WD Gann : The Man and His Incredible Trading Legacy

The name of WD. Gann has become legendary among traders and market technicians today. Tales of his phenomenal success in trading and his arcane, yet highly accurate, technical theories are widely known. Not so well known, however, are the particulars about Gann and his methods.

Who was this mysterious man who claimed to have discovered the secrets of consistently and accurately forecasting the markets? What discoveries enabled him to do this? Do his theories and techniques still apply in today's markets? More importantly, if they do still apply, can they be explained in a straight-forward, simplistic manner without the esoteric jargon and abstruse mathematical concepts that enshroud much of his work?

To begin, |et's explore a little of Gann's background. William Delbert Gann was born on a cotton ranch on June 6, 1878, in Lufkin, Texas. He displayed a strong aptitude in mathematics during his early strong aptitude in mathematics during his early years, completed a high-school education, and start-ed trading in 1902 at the age of 24. By his own admission, Gann‘s early trading was based on "hope, fear and greed," all of which he later realized were not compatible with a successful trading strategy.

”After losing significant sums of money," writes James A. Hyerczyk in his excellent work on Gann theory entitled Pattern, Price gr Tirne,2 ”Gann began to obsenre that markets followed mathematical laws and Certain time cycles. He was particularly interested in the connection between price and time, a relationship he referred to as the 'square* of price and time. l-le began studying this interaction diligently even traveling to England, India, and Egypt to research mathematical theory and historical prices.

"In developing his theories, Gann was undoubtedly one of the most industrious technical analysts. He made thousands of charts displaying daily, weekly, monthly and yearly prices for a wide variety of stocks and commodities. He was an avid researcher, occasionally charting a price back hundreds of years. At a time when most market analysis was strictly fundamental, Gann's revolutionary theories relied on natural laws of mathematics, time cycles, and his unshakeable conviction that past market activity predicted future activity.

In conducting his market research, Gann discovered a rule that would become the bedrock of his trading methodology a rule he called the "Law of Vibration/‘ which he claimed applied to the realm of natural science as well as the financial realm. Gann so refined this law that once a stock started to move higher or lower he was able to pinpoint the exact level to which a stock would rise or fait and often the exact time required to reach this objective.

He is famous, of course, for being one of the few to accurately forecast the stock market crash of 1929 and subsequent depression. in fact, he wrote a detailed month-by-month overview and forecast for the entire trading year 1929 one full year in advance (as part of his "Annual Stock Forecast" service to his newsletter subscribers); the vast majority of which was accurately fulfilled.

Gann was as versatile a trader as he was a successful one. Unlike traders of today who tend to specialize in a single area (like stocks or particular commodities), Gann made money trading in everything. He was a member of the New York Rubber Exchange,New York Commodity Exchange, New Orleans Cotton Exchange, and Chicago Board of Trade. ln his various books he describes his methods for accurately forecasting price trends of a wide variety of commodities, including coffee, sugar, cocoa, rubber, hides, hogs, eggs, cotton, wheat, rye, corn, soybeans, wool, Iard, and butter. lf there was an various books he describes his methods for accurately forecasting price trends of a wide variety of commodities, including coffee, sugar, cocoa, rubber, hides, hogs, eggs, cotton, wheat, rye, corn, soybeans, wool, lard, and butter. lf there was an exchange for it, Gann probably traded it, regardless of what it was. This goes to show the universality of Gann's phenomenal trading and forecasting techniques, which can be applied to any market.

By all indications, Gann's trading success was impressive. According to Hyerczyk, an analysis of Gann's trading record over 25 market days revealed that Gann made 286 trades, 264 of which were profitable. His success rate of 92.31% turned an initial investment of $450 into $37,000.** It has been rumored that over the span of his trading career, Gann acquired cumulative profits totaling $50 million, a figure which, however, is unsubstantiated. Brokerage statements indicate that he traded an account with a balance in excess of $2 miIIion and that upon his death he left an estate valued at around $5 million.

During his lifetime, Gann generously shared his knowledge and ideas with others, pennlng a total of seven books and numerous trading courses. Most of his more complex, intricate techniques were revealed in his commodity trading courses, such as the "Master Egg Course," among others. But the basis of his theories was revealed in more down-to-earth, perpetually popular volumes such as Truth ofthe Stock Tape and its companion, Wali Street Stock Selector. Other works include The Tunnel Thru the Air: Or Looking Back from l940; New Stock Trend indicator; How to Make Profits in Commodities; and 45 Years in Wall Street.

Overall, WD. Gann was arguably one of the most successful and accurate traders in the annals of Wall Street history. He set world records for leverage and trading profits on more than one occasion, and unlike most of his successful peers, he never failed to share his knowledge with an eager trading public, desirous of learning the proper way to acquire profits in the markets. He was as prolific and successful a teacher as he was a trader, a legacy which endures even today, as many of the worId’s top traders and investors continue to pore through his work and adapt Gann methods to modern—day instruments. Let us now take a look at some of the basic principles of Gann Theory, which continue to influence modern—day investors.