - o r B M o n h e o pp os i p ag e s ho w d if fe re n ce s a c ro s s t h v ar io u s t im e f ra m e s N o ti c o n B M 's d a i c ha r F ig ur e 9 - 1 h e d ro p h e $ 8 e ve l r e fl ec t s t e c h ni ca l w e a k ne s s ; h o w e v er , I B M ' w e e k l c ha r F ig ur e 9 - 2 s ho w s s tr on g s up po r a t h i e ve l e ar l 1 99 9 O n h e m o n h l c ha rt , F ig ur e 9 - 3 h e d ro p $8 af ngfr 13 $1 oe no s e e t o s e ve re . L o n ge r- te r c ha rt s h e l t h t ra d e p u t t hi ng s p e rs pe c t v e w it h r es p ec t t o t h o v er a t ec h ni ca l p o si t o n o f s to c k o r c o m m od it y

S IM P LI FI E

~~~~~~

C:::::l : :: :: :: ;: = . .

F IG U R .....

9 -3 :

IB

Monthly

.....................

GAN

S IM P LI FI E

87

Gann advise no no tr to trade every day watch an wait for opportunities an

nc yo 5e

yo ar inrigh with th tren of the market. follo

it up

down until yo se

5igntha

the trend has reversed.

C o nt in u n g h e w r t es , " Af te r v io le n t f lu ct ua t o n u p o r d ow n h e m a k e n ea r a lw ay s o me s t o s ta nd st i b e o r t h n ex t m o v s ta r s . B u y n g a n s e n g b ec om e a bo u e qu a a n h e m a rk e n a o w d ow n h e a c v i s ta r o n w a o r h e o th e a n y o h ou l g o w i O f c ou r e . h e a r b ou n b e a ls e m o ve s a t m e s A f e r a cc um u a o n s ho w s om e n ew s m a y d ev e o p w h c h w i c au s s ha r d r v e d ow n o l o we d b y q u c k r eb ou n d T h e p r c e g o a bo v t h e ve l p re v o us e st ab l s he d y o c a c on s d e t ha t t h m o v h a r ev er se d a n d t ha t p r c e w i c on t n u u p wa rd . "3 G an n n o e d h a o f e n w he n h e s t o p m ad e o t o f p ro f a k n g w i b e e n o un te re d a n s ho r n te re s w i b e b u u p S o m e h in g o ft e w i o cc u o f a vo ra b n a u r s ca r h e s ho r n t c o ve ri ng , f or ci n p ri ce s t o s l g h tl y h ig h e r l ev e l w h ic h w e ak en s h e e ch n c a p o s o n T h e qu ck d ec l n e d e ve lo ps , a n d p re v o u o w e ve l a r b ro ke n a n h e m ar ke t v e a c v e o n h e d ec l n e w i b e a n n d c a o n h a h e e n h a a ga i u rn e d ow n a cc o d in g G an n Do no a d e ve r d ay , h e a dv is ed . W a tc h a n w a o r o pp o u n e s a n o nc e y o s e y o ar gh wi he en of he ma et olow u p o r d ow n u n o u s ee a s ig n h a h e e n h a r ev er se d D o n o c lo s y ou r t ra d u s b ec au s y o h av e p ro f b u a lw ay s b e c on v n ce d b y t h e p os i o n o f h e c ha r a n h e g en er a c on d o n h a h e e n h a c ha ng ed . N ev e b u a f e r o t o f v er y b u s h n ew s c om e s o u t n o r s e a f e r a n e xt re m e b ea r s h e po r B o g oo d a n b a n ew s n ea r

a lw a y d is co u n e d . O f c ou rs e c on s d e r w h et he r t h sup ws m a d k no w n "4

H e a d vi se s f u rt he r " R em e m b e r [ pr ic e sJ c a n a lw a y s g o h ig he r c on d o n a r g h D o n o b u u s b e ca us e p r c e a re ] . . a t o w e ve l s ] a s [ th ey ] c a a lw ay s g o o we r N ev e b uc k h e e nd , a n d o n o g ue s h e o p o r b o o m W a u n h e h a s ho w y o h a h e e n h a u rn ed . Y o c a a lw a y m a k p le nt y o f m o ne y b uy in g o r s e n g a f e r h e e n s w e l d e n ed . T h m a w h oo bi h ur r w i o s m o ne y a n m is s o p po r u n it ie s u s a s o e n a s th e m a w h s t o ow ac " Fo l o w h e a p a n h e c ha r s , c on c u de s G an n " fo r h e w i p o n t h e c or re c c ou rs e o f p r c e a cc o d in g h e n a u ra l a w o f s up p a n d e m a n d . G an n A ng le s c a b e u se d qu ck d e e rm in e w he th e s up p o r d em a n h e d om i n a n g f ac to r g iv e m a rk e T h e a r p os s b l h e m o s w e k no w o f G an n e ch n c a o o a n r ep re se n t s ig n c an t c on tr ib u t o n t o t h f ie l o f t ec h ni ca l a n al ys is . T h e y a r e i nt ro d uc e d i n t h n e x chapter.

Gan

NOTES G an n w.o., T ru t o f t h S to c Tape, L a m be r G a n n P u bl is h in g , P o m er oy , W a s hi ng to n , 1 9 23 , p g . 1 6 5

Ang

n c t h b as i c on ce pt s o f t re n n e s up po r a n r es is ta nc e h av e b ee n m a st er ed , w e c a n o p ro ce e m o a dv an ce d c on ce p h a a l o w s f o g re a e r a cc ur ac y m a rk e o re ca s i n u s in g c h ar ts . E m p lo y in g l it tl e- kn o w n t ec h ni qu e d ev e o pe d b y W . D G an n a de r c a d e v e m ax i m u m e ve ra g n eg o a t n g h e m a rk e s .

The technique

G an n w a m as te r g eo me te r a s w e a s a m as te r m a rk e t t ec h ni ci an . H e s a w m a n y p a ra l e l b e tw e e h e c on ce p o f g eo me t a n h e p a e rn s he m a rk e H e d ev e o pe d s ev er a d ea s b as e o n G re e g eo me t h a h e m p e me n e d h i a d n g s ys e m , d ea s w h ic h p ro ve d h ig h a cc ur at e a n w h ic h c a b e u se d a lm o s a n m a rk e n c u d n g c o o n K no w a s G an n A ng le s h i e ch n q u u se s s ev e ra l d eg re e o f t re n n e t o d et er m in e h e o ve ra l

whether strong

kn

as "Gan

Angles," uses severa degree tren deter in

li

to th

overall positio of th

arket.

or weak.

Ibid ., pg. 16 b id . . p g 1 6 I bi d. , p g 1 6 Ibid., p g 1 6 I bi d. , p g 16

90

GANN SIMPLIFIE

A l o f G a nn ' t ec hn iq ue s r eq u r e h a e qu a t im e a n p r c e n te rv a b e u se d o n h e c ha r s , s o h a un of w i a lw a e qu a 4 5 d eg r a np le . H e b e e ve d h a h e d ea l b a a nc e b et we e m e a n p r c e e x s t w he n p r c e s e o r a l a t 4 5

GANN SIMPLIFIE

91

d eg re e a ng l r e a t v e t o t h t im e a x s . T h i a ls o ca ed a ng l L e p r c e r is e o n p r c e u n o r e a c t im e u n it ). '

The

re

l in e d ee me d t h most important

by Gann. signifies

bull

mar1cet If prices a r a bo v

th

bear mar1ce if below. Gann

t ha t

felt

trend

line provides majo suppor d ur in g a n uptrend,and w he n t h t re n lin isbroken i t s ig ni fi e majo reversal i n t h t re nd .

h i b oo k T e c hn ic a l A n a ly s i F ro m to Z, Steven A ch e e xp la in s t h c on ce p o f G a n A n g e s a s o l o ws : G an n A ng le s a r d ra w b e w ee n s ig n c an t b o t o a n t o ( o v ic e v er sa ) a t v ar io u a ng le s D ee m e h e m o s m po r a n b y G an n h e r en d n e s ig n e s b u m a rk e prce ar a bo v h e e n n e o r b ea r m ar ke t b e o w G an n e l h a en n e p ro v d e m a o r s up po r d u n g a n u p e nd , a n w he n h e e n ne b ro ke n , s ig n f ie s m a jo r r ev er sa l i n h e r en d . G a n d en t e d n in e s ig n f ic an t a ng le s w it h t h be ng he mos mpo an 8 2 . d e gr e e 7 5 d e gr e e 7 1 .2 5 d e gr ee s 6 3 .7 5 d e gr ee s 4 5 d eg re e 2 6 .2 5 d e gr e e 1 8 .7 5 d e gr e e 1 5 d e gr ee s 7 . d e g re e s " Ga n o bs e v e h a e ac h o f h e a ng le s c a p ro v d e s up po r a n r es is ta nc e d e pe n d n g o n h e t re nd . F o r e xa mp le , d u n g a n u p e n h e a ng l e nd s p ro v id e m a jo r s u pp o rt . m a jo r r ev e rs a l i s ig n if ie d w he n p r c e a l b e o w h e a ng le d e n n e A cc or d n g t o G a nn , p r c e s ho u t he n b e e xp ec te d al he ne en ne e. he a ng ie ) o th e w o rd s a s o n e a ng i p en et ra te d e xp ec t prce m o v a n c on so l d a a t h e n ex t a ng le ."3

O nc e y o l in e yo

e st ab li s t h

e it he r ou

he

u p r en d

r ef er en c

s ig ni fi ca n us

to

p oi n

f o d ra wi n

( do wn tr en d

protractor to measur

h e a ng l

ou

t om ; i n a d o n t e nd , d o n wa r

d ra w

t h a ng l

o r b ot to m ( up tr en d) , the variou degrees.

up ar

ro

h e bot-

f ro m h e o p

G a n A ng le s a r d ra w n b y o ca t n g s ig n if ic an t t o o r b o o m a n u s n g h a a s t h r e e re nc e p o n t o r d ra w n g h e a ng l n e F ro m h i o p o r b o o m , draw h o r z on ta l n e o ut wa r a n u s p ro tr ac to r t o m e as ur e t h v ar io u s d eg re es , k ee p n g m in d h a h e 4 5 d eg re e n e w i b e m o s m p o a n O n c y o h av e s o a te d h e s d eg re es , u s ru er to d ra w h e e n n e r o h e r e e re nc e p o n t o u w a d . w i b e n o e d h a s ma l e r d eg re e o f e n ne th es ke h av e a n s ig n c an ce . I t h a b ee n o u o bs er va t o n t ha t w h e p r c e h av e b ro ke n b e o w 3 5 d eg re e e n ne he en mov e op a rd y o f b e n g r ev er se d ( ev e t ho ug h G an n d i n o e fe r t o 3 5 d eg re e e n n e h i w r t in gs ) T h e a n g e s b et we e 3 5 d eg re e a n 4 5 d e gr ee s a r a lw a y h e m o s m p or ta n o ne s w he th e a n u pw ar d e n o r d ow nw a e nd . No

h e u s o f G an n A ng le s nd

h e c ha r

ha

ol

~;D.II~;~t~i~£];;;T0i(!7~1~;~~~~)~~~~ijr'"~~--

, . . . [

.... 70

60

60

F I GU R E 1 (1 .1 :

One-year daily c ha r o f G en er a Electric (GE

94

GAN

g ur e 1 0- 1

G e n er a E le c tr ic 's c h a r s h ow s f ou r G a n n A n gl e en n e b e w ee n J un e a n O c o be r o f 2 00 0 No he bu sh a ng l h a w a s t p en e r a ed S e pt em b er , t h e d ec is iv e b ro ke n O c to be r swe hsu G a n A ng l r en d n e w a o f o we r d eg re e h e nc e e ss b u l s h t ha n h e p re v o u o ne . A ft e t h a ng l w a b ro ke n O c o be r ne ereso d o wn w ar d- s o p n g G a n A n g e s d e ve lo pe d D ec em b e st he a ng le , o l o we d b y h e ng Th ang h e d ec l n in g p ha se , t h m o r b e ar is h t h e ch n a l p o o n o f h e m a e t N o h a h e a n g w a s t es te d F e br ua r b e o r h e s to c p lu ng e o nc e m o re .

S IM P LI FI E

F IG U R

e n r a E l c tr i ( GE )

N o t t h t hr e c le ar ly -d ef in e d s er ie s o f G a n A ng le s h e c ha r o r n te l A f e r h e b u s h a ng l w a b ro ke n A p 2 00 0 g av e w a n in g h a h e s to c w a s o s n g u ps id e m o m en tu m . T h i w a s c on me wh wa S ep te m be r A n e x e m e s ha l o w a ng l w a b ro ke n a te r

1 ( 1 .2 :

1\vo-year d ai l c ha r o f Intel (lNTC)

h e m on th , w a n in g o f m uc h o we r

level ahead. G an n A ng le s a r h e p fu l o o u s w he n u se d c on ju nc t o n w it h t h o th e o rm s o f c ha r a na ly s d es cr ib e d C h ap te r t hr ou g 7 . T h es e a ng le s e sp ec ia l w h e p ot en t a l c ha ng e r en d h a b ee n s ig na le d a r u se fu l d e e rm in in g h e s lo p o f h e n c p ie n e nd . T h s ha l o we r h e s lo p o f h e r en d n e h e e ss l ik e h e n e en sto ho d. T h s te ep e h e a ng le , h e m o r k e sto be he

GAN

S IM P LI FI E

95

b e g in n in g o f s ig n if ic a n m o v e G a n n ' e x te n si v v ie w o n a d n g a n m an y o f h e o p c s d is cu ss e h e p r o r c ha p e r a r s um m a r z e G a nn ' r ad n g u le s w h ic h a r n c u de d C ha p e r 1 1

G a n n ' T w e n ty -F o u r " Ne ve r- Fa i n g " R u le s

a n a lw ay s b e e ve d h a o rd e m ak e s uc ce ss a t r ad in g t h m a rk et s o n m u s o l I ow a s e ri es o f w e ll -d e fi ne d r ul es , n e ve r o n c d e vi at in g f ro m t he m r eg a rd le s s o f c ir cu m s ta n ce . H e p ro v d e 2 4 o f h i m o s r e a b l r u e s f o r t h t ra de r to olow a n m a rk e a n a l c ir cu m st an ce s s t o f h i r u e s a lo n w i h e a p pr op r a t h ea d in g , follows.

N e ve r o ve rt ra de . T h i w o u c a p it a l r u le .

NOTES A ch e s , S te ve n B . T e ch n ic a l A n al ys i F r o Professional Publishers 1995, pg 148. I bi d. , p g . 148 l bi d. , pgs. 148-149

Z , Irwin

believed that or er to make

succes

at trading the markets, on must

follow

series of well define

rules,

neve once

A m ou n o f c ap i a l u se . D iv id e y ou r c ap i a l n t 1 0 e qu a p a a n n ev e s k m o r h a o ne - e n o f y ou r c ap i a l o n a ny on e a de . U s e s t o p- lo s s o rd e rs . A lw a y s p ro te c t wh ma wi p o in t a w a y

Gannalways

deviating from the

regardles

of circumstance.

t ra d e

b e v io la t n g y ou r

N e e r e t p ro f u n n t os Afer ou o nc e h a p ro f o f p o n t o r m o e , a i y ou r o p o s o rd e s o t ha t o u w i h a n o o s o f c a p it a l

G A N N S IM P LI FI E

97

D o n o b uc k h e

e nd . N e e r b u y o r s e

a r n o s ur e o f h e

en

a cc o d in g

ou

y ou r

charts. Wh

Gann considered

T ra d o n

the rule concern-

d e a d o n es .

in placin

17

a ct iv e s to ck s K e e o u t o f s lo w ,

18

on

E q ua l d i st r b u o n o f r is k T ra d

stop-loss orde

p os s b le . A vo i

the most impor-

or

hiswritings, he

N ev e

continually

y io g u p a l y ou r c ap i a l

m i y ou r o rd e

p ri ce . T r ad e a t t h

the

m a r ke t

D on ' c lo s y ou r a de s w i h ou t

placing protec-

s on . F o o w u p w i

al

11

ing the reader that bi losses

A cc um u la t

s to p o s o rd e

p ro -

m o ne y n t

this

e m e g en c o r

ay an

profits preserved.

s ur p u s A ft e y o

hav mad

s e ri e o f s u cc e ss fu l t r a de s , p u t s o m e

are prevented

s ur p u s a cc ou n

b e u se d o n

m e s o f p an ic .

N e ve r b u u s t o get

14

GAN

g oo d e a

t ec t y o u p ro fi ts .

trades, remind-

98

an

b uy in g o r s e n g

importance of tive stops

s to ck s

o n e s to c k

tant. Throughou

emphasize

wh

ub

i n d o ub t

these 24 rules

d iv id e n d

N e ve r a v e ra g

o ss . T h i

w o rs t m is ta ke s

r ad e r c a m a ke .

N ev e g e o u o f h e m a rk e u s b ec au s

k e b ec au s y o

a r a nx io u

15

o ss es .

S IM P LI FI E

one of th

y o h av e o s p a e nc e o r g e n t ro

A v oi d t ak in g s m a l p ro fi t and bi

N e ve r c a n ce l p la ce d

wai ng

h e m ar -

atth

A vo i g e n g often.

s to p- lo s o rd e a f e r y o h a v me ou ma

a de .

an ou of he ma et oo

B e ju s a s w i n g s e l s h o a s yo u a r bu Le ou obec be ee wi he r en d a n m ak e m on ey .

19 20

Healso advised continually following up

N ev e b u u s b ec au s h e p r c e o f s to c o w o r s e l s h or t j u s b ec au s h e p r c e h ig h

B e c a re fu l a bo u p yr am id in g a t h e w ro n m e . W a i u n h e s to c s v e r a c v e a n h a s c r o s se d r es is ta n c l ev e l b e fo r b u yi n m o r e a n d un h a b ro ke n o u o f h e z on e o f d is tr ib u o n b e fo r e s e ll in g m o r e

21

S e e ct t h e s to ck s w i s m a v o u m e o f s ha re s o u ts ta nd in g p yr am i o n t h b uy in g s id e a n h e o ne s w i t h e a rg es t v o lu m e o f s to c k o u ts ta n d in g t o s e l s h or t

stop-loss order byadj stin

it

highe or lower,

as the cas. ma be, in order

to

further protect pr fits an

guar

against potential

losses.

N ev e h ed ge . y o a r o n o f o n s to c an s ta r g o d ow n d o n o s e l a no th e r s to c s ho r h ed g Ge ou at he ma et a k y ou r o s a n w a i f o a n o h e o pp or tu n y . N e ve r c ha n g y ou r p os i o n h e m a rk e w i h ou t g oo d e as on . W h e y o m a a de , e t b e o r s om e g oo d e as on s o r a cc o d in g o m d e n i p la n h e d o n o g e o u w i h ou t defni n d c a o n o f c ha ng e r en d .

24

A vo i n cr ea s n g y ou r r ad in g a ft e on p er io d o f s uc ce ss o r p er io d o f p ro f a b l

trades.

G A N N S I M PL I FI E D

99

Gann als

heavi-

ly emphasized the importanc of no changing

your mind when nce yo have co mitted to trade_ "Nin ti es ten,

he wrote.

"whe

once yo

place

stop-l ss

rder. if yo never cancel it It

il pr ve to

be the best

thin

that ever

happened. an the

ma

adhere rule

wh to this

il

ak

success,"

O f t he s 2 4 r u e s G a n c on s d er e h e r u c on ce rn n g p la c n g s to p- lo s o rd e h e m o s m p or ta n T h ro u gh o u t h i w r it in g s h e c o nt in u a l y e m p h as iz e d h e m p or ta nc e o f p la c n g p ro te c v e s to p o n a l r ad e s r em in d n g t h r ea de r t h a b i o ss es a r p re v en te d h i w a y a n p ro f t s p re se rv ed . H e o ft e s a h a t " fa i n g t o p la c s to p- lo s o rd e a n o ve r r ad n g h av e b ee n h e c au se o f o ve r 90 p er ce n o f h e f a il u re s i n W a l l S t re e t. " H e a l s a d v is e d c o n ti n ua l l f ol lo w in g u p s to p -l os s o rd e r b y a d ju s ti n i t h ig h e r o r o we r a s th e c as e m a y b e o rd e ur he p ro te c t p r of it s a n d g u a r a g a in s t p o te n t a l l os se s . A lo n w it h h e n ec es s t y o f p la c n g s t op - lo s s o r d er , G a n a ls o h ea v e m ph as iz e t h m p or ta nc e o f n o h an g n g o u m in d w he n o n o u h a c om mi ed a de . N in e m e o u o f e n h e w ro te , " wh e o nc e y o p la c s to p- lo s o rd e y o n ev e c an ce l w i p ro v b e h e b es t t h n g h a e ve r h ap pe ne d a n h e m a w h a dh er e th ru wi mak s uc ce ss . G an n a ls o u rg e h i e ad er s t h ee d n o h in g b u h e m e ss ag e o f h e m a rk e a n g no r w ha t f in a nc ia l w r t er s a n a dv is or s m ig h t b e s ay in g a bo u he ma ke s y o u r ad in g d ec is io n b as e o n y ou r n te rp re ta t o n o f h e m a rk e h a w i m ak e y o m o ne y n o s om e on e e ls e s o p in io n h e s a d . " On e o f h e m a i e as on s w h r ad e m a k o ss es i s b ec au s h e d o n o t t h n k f o t he m se lv e a n a l o w o th e h in k o r h e a n a dv is e t he m , w ho s a dv ic e a n u dg m en t n o b e e r h a h e o wn , h e w r ot e O n h i s am e s co r h e a dv is ed , " Wh e y o h in k h e m a rk e e ac h n g b o o m o r o p y o w i n d

100

GAN

h a s ev e m e s o u o f o u w i b e w ro ng . n o w ha t h e m a e t d oe s t od a n o w ha t o u h in k go ng do ha mpo an e xa c w ha t h e n d c a o n a r h a w i d o a t a te r d a w he n y o e xp ec t m a k p ro f s . Y ou r o b e c h ou l b e ee gh on he ma et Go wi he e n o f h e m a rk e S tu d a l h e m e d e e rm in e h e c o e c e nd . D o n o h in k a bo u p ro f s , y o a r g h o n h e m a k e h e p ro f w i c om e yo a r w ro ng , t he n u s h e o l r e a b p ro te ct or , t h s t op - lo s s o r d er . "

S IM P LI FI E

NOTES E x ce r pt e d f ro m 45 Y e ar s i n W a l S tr ee t by w . o . Gann, L a mb e r G a n P u bl is hi ng , P o me ro y W a sh in g to n , 1 94 9 pg.20.

GAN

S IM P LI FI E

1101

Conclusion

,I

h e t ra d n g m e h od s a n h eo r e s o f W .D . G an n w i o re ve r c ha ng e h e w a y o v ie w h e s to c a n c om m od i m a k e s . W he th e y o a r s ho r - te r " sw in g r ad e o r o ng -p u n ve st or , G an n w is do m c a p ro f a l a de r an yp of m a r k e e n v ir o n m en t .

On

th

amazlreg things ab ut Gann

theor

Isthat

It

can be as simple

as comple

as

the trader

On of a ma z n g h in g b ou t G an n h eo r ha c a b e a s s im p o r a s c om p e x a s th e a de r w is he s b e d ep en d n g o n h o d ee p o n w is he s d e v e n t G a nn ' w r t in gs . G a n e f a n m p re ss iv e b od y o f w o b eh in d w h c h a ng e r o he ai s im p l a n d s tr ai gh t- fo rw a r ( a r ev e al e hi semi n a l w o r k T ru t o f h e S to c T ap e h e a rc an e a n h ig h c om p le x ( a r ev ea le d h i " Ma st er " s er ie s o f c om m o d m in g c ou rs es ) I n w r i n g h i b oo k w e h a v p u rp o se l o v er lo o ke d s uc h G a n n t ec hn iq u e a s h i v a r o u s s q ua ri n f or m u a s , " m as te r c h ar ts , i nt er p la n et ar y c y c a n al ys is , e t c I ns te a d w e h a v f oc u se d s o le l o n t h m o s t b a si c a n d e a sy -t o- un d er s ta n a sp ec t o f h i w o r a n p ro v d e a n n tr od uc on G an n A ng le s o u o p n io n h a h i w h e r G a n n' s b e s c on tr ib u ti on s t o u n de rs ta n di n m a rk e b eh av io r w e r m a de ,

GAN

ishe it to be, depeneling on ho

deep

ne

ishe to delv Into ritings. Inthis

book.

have

focused solely th

most

basic and easy-

tc>understand aspects of his work.

S IM P LI FI E

1103