Gann rules of trading were devised by William Delbert Gann (June 6, 1878 – June 18, 1955), who was a legendary Wall Street trader with a 92 percent win rate.

Those schooled in technical analysis will have heard of Gann angles and Master Charts, known as the Square of Nine. 

Gann
S&P 500 returns 2019

Gann rules of trading were devised by William Delbert Gann (June 6, 1878 – June 18, 1955), who was a legendary Wall Street trader with a 92 percent win rate

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Gann was a trading legend of his age. In the many books, he wrote Gann noted that every stock has a different walk, similar to how every human walks differently. Some stocks will reach resistance and make a clean breakout to the upside. Other stocks will hit resistance price level, then fall back retest and repeat the price action over several times. Gann suggested that traders need to find themselves in harmony with the stock’s vibrations. 

While the jury is still out on the relevance and value of Gann’s work, which uses ancient mathematics, geometry, astronomy, and astrology, Gann rules for trading are valuable for all aspiring traders, investors.

William Gann - Stock Different Walk

Gann noted that every stock has a different walk, similar to how every human walks differently

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Gann rules for trading were developed over 45 years of trading in Wall Street

Here are Gann rules, for aspiring traders

  1. Gann recommends Dividing your capital in10 equal parts, never risk more than one-tenth of your capital on one trade.
  2. Use stop-loss orders. Always protect a trade when you make it with a stop-loss order.
  3. Gann believes you should never over trade, which would be violating your capital rule by taking too many positions or too large positions. 
  4. Don’t let a profit turn into a loss after. So, after you have a profit of three points or more raise the stop-loss order so that you have no loss of capital to a point of breakeven after covering broker expenses.
  5. Don’t buck the trend being aware of the trend. Gann recommends trading according to trend. Be wary of buying a downtrend. If the market shoots up don’t rush to the short market. Never buy or sell if not sure of the trend.
  6. When in doubt don’t get in and get out. If the opportunity doesn’t tick all your boxes and meet the rules better to be on the sideline.
  7. Trade active stock, commodities stay out of slow dead ones.
  8. Gann recommends equal distribution of risk. Trade-in 4 or 5 stocks and avoid tying up your capital in any one stock.
  9. Never limit your orders or fix a buying or selling price. Sell at the market.
  10. Don’t close trades without a good reason. Let profits run.
  11. Accumulate a surplus to use as an emergency or time of panic
  12. Never buy to get just a dividend 
  13. Never average a loss. 
  14. Avoid taking small profits and big losses.
  15. Never cancel the stop-loss order after you have placed it at the time you made the trade. 
  16. Avoid getting in and out of the market too often.
  17. Gann believes you should be just as willing to sell short as you are to buy. 
  18. Never buy just because the stock is low or sell because the price is high 
  19. Gann suggests you should be careful about adding to your position at the wrong time. Wait until the stock is very active and has crossed resistance levels buying more.
  20. Finally, Gann recommends that you should avoid increasing your trading after a long period of success.
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