†A 15 Year Analysis of Gannís Trading Methodology!
How to Trade Like W. D. Gann
An Exploration of the Mechanical
†Trading Lesson on U. S. Steel
STATEMENT OF INTENT
The intent of this course is to present a detailed analysis of the entire sequence of 322 trades from 1915-1931 presented in WD Gannís US Steel trading course. The specifics of these trades and of Gannís Mechanical Method provide profound insights into the mind of one of the greatest traders of history. With detailed charts accompanying the analysis, the reader will discover great insights in reading market action and learn to understand the specific rules and trigers that Gann used to manage an account through every phase of market activity.
This course demonstrates how Gann could turn a $3000 account into over $6 million in 15 years.† But it also shows extraordinary returns in shorter trading periods. For instance, from his initial investment of $3000 in February 1915 until October 21 of the same year, Gann produced a 1,337% return increasing the account to $40,123. This course will teach you how to do the same, by trading like W.D. Gann!
WD Gann is one of the most prolific traders and authors in the history of Wall Street. In a career that spanned over 50 years from 1902 to 1955 he wrote numerous courses and books, gave personal instruction on his methods, published forecasts and managed subscription services for investors.
Today many traders have heard of his name and many have read at least one of his books. And yet there is very little written material which actually goes through what he wrote. Most modern writers have taken a technique or two and woven it in with their own methods. But for those who wish to study Gannís original writings there is not much to go on. Very few charts are available to cover the examples he gave, making many of his statements obscure at best.
After searching for some years for a book that addressed his courses, I determined that if I wanted to read one I would have to write it myself. But where to start? I picked one of Gannís Ďbeginnerí lessons, called Method for Trading the Overnight Chart. The reason was simple. When new students came to Gann for instruction, he first sold them his swing trading system. Only when a person had learned how to trade would he teach them how to forecast.
This lesson, which is today published as part of the Stock Market Course, consists of 9 Rules followed by 15 years of trading examples on US Steel. At the time US Steel was the largest company in the world and therefore an obvious candidate to demonstrate the method. But I wondered why Gann covered a period of over 15 years in his examples. Surely a few months would have been sufficient to illustrate his mechanical rules.
The first obstacle I encounterd was that neither the data nor the charts for this period of US Steel were available from any source I could find.† I eventually realzied that I would have to copy the data off of microfilm from old newspapers in order to be able to make the needed charts. It took me about half an hour to copy every month of data, so for the 16 years of the lesson that took about 100 hours. In actual fact I extracted 36 yearsí worth, from 1901 to the end of 1936, so the total was well over 200 hours. I also hand-charted a daily and monthly chart, as originally I didnít have the ability to put the data into software, and that took about the same amount of time again.
After this slow process of acquiring the daily price data from old newspaper records and loading it into software, I was finally in a position to begin my analysis. It was only when I sat down with the charts that I discovered a wealth of hidden information that I hadnít expected. I kept asking, ĎWhy did he do that here?í and I saw that, while the system is described as mechanical, the application gives many subtle indications of how Gann would read a price chart. I also understood that the reason he covered so many years of trading was to demonstrate the performance of his system in all possible market conditions in order to better prove its value.†
Throughout the series of trades Gann takes the student on a progressive journey of difficulty. In the earlier trades he gives more explanation and allows more latitude with placement of stops and reversals of position. As time progresses he adds more tools into the Matrix and appears to be leading the reader along a path towards the way he would trade. Even though he states that he has rules that he is not applying, it is possible to get a sense of how he was thinking at times, and to see hints of where he might have had other rules to use. But even without these further rules, we can get a fantastic insight into the mind of a master trader.
The last part of the lesson, covering the Crash of 1929 and the first part of the Great Depression, occurred during the time he was writing it, and his trades would have reflected what he was seeing in the market at the time. The original text, however, is almost impossibly dry. In 1930 it was not possible to produce daily charts covering 15 years of market action, and so instead he had to list the highs and lows in the text so that students could construct a basic chart as they read through. But even here much information is lost, as you canít see the actual bars.
This brings me to the actual book itself. I have divided up Gannís text into the individual trades, of which there are over 300, spanning 16 years from 1915 to 1931, all in the one stock, US Steel. I have gone through these trades one at a time, offering a commentary and observations on what Gann is doing Ė how he enters a trade, how he manages the stops, when and why he pyramids, and suggestions on factors that he may have been acting upon.
These trades are broken up arbitrarily into different phases of the market Ė bull markets, bear markets, corrections and so on. This enables us to see the moves in the bigger context. From time to time I also give summaries of what is happening and the lessons that can be learned. The commentary is accompanied by about 90 charts which show every trade in detail.
In addition to the charts in the text, enlarged copies of each chart are included in a separate volume so that you donít have to turn pages back and forth to follow what is happening. They are large enough that you can make your own notes on the charts. I have also included a copy of Gannís original lesson, so that this will be a one-stop purchase, and have provided a tabulation of Gannís trades and profits tracking the development of his account from the starting capital of $3000 to the final total 300 trades later of over 6 million dollars!
This is really a complete course in itself. It presents an entire trading system with a complete explanation by Gann. It is about as close as we can get to sitting in a classroom with him and watching him trade. I believe that it is through lessons like this one that we come closest to seeing how he actually thought when he was trading. Your job is to internalize this methodology and integrate it into your own trading strategy.
GANNíS MECHANICAL SYSTEM APPLIED TO THE CURRENT S&P 500
(Excerpt from Spring 2014 Traderís World Article) As an example of how his method would apply today, let us consider a chart of the e-mini S&P 500 futures contract and demonstrate exactly what the trades from Gannís Mechanical Method would be in the current market.
Gann wrote his lesson for stocks trading around 50-200, so we have to make some assumptions to adjust for a stock index trading at 1800. You would have to test these to work out the optimum numbers, but for this exercise, I am going to place stops 5 points above swing tops or below swing bottoms. Gannís pyramiding rule was to add half the position size every so many points. I will use 50 points here. We will take an initial trade size of 2 contracts, based on Gannís risk management rules of only risking 10% of oneís capital on any one trade, which would require a capital of $50,000.
We will assume that we have been trading the S&P for some time and simply pick up the trades from the beginning of 2014. As the New Year dawned, we would be long at around 1788 from 18 December. This trade was stopped out around 1812 on 13 January. Profit 24 points x 2 contracts = 48 points. As the system requires us to reverse positions we will be short 2 contracts at 1812 with the new stop placed above the 31 December high.
The market continued sideways for several days more. Gann was careful in such situations not to bring stops too close, so he would have left them above the 31 December high. An additional contract was sold at 1762 on 29 January.
On 3 February a special rule was triggered. Gann didnít even mention this rule at the beginning of his lesson and it is only in the trade examples that it becomes apparent. We would exit all short contracts at 1736 (total profit 178 points) and go long 2 contracts at that price.
Although the market went a fraction lower on 5 February, Gannís rule for stops would have kept the long trade intact, and we are placed to take the full benefit of the strong rally that followed. An extra contract is bought at 1786 and another again at 1836. All 4 contracts were stopped out at 1860 on 12 March. Total profit 346 points.
Total profit on 3 trades is 572 points or $28,600. Thus the return on our $50,000 capital over the first 3 months of the year, without deductions for commissions, was 57%. But donít forget that we are only trading with 10% of our capital in this example, so the returns on the actual ďat riskĒ investment are much higher.† If we consider that our initial investment was approximately $5,000, and we generated a $28,000 return, we actually produced 570% on our initial investment in only 3 months! Not bad for a relatively simple mechanical systemÖ
Thank you for another update on the fabulous book - I love it. If my house was on fire the book would be my first to be saved (after the wife and kids). PC (NSW)
Walking through Gann's US Steel trades, using your book as a guide, has taught me more about how Gann actually traded than any of my own attempts to learn by reading Gann's own books over several years. DM (VIC)
I have certainly had some better success with my trading since implementing the methodology that you have made very clear in your book. While I have still not completed the testing of all the trades, I have gone to great depth to fully understand everything I have done so far, and this effort has been reflected in my account balance. Thank you so much for being the conduit to unlocking some of Gannís secrets for me. EL (WA)
I am finding it an amazing course really, more so than a book as such. GS (NSW)
I'll sum up my support in one word....AwesomeÖYour book and the charts you provide make it soooo much easier to follow and read.... I do hope the next book you are working on is the lesson from the New Stock Trend Detector. GJ (NSW)
Will keep reading the book till I drop. Again, thanks for taking the time to write all this, it will be very resourceful and great additional knowledge for any traders in the world. HW (Indonesia)
I've had an epiphany whilst studying US Steel Lesson and now I'm bursting with energy and enthusiasm! I'm not even half way through - at chapter 10. I can't begin to imagine what other ideas will continue to flow up on studying the remainder of the lesson, and then second reading, then third... MP (QLD)
I am really enjoying the book. It's so good to be able to get this close to Gann's thinking and his trading style. All thanks to your efforts in presenting the material in a more understandable and fluid format. AM (NSW)
I am putting your (Gann's) teachings to good use, I have been applying the principles to ANZ for quite some time and at this stage I'm delighted, especially that I'm so time poor. RT (NSW)
Finally, a trading guide on Gann's methods containing detailed instructional charts allowing the reader to follow and observe what Gann observed as he traded. SM (VIC)
I love the book; you really did do a superb job. You take us through it as if it is happening right now. Itís more than I ever imagined. Iím going through it slowly and Iím loving it more and more. Thank you. MA (WA)
The author came across the name W.D. Gann about 10 years ago and has been studying his writings and trading since 2006. A background in law and communication helped with the analytical task of pulling Gannís work apart piece by piece. From 2007 to 2013 he worked with Safety in the Market, a trading education company teaching Gann analysis in Australia, first as a Trading Tutor helping other students and then as a seminar presenter.
Owners of this course will also be given access to an Online Discussion Forum, where they can ask questions from the author, and discuss trades and ideas with other owners of the course.† This give the opportunity for the idea to be furhter developed and studied amongst the group, and for new insights or discoveries to be shared between the community of readers.
CONTENTS & SAMPLE SECTIONS
The following link presents several sample sections from the actual course, including the Contents, Prefact, and Epilogue.† For a sense of the layout and style as well as for some more detail about the course, just follow this link:
PRICE & ORDERING
How to Trade Like W. D. Gann
An Exploration of the Mechanical Trading Lesson on U. S. Steel
Volume 1 Ė Text, Volume 2 Ė Supplementary Material & Charts
black suede hardcover. 2 VOLUMES Vol. 1 216 pages, Vol. 2 136 pages.
cat#555 Retail Price $595.00††
The Institute of Cosmological Economics & Sacred Science Institute are economic research and educational companies.† The information contained herein is for general education purposes and is not intended as specific advice or recommendations to any person or entity.† Any reference to a transaction, trade, position, holding, security, market, or level is purely meant to educate readers about possible risks and opportunities in the marketplace and are not meant to imply that any person or entity should take any action whatsoever without first evaluating such action(s) in light of their own situation either on their own or through a professional advisor. The methods presented are not solicitations of any order to buy or sell. If a person or entity does not believe they are qualified to make such decisions, they should seek professional advice.† The prices listed are for reference only and are in no way intended to represent an actual trade, entry price or exit price conducted by the Institute of Cosmological Economics, portfolios managed by any entity affiliated with the Institute of Cosmological Economics, or any† principal or employee of the Institute of Cosmological Economics, or any of its affiliates. This information is not a substitute for professional advice of any nature, including tax, legal, and financial.† While we believe the information contained herein to be accurate, all numbers should be verified by the reader through independent sources.† It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. There is no assurance that the strategies and methods presented in this book will be successful for you. Past results are not necessarily indicative of future performance. Trading securities, options, futures, or any other security involves risk and can result in the immediate and substantial loss of the capital invested. The author, publisher, distributors and all affiliates assume no responsibility for your trading or investment results, and will not be liable for any loss, damage or liability directly or indirectly caused by the usage of this material. There is considerable risk of loss in Futures, Stock and Options trading. You should only use risk capital in all such endeavors. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.Every reader/recipient is responsible for his or her own investment decisions.† The information contained in this report or in any update does not necessarily mean that the Institute of Cosmological Economics, or any portfolio managed by any affiliates of the Institute of Cosmological Economics, or that any employees of the Institute of Cosmological Economics, or its affiliates holds the positions or has conducted the actual trade. At various times the Institute of Cosmological Economics, portfolios managed by affiliates of the Institute of Cosmological Economics, or any other principal or employee of the Institute of Cosmological Economics may own, buy or sell the securities discussed for the purposes of investment or trading.
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