Wednesday, December 30, 2009

Gann—28 Trading Rules

I’ve been reading a lot in Gann over the holidays, trying to make headway in understanding some of his obscure and bizarre ways of using numbers in his square of nine, etc. Regardless of what anyone thinks of that approach, the guy wrote some outstanding things about how to approach trading. I reread his 28 trading rules regularly. Here they are and we'd all do well to memorize and practice them in our trading.

1. Never risk more than 1/10th of your capital on one trade
2. Use stop losses
3. Never overtrade
4. Never let a profit run into a loss
5. Don’t buck the trend
6. When in doubt get out
7. Trade only in active markets
8. Do equal distribution of risks
9. Never limit your orders. Trade at the market
10. Don’t close out without a good reason
11. Accumulate a surplus. After a series of successful trades put some money into an account for emergencies
12. Never buy or sell just to get a scalping profit
13. Never average a loss. This is one of the worst mistakes a trader can make
14. Never get out just because you have lost patience or get in because you’re anxious from waiting
15. Avoid small profits and big losses
16. Never cancel a stop loss order after you placed it at the time you made the trade
17. Avoid getting into or out of the market too often
18. Be as willing to short as to buy. Let your object be to keep to the trend
19. Never buy because the price is low or sell because the price is high
20. Be careful about pyramiding at the wrong time. Wait until the asset is active and has crossed resistance levels before buying more and until it’s broken out of zone of distribution before selling more
21. Select the commodities that show strong uptrend to pyramid on the buying side and the ones that show definite downtrend to sell short
22. Never hedge. If you’re long one and it starts to go down, don’t sell something else short to hedge it. Take your losses and get out and wait for another opportunity
23. Never change your position in the market without a good reason
24. Avoid increasing your trading after a long period of success
25. Don’t guess at tops or bottoms. Let the market prove it. By following definite rules you can do this
26. Don’t follow another’s advice unless he knows more than you do
27. Reduce trading after the first loss. Never increase
28. Avoid getting in wrong and out wrong

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