The 28 Gann’s Rules to trade successfully in financial markets

28 Gann's rules

The 28 Gann’s Rules to trade successfully in financial markets

The 28 Gann’s Rules.

28 Gann's rules
W.D.Gann

 

The 28 Gann’s Rules: comment extracted from the book ” The Mathematical Geometric Mechanics of Financial Markets “.

1) “Divide the reference capital by 10 and invest 1/10 of it”.

We have described in the previous chapter (reference capital) how to apply this simple Money management rule.

2) “Always use Stop Loss, from 1 to 3 Units, never more than 5”.

We have commented in the previous chapter the Risk Management percentages.

3 ) “Limit the operativity” .

We have seen in the chapter of the “market psychology” how the simple rule to stop after two consecutive Stop Loss avoids going into Over-trading state when we are in a negative cycle.

4) “Do not allow a profit operation to turn into a loss”.

Stop Loss serves to protect our reference capital and must be transformed into a stop-profit.

After calculating the time signal and entering the order, we will wait for the prices in the third time unit break up (it can be a weekly, monthly or daily bar) and the Stop Loss will raise on the minimum of the third bar following the time Set Up. Following any further bullish break, the stops will raise (now they will be called Stop Profit and no longer Stop Loss) on the minimum of the next bar.

So if the market were to reverse trend direction, our profit will still be safeguarded.

The Gann’s 28 rules must be integrated into technical theory.

5) “Study the operation to perform”.

As we have seen previously, entry and exit from a market must always be coherent with our trading plan previously studied.

6) “Do not operate in doubt”.

If the trading plan does not have the necessary data for its completion, it is better not to operate, to change the bargaining market.

7) “Do not operate on active markets”.

8) “Balance the operativity”.

Since in some circumstances the markets have no directionality or are in the positive/negative side, it is better to study more markets at the same time to have always a general Out-Look on the most directional ones. (We recommend 1 currency cross, 1 index, 1 commodity)

9) “Do not use a pre-established entry level“.

Every historical moment of a market has its peculiarities, so on some occasions it is not ‘possible to buy on weakness for example, but it will be necessary to buy into outward protrusion that is with a “order at market”.

10) “Do not leave the market without a good reason”.

This is a fundamental point on which reflects a few seconds.

What is the trader’s main purpose in an operation?

At first the answer would be to earn as much as possible.

This is important, but it is a goal resulting from another fundamental rule: stay in trend as long as possible.

Here because we could leave the market only for an objective expected from our plan prepared in advance. The result in terms of earnings is properly a consequence of maintaining positions throughout all the trend.

To reach this target, the technique is not enough: it is also necessary a psychological development of the broker.

11) “Put aside a stock”.

When we are making profits, it is good practice to leave 20% of the earnings on the account to increase our reference capital.

12) “Do not enter the market for low profit trading”.

We have seen above that we need to enter the market and remain in trend as much as possible, contrary to those who operate for a few profit ticks .

trading books
The Mathematical Geometry Mechanism of the financial markets
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