Preface to The Trading Methodologies of W.D. Gann: A Guide to Building Your Technical Analysis Toolbox
This chapter is from the book
This chapter is from the book
This chapter is from the book
Preface
- “Life affords no greater pleasure than that of helping others who are trying to help themselves.”
- —W. D. Gann 1
When I was 16 years old, I was doing chemistry homework one night and stopped in my father’s office to get some assistance with my assignment. I saw my father studying a graph of some sort displayed on his computer screen. I asked him what he was looking at, and he said it was a chart plotting the changes in a stock price; he was using the chart to help him trade the stock. When I asked how he was doing that, he explained that he was using the mathematical relationships present in the stock’s price history to help him determine whether the price of the stock would likely go up or down so that he could buy or sell shares of the stock accordingly.
I was intrigued. (I’ve always been a “math geek,” so that wasn’t surprising.) I told my father that I wanted to know more about this type of financial analysis. I asked him about the possibilities of learning more about it in college, and he told me that the subject was not very popular and that I likely would not come across it while at school. However, he did offer to help me learn about trading through books and by following his stock charts. Over the next few months, he gave me his old edition (printed in 1976) of Gann’s How to Make Profits Trading in Commodities. He told me to read that book over and over and glean Gann’s methods from it. Seventeen years later, he gives me the same advice—keep studying the works of Gann’s great mind and incorporate what I learn into my own trading plan.
Back when I was in high school and college, as a young person with no experience with the markets, I had to teach myself the methods presented in Gann’s works. I did this by synthesizing the concepts into smaller pieces that I could grasp. With knowledge gained through these smaller tenets, I annotated countless charts both on my computer and by hand. I then synthesized into my own trading plan the buy and sell signals and trade management concepts that I understood and witnessed, and I continued to collect examples of charts that illustrated the relating theories. I even began to create market newsletters for myself, focusing on one security at a time and looking at its key price points. This was all to help me better understand Gann’s main points and methods so that I could profitably apply them to my trading.
I eventually obtained my Chartered Market Technician (CMT) designation, administered by the Market Technicians Association (www.mta.org). I then worked as a professional technical analyst for several years. However, what I learned from Gann’s teachings has remained my prime trading guide.
The chapters ahead contain my humble attempt to present my self-taught interpretation of some of Gann’s major works. His writings are among the most esoterically written trading and investing materials out there. However, over the course of my study, I have been able to make them my own. Hopefully, the research I’ve done into Gann’s trading methodology will enable you to grasp the concepts quickly and incorporate them immediately into your own investing/trading.
Anyone who has looked at Gann’s works sees that he used many chart examples to illustrate his trading rules and philosophies. I do the same, and I expand the realm to include securities that many of us observe regularly. I apply the trading rules and ideas to modern charts. You’ll likely see that, among the charts I use, many of them are drawn from market observations made after I began conducting research for this book (December 2010).
I hope you, the reader, find that this helps you improve your own trading toolkit. My goal is not to make you a Gann expert through this book alone: I believe that trading education is an ongoing process and can’t come from any one person or resource. I do, however, hope that I am speaking to the part of you that is akin to the 16-year-old I once was—eager to venture into a deeper study of Gann’s materials for the most complete approach to this master’s investing methodologies.