It has been said that wealth is the product of a person's thinking ability. In the ever-changing world of trading, if one does not want to be influenced by others, it is essential to develop one's own investment philosophy and adhere to the correct investment concepts. Of course, a core investment philosophy cannot be simply replicated, but we can learn from the trading rules of masters to continuously improve our own trading methods and principles, forming a unique personal investment philosophy.

William D. Gann, a name that should not be unfamiliar to those who admire technical analysis in trading. As the founder of stock technical analysis, we are still using Gann's trading methods to this day. The three most famous theories in the trading industry about technical analysis are the Elliott Wave Theory, Gann Theory, and Dow Theory, with the Gann Theory being created by him. In this article, the editor will share Gann's investment story with friends in the exchange, and from his legendary experience, we can glimpse the investment philosophy of the trading master.

Advertisement

An Investment Genius in the Eyes of Others

Gann was born in Texas, USA, in 1878. In 1902, at the age of 24, Gann made his first entry into the market to trade cotton futures. In 1908, at the age of 30, Gann developed his most important market trend prediction method, called "Control Time Factor." After several accurate predictions, Gann became famous.

One of the most widely circulated stories about him is recounted by a friend of Gann, named Gilley. In the summer of 1909, Gann predicted that the September wheat option would reach $1.20. As a result, one hour before the market closed on September 30, the contract was exactly at $1.20. Another legendary story is that Gann accurately predicted the great stock market crash of 1929 in his annual stock market forecast published in January 1929.

This investment genius was the most diligent researcher of technical theory, studying market techniques throughout his life. He was bold and meticulous, while others showed off with airplanes, he used them to study market conditions, sending people to fly to various countries to observe the growth of crops, in order to more accurately estimate prices. As the most famous short-term operator, Gann made 260 trades in 25 trading days, with a profit rate of 92.3%, and his principal increased tenfold in 25 days.

Until Gann's death in 1955, in his complete 77 years of life, he had been speculating in the market for 45 years, experiencing World War I, World War II, the great stock market crash of 1929, and the economic depression of the 1930s. In that turbulent era, he used his mysterious basis, based on ancient mathematics, geometry, and astrology, to establish a unique set of analysis techniques and methods, earning a profit of more than 50 million US dollars at the time.

The Trading Strategy of the Technical Master

William D. Gann was a Christian, and he discovered the market cycle theory in the Bible. He spent ten years alone, studying in the UK, Egypt, and India, and developed a trading method centered on natural rules. Therefore, Gann's theory includes Eastern and Western mysticism, astrology, the Bible, and mathematics.Gann once utilized knowledge in astronomy, mathematics, geometry, and other fields to establish a unique technical analysis theory, which includes the Law of Vibration, the Theory of Cycles, Gann Angles, Gann Square, Gann Hexagon, and so on. In Gann's world, each stock has a unique rate of vibration that governs the rise and fall of market prices.

Gann's main contribution to technical theory is that he conducted a more in-depth study of time cycle cycles and proposed that the stock market operates according to certain mathematical proportional relationships and time cycle cycles. In Gann's theory, the time cycle is the primary factor, followed by the proportional relationship, and then the pattern. In addition, Gann also clarified the relationship between price and time, and distinguished between the test system and the operating system.

Gann believed that the natural laws of the universe also exist in the stock and futures markets, and the trend of market price movements can be predicted by mathematical methods. The mathematical equations related to this are not complicated; the essence is that the price movement must follow the support and resistance lines, which is what everyone often refers to as "Gann lines."

Gann's advice to investors:

Gann's theory includes Gann's Time Law, Gann's Price Law, and Gann lines, etc., and in terms of specific investment, it also proposes the specific factors of capital loss. Based on these factors, investors can more clearly analyze the reasons for their losses.

1. Over-trading on limited capital, that is, operating too frequently. Operating in the short and ultra-short lines of the market requires a high level of operational skills. Before investors master these skills, over-emphasizing short-line operations often leads to significant losses.

2. Not setting a stop-loss point to control losses. Learning to set a stop-loss point to control risks is one of the basic skills that investors must learn. Many investors suffer huge losses because they do not set an appropriate stop-loss point, allowing mistakes to develop indefinitely, and the losses become increasingly larger. There are also some investors, even some market veterans, who set a stop-loss point when trading, but do not firmly implement it in actual operations, resulting in huge losses.

3. Lack of market knowledge. Some investors do not pay attention to learning market knowledge, always act on assumptions, and cannot distinguish the authenticity of information, resulting in heavy losses due to misinformation. There are also some investors who only apply the knowledge they learned from books without making distinctions, and eventually become the "chopped leeks." Gann emphasizes the knowledge of the market and practical experience, which must be gained through a long period of trial and error in the market to have some insights.