Gann: 28 rules of trading

William Delbert Gann, a famous American trader (1878-1955), earned $50 million during the Great Depression. In 1933, he performed 479 trades – 422 of which were winners – which enabled him to achForex-central-videos-right-160x600ieve an overall gain of 4000%! He is credited with the design of a stock market forecasting system that is based more on dates than it is on prices.

Below are the rules of Gann. Anything in italic is a comment that and not a part of Gann’s original rules.

  1. Gann never risked more than 10% of the trading capital in a single trade! (This is still pretty risky, I wouldn’t ever recommend risking more than 1.5% of your capital on a single trade);
  2. Gann always used stop-loss orders;
  3. Never overtrade. (If you have 2 trades open, the total risk involved should not violate the first Gann’s rule);
  4. Never let a profit run into a loss. (As soon as you’re making a profit, raise your stop so that you don’t lose any money);
  5. Don’t enter a trade if you are unsure of the trend. Never trade against the trend.
  6. When in doubt, get out, and don’t get in when in doubt.
  7. Only trade active markets. (And only trade liquid markets)
  8. Distribute your risk equally among different markets. (It’s better to have 3 small orders on 3 different currency pairs than 1 big order on 1 currency pair)
  9. Never limit your orders. Trade at the market. (This means no buy limit or sell limit orders);
  10. Don’t close trades without a good reason;
  11. Extra money from successful trades should be placed in a separate account.
  12. Never trade to scalp a profit. (You should only shoot for big profits, not small ones as one bad trade can wipe out lots of small winning trades);
  13. Never average a loss. (Example: if you buy EUR/USD and it falls, don’t buy more (in order to average out your average purchase price) because you could lose twice as much money now);
  14. Never get out of the market because you have lost patience or get in because you are anxious from waiting;
  15. Avoid taking small profits and large losses;
  16. Never cancel a stop loss after you have placed the trade;
  17. Avoid getting in and out of the market too often;
  18. Be willing to make money from both sides of the market. (Your objective is to stay with the trend and make money. If the trend slows down, sell on rallies to buy back at a lower price);
  19. Never buy or sell just because the price is low or high;
  20. Be careful about pyramiding at the wrong time. Pyramiding should be only accomplished once it has crossed resistance levels and broken zones of support;
  21. Pyramiding can be very profitable at the right time. Select commodities (or currency pairs) with a strong trend up when buying and with definite downtrend to sell short;
  22. Never hedge a losing position. If you are long one commodity and it starts to go down, don’t sell another commodity short to hedge it. Get out of the market. Take your loss and wait for another opportunity;
  23. Never change your position without a good reason. When you make a trade, make it with good reason according to some definite rule. Then do not get out unless there is a definite indication of change in trend;
  24. Avoid trading after long periods of success. You should maintain a disciplined, planned trading program;
  25. Don’t try to guess tops or bottoms. Let the market show you that it has genuinely made a top or bottom;
  26. Don’t follow a blind man’s advice. (Only trust advice when you are 200% sure that this person’s trading system works);
  27. Reduce trading after the first loss; never increase;
  28. Avoid getting in wrong and out wrong; or getting in right and out wrong. This is making a double mistake.

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