Overview of W. D.

Gann
Introduction to W.D. Gann

Who was W.D. Gann?

William Delbert Gann, an American trader, is known for his innovative approach to trading
using technical analysis, time cycles, angles, and astrology. His methods revolutionized
how markets were analyzed, making him one of the pioneers in technical analysis.
Key Highlights:
Gann was a 33rd degree Freemason.
Integrated astrology and mathematics into his market analysis.
Achieved remarkable success, reportedly with a 92% success rate over observed
trades.

Core Principles of Gann Theory

Time Cycles:
Gann believed that market events recur in cycles influenced by time. By identifying
these cycles, he predicted market highs and lows.
Example: Gann predicted the Union Pacific stock wouldn’t hit 169 before dropping, a
prediction he accurately timed.
Price-Time Correlation:
Gann correlated price movements with specific time cycles, aiming to predict when
market trends would reverse.
His approach was rooted in the idea that "time is more important than price" in
market movements.
Astrology and Geometry in Trading:
Gann applied astrological cycles to predict price patterns, correlating planetary
movements with market behavior.
Used geometric shapes such as squares, triangles, and angles to plot price
movements, considering market trends as part of natural, cyclical patterns.

Technical Tools Developed by Gann

Gann Angles:
A tool to forecast support and resistance levels based on angle lines. The most
famous of these angles is the 45° angle, which Gann viewed as the ideal trendline.
Other angles include 1x1 (45°), 1x2, 2x1, and 1x4, representing varying levels of
support/resistance strength.
Gann Fan:
A tool created by drawing angles from a single price point, forming a fan-shaped
pattern on charts.
Used to identify trend strength and predict potential trend reversals. Each angle
within the fan represents different degrees of support and resistance.

Notable Works and Predictions

 Gann's techniques and predictions are documented in various works, with one of the
most notable being an article by Richard D. Wyckoff in 1909, titled "William D. Gann: An
Operator Whose Science and Ability Place Him in the Front Rank".
Examples of Gann’s accurate predictions:
Union Pacific Stock: Predicted that it wouldn’t reach 169 before declining, capturing a
23-point profit.
Wheat Prices: Forecasted a rise to $1.35 from 89¢, a target it indeed reached.

Practical Application of Gann’s Methods

Using Gann Angles in Trading:

Traders can apply Gann Angles to a price chart by drawing lines at angles like 45°,
26.5°, and 63.75° to project price movements.
The angles help in setting entry and exit points and identifying trend continuation or
reversal.
Using Gann Fan:
Placed on significant highs or lows, the Gann Fan can be used to track price
momentum. If price stays above the 1x1 line, it’s in an uptrend; falling below indicates
a downtrend.
Each line in the fan represents a different level of trend strength.

Supplementary Topics for Deeper Understanding

Mathematics and Natural Cycles:

Gann’s theories were deeply rooted in mathematics and natural laws. He used
concepts like the Square of 9, a numerical grid used to find support and resistance
levels based on natural cycles.
The 50% Retracement Rule:
Gann believed that after a significant move, markets often retrace by 50% before
resuming the trend. This rule is widely used to identify reversal levels.
Gann’s Application of Astrology:
Gann used planetary cycles to time trades, studying how celestial movements
affected human behavior and, by extension, market psychology. He particularly
focused on planetary aspects and conjunctions.

Limitations and Criticisms of Gann Theory

Complexity:
Gann's theories require substantial expertise to interpret and apply effectively. The
reliance on astrology and time cycles can make them challenging for modern traders to
adopt.
Subjectivity:
While Gann’s angles and time cycles are structured, the interpretation of astrological
influences is subjective, which may not suit all trading styles.

Legacy and Relevance of Gann’s Methods Today

 Gann’s methods remain relevant in technical analysis as they introduced geometry,
cycles, and the concept of time into market analysis.
Modern Applications:
Gann’s tools like the Gann Fan and Square of 9 are available on trading platforms and are
still used by traders to forecast support, resistance, and trend direction.

W.D. Gann’s 28 Golden Rules of Trading

W.D. Gann, a legendary trader, developed a unique approach to trading that combined
technical analysis, astrology, and time cycles. His 28 Golden Rules of Trading reflect a
disciplined approach, aiming to guide traders in managing risk, controlling emotions, and
making informed decisions based on market trends. This study material will dive deep into
each of these rules, explaining how they shape a trader's mindset and decision-making
process.

From managing capital allocation to using stop-losses effectively, these rules encourage a
systematic approach to trading, promoting long-term consistency and protection of capital.
With Gann’s insights, traders can navigate the markets with a structured, resilient strategy
that guards against impulsive decisions and excessive risk. Each rule serves as a fundamental
building block in developing trading discipline, while practical examples make it easy to see
how these principles apply in real-world scenarios.

1. Never Risk More Than 10% of Your Trading Capital in a Single Trade
Gann advises traders to limit exposure to any single position, ensuring that no one trade
can lead to catastrophic losses. If you have ₹1,00,000 in trading capital, you should only
risk ₹10,000 per trade. This approach protects your capital, allowing you to recover from
multiple small losses rather than risking your entire portfolio on one position.
2. Always Use Stop-Loss Orders
Gann emphasizes the importance of stop-loss orders to limit losses and protect capital.
Stop-loss orders automatically close a trade when it reaches a predetermined loss
threshold. If you buy a stock at ₹500 and place a stop-loss at ₹450, your loss is capped if
the stock price falls to ₹450 or below. This way, you control the potential downside.
3. Never Overtrade
Overtrading can lead to increased transaction costs, emotional exhaustion, and impulsive
decisions. It’s essential to only take trades that align with your strategy and offer a
favorable risk-to-reward ratio. Instead of taking every opportunity, select trades that fit
your criteria, keeping your focus on quality, not quantity.
4. Never Let a Profit Run Into a Loss
Gann advises locking in gains before they turn into losses. A trailing stop can be useful
here to preserve gains as the price moves in your favor. If you buy a stock at ₹100 and it
rises to ₹150, move your stop-loss closer to your purchase price, say at ₹120, so you
retain at least some profit.
5. Don’t Enter a Trade If You Are Unsure of the Trend
Trading with the trend increases your chances of success. Entering without a clear trend
 increases risk, as the direction is uncertain. If a stock is fluctuating without a clear
upward or downward trend, it’s best to wait for confirmation. Enter the trade only when
there’s an evident direction.
6. When in Doubt, Get Out, and Don’t Get In When in Doubt
This rule advises against trading when uncertain. Exiting a trade and waiting for clarity
can prevent unnecessary losses. If news or volatility increases and creates doubts about
your trade, exit and reassess once the market stabilizes.
7. Only Trade Active Markets
Active markets with high volume provide liquidity, reducing the risk of slippage and
allowing for quick entry and exit. It’s easier to trade large-cap stocks on major exchanges
due to their high trading volumes, making them more predictable and easier to trade.
8. Distribute Your Risk Equally Among Different Markets
Diversifying trades across different assets or markets helps balance risk. If one market
declines, gains in others can offset losses. Instead of putting all funds into tech stocks,
diversify across sectors like healthcare, energy, and finance to avoid sector-specific risks.
9. Never Limit Your Orders; Trade at the Market
Gann suggests trading at the current market price instead of waiting for a specific price
point, as conditions may change quickly. If a stock is rising rapidly, placing a limit order
could mean missing out if the stock doesn’t pull back. Trading at the market price allows
immediate entry.
10. Don’t Close Trades Without a Good Reason
Prematurely closing a position can limit gains or increase losses. Close only based on
strategy, not emotions. If you bought a stock expecting a rise but sell due to short-term
price fluctuations, you might miss out if it eventually hits your target.
11. Extra Profits from Successful Trades Should Be Placed in a Separate Account
This encourages traders to save or reinvest their profits wisely rather than risking it all in
future trades. After a profitable trade, transfer part of the gains to a savings or
investment account to secure your earnings.
12. Never Trade to Scalp a Profit
Scalping or taking quick profits from minor price movements doesn’t align with Gann’s
focus on disciplined, strategic trading. Instead of scalping small gains daily, focus on
trades with a strong risk-to-reward ratio where profits align with the larger trend.
13. Never Average a Loss
Averaging down by adding more capital to a losing trade can magnify losses if the trend
continues against you. If you buy a stock at ₹200 and it falls to ₹150, avoid adding more
at ₹150. Accept the loss or wait for the trade to recover.
14. Never Get Out of the Market Because You Have Lost Patience or Get in Because You Are
Anxious from Waiting
Emotional impatience can lead to irrational exits or entries. Trade based on strategy, not
on impulse. If a stock isn’t moving as expected, resist the urge to exit too early. Wait for
your set target or stop-loss levels.
15. Avoid Taking Small Profits & Large Losses
Taking small profits might seem rewarding, but holding on to large losses can be
disastrous. The key is to let profitable trades run their course and to cap losses by using
stop-loss orders. For instance, if you enter a trade with a 10% target profit and a 5% stop-
loss, sticking to these limits helps you avoid wiping out gains with one big loss.
16. Never Cancel a Stop Loss After You Have Placed the Trade
W.D. Gann emphasizes that once you set a stop-loss, it should stay in place no matter
what happens in the market. Canceling a stop-loss can expose you to even greater losses,
as it removes the protective measure designed to limit risk. For example, if you enter a
trade at ₹1,000 with a stop-loss at ₹950, canceling that stop-loss could lead to
unchecked losses if the price drops significantly below ₹950. By keeping the stop-loss in
place, you’re enforcing discipline and protecting your capital from unexpected market
movements. Stick to the initial plan, as stop-loss orders are crucial to minimizing losses,
especially in volatile markets
17. Avoid Getting In and Out of the Market Too Often
Over-trading can quickly drain your capital and increase trading costs. Rather than
reacting to every market movement, focus on high-quality setups and clear trading
opportunities, which reduce unnecessary risk and potential losses.
18. Be Willing to Make Money from Both Sides of the Market
Being open to both buying and selling (short-selling) opportunities allows traders to
profit in any market direction. For instance, in a down-trending market, short-sell
positions can capitalize on the falling prices rather than waiting for an upturn.
19. Never Buy or Sell Just Because the Price is Low or High
A low price does not mean it won’t drop further, nor does a high price guarantee a fall.
Price levels alone are not enough; you should wait for indicators or patterns that signal a
genuine trend shift. This approach prevents premature moves based solely on price
perception.
20. Be Careful About Pyramiding at the Wrong Time
Pyramiding, or adding to a winning position, can be profitable but only when done after
the price crosses resistance or breaks through support levels. For example, when an asset
has surpassed a strong resistance level, adding to the position can maximize gains rather
than compounding losses.
21. Pyramiding Can Be Very Profitable at the Right Time
The strategy of adding to positions can yield high returns, especially in a strong trend.
Selecting assets with a clear uptrend when buying, or a clear downtrend when selling
short, increases the probability of profitable pyramiding.
22. Never Hedge a Losing Position
Hedging a losing trade with a new, opposite trade can complicate losses. Instead, it’s
better to exit the losing trade altogether. For instance, if a long position starts to drop, it’s
often wiser to sell and take the loss, rather than shorting another asset to balance the
losses.
23. Never Change Your Position Without a Good Reason
Stick to your original trading strategy and exit only when there’s a clear sign of a trend
change. Avoid impulsive moves; if you buy based on an uptrend, stay in until evidence
suggests a reversal, rather than exiting due to short-term fluctuations.
24. Avoid Trading After Long Periods of Success
After a winning streak, there’s a temptation to increase trade frequency, but this can lead
to hasty decisions. Instead, stick to a structured trading plan that minimizes emotional
trading. Consistency, even after success, protects your gains from overconfidence-driven
mistakes.
 25. Don't Try to Guess Tops or Bottoms
Attempting to time exact tops and bottoms can lead to early or poorly timed trades. Let
the market show confirmation of trend shifts before making a move, rather than guessing
the market's peak or trough.
26. Don't Follow a Blind Man's Advice
Following unverified advice can lead to poor results. Instead, trust your own analysis or
seek guidance from proven, reputable sources, avoiding unsupported tips that lack a
solid basis.
27. Reduce Trading After the First Loss; Never Increase
After a loss, it's crucial to reduce position sizes instead of increasing them to “make up”
for the loss. This approach conserves capital and keeps emotions in check, giving you
space to rebuild with smaller, safer trades.
28. Avoid Getting in Wrong and Out Wrong; or Getting in Right and Out Wrong
Entering and exiting trades poorly, or entering correctly and exiting impulsively,
compounds losses. Adhering to your plan for both entry and exit, and waiting for clear
signs to make moves, can help avoid these double mistakes.

Gann Fan : An Overview

Introduction to Gann Fan

The Gann Fan is a technical analysis tool developed by W.D. Gann, a trader and market
analyst known for his innovative approach to market prediction. The Gann Fan consists of a
series of diagonal lines, or angles, that radiate from a significant price point, providing traders
with potential support and resistance levels based on time and price relationships. Gann
believed that the markets move in predictable cycles and that these angles can help identify
trends and reversals.

Different Angles in Gann Fan

The Gann Fan typically includes several angles, each representing a different relationship
between price and time. The most common angles used in Gann Fan analysis include:

1. 1x1 Angle (45 degrees): This angle indicates that for every unit of time that passes, the
price moves one unit in the same direction. It represents a balance between time and
price and is often seen as a critical support or resistance level.
2. 2x1 Angle (26.25 degrees): This angle indicates that for every two units of time, the price
moves one unit. It is steeper than the 1x1 angle and suggests that price increases at a
faster rate.
3. 3x1 Angle (18.43 degrees): This angle indicates that for every three units of time, the
price moves one unit. It is even steeper than the 2x1 angle and represents an aggressive
upward movement in price.
4. 1x2 Angle (63.75 degrees): This angle indicates that for every unit of time, the price
moves two units. It is a bearish angle, indicating a rapid decline in price.
 5. 1x3 Angle (71.57 degrees): This angle indicates that for every unit of time, the price moves
three units. It is the steepest angle in the Gann Fan and is often used to identify extreme
market conditions.

Methods of Plotting a Gann Fan

There are three primary methods for plotting a Gann Fan:

1. Square Grid Method:

The Square Grid method involves using a square grid to identify significant price and
time levels. The trader draws horizontal and vertical lines that create a grid of squares,
with each square representing a unit of price and time. The Gann Fan is then plotted
based on the angles derived from these squares.
2. Regression Method:
The Regression method utilizes statistical regression analysis to identify trends in
price and time. By plotting a regression line based on historical price data, traders can
determine the slope of the trend. The Gann Fan is then overlaid on this regression line,
using the identified slope to plot the angles.
3. Price-Time Correlation:
The Price-Time Correlation method involves analyzing the relationship between price
movements and time intervals. Traders identify key price levels and corresponding
time frames, plotting the Gann Fan based on these correlations. This method
emphasizes the significance of both price and time in determining market behavior.

Gann Angles

Gann Angles are the lines that form the basis of the Gann Fan. They are derived from the
mathematical relationships W.D. Gann believed exist between price and time. Each angle
represents a specific relationship and can be used to identify potential support and
resistance levels. The angles provide traders with a visual representation of how price levels
might behave in relation to time.
Square Grid Method