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“TABLE OF CONTENTS.
INTRODUCTIN ©.
THE POYCHOLOGY OF TRADING...
Mastering Hope, Fear and Greed”
Disciptina and Protactive Stops
Partial Positioning
HOH WARKETS MOVE a
Four Investment Stratagins
Tops, Bottoms, and Consolidations
Volume of Salas
Trends and Tread Following Techniques
THE CYCLE OF YEARS oe
Goonatrio Charts
Anglas..
Support and fesistance”
‘Akay From The 1x2 Angle
Angles and trong or Weak, Positions
Fast Angles and Thain Applications
Zero Angles
Illustrations of Price Squares
TRADING A DECADE oe ee
Gann's Decade Long Plan
The Road Map Applied
THE SQUARE OF NINE 2 ee
APPLYING THE CONCEPTS 6. ee
THE PLANETS AND GEOMETRIC VIBRATION. .
CONCLUSION 6s
APPENDIX
AURUEA
Us. steer DDD D Lilli
Overnight chart rt
Forecasting 6s
u
34
43
79
82
= 104
197
= 204
209
1 Bis
227
2838
INTRODUCTION
Th the years since W.D. cann's eareer ended, nany people have
aptenoted to dunticate, the ppadiotion and trading capabilitiog
GLEN ES! acame RaGuee tone Sten ceed many Teach, capehelatise
Which ae siaple ant esey’ to understands esis ethers’ are "nore
Gbsoure. viet’ become ‘apharont fran 8 quick overview ot the men’s
Retory isuthat hw dus "e'precighous amiune of work ite papers,
Sbcumlatea avers Lifetia of Study, tilted an grtire newly th
thenthey nore purvhated’ by Billy donee; Foam this ane fact, 2
San'be stid’ that’ there waa no Girgle "technique which produced’ the
Fetulte that Gann used Ye ne trading.
Teaay" jou can find nary andivifiets yro claim to have. found
one olapld Ley teat'was the’ cornerstone of aii ofthe proaietive
Gori "wnion me? Gang accomplished, but the “secrets ot Gann?
Bre'aany nunopaus” faucets of the man’s Workerand e-ones without
Af Gundort of generss warke aosutately Sia Weil all of the tina:
Tr yout Pancon For reading thie book ie fo find that one secret,
Posbibly'the “magic oquare-, or the vupitar. - Saturn aspects which
Seen You ta Mfectesk trade” every ties, then” yor wily be
sappointed. The purpose of this Book is ‘to giva, you a. grasp of
the, Uhncing techniauts. and, Growaage of “chia whlch ‘adnny and
Sthere sinee nin, nave uesd suscecerully in determining key dotes
fre prise evole' inthe future," Also, wane Go give you" onauh
Knowledge to he ‘suocbeeful th your own" trading! Bee
prevented herein, if'sssd property very ascurede 1n predicting
fowehesnpako,, daye, "and even’ ere Five, eatite perso’ sees “the
Waku’ whtsh will Lhange the direction ot The price movonwne An's
Beer otaarkets
Tn ay Fitteon years of gtudy of tha man*e work, 1 have
discovered simple tdcnmaues that Sh sna SP thenwallvas, "ave
talgable prodittive ‘toolet and have. conbined these teble ar tea
valuable prodistive (goles and have combined thnee, teks ay 19 3
HGMO Ground tr Gann'e werk, not aolngie tool, and not eo many
Toole that it becopes confusing. The promise which resulted in
Eefstegthod was" Fied cut whet workey wun to apply ity and then
T hope you will uge the sinple methods in your work, those
wath 4 nitinde anount Of efforts You wilt hays 2 doveve time. £0
Wile hetipds bute thoos ‘time and prices. whieh are. spparent tron
Srawung the ‘angiosy uoing the eyealeal courte and dotty the paste
artketbeloer Saleudetion®, ‘wil gave you tne tefocwstion you need
fe trades “Go not atterpt’ touoe all BF the aathode for every
Teados "$s #ind"overy oF division every renger or every high, for
PAGE 2
you will find that you haye too much information and it will oecone
Sonfuntng. "Et struggled thrauah the originalty. When T wae, Ueing
every techniques f found thet’? had too auch information "too any
squares, teo'miny counts to nake a doctsion-” Over. tho! yoars, {
Reve eittes’ durcigh the indivisual ‘methods, isolating the ohes
onion T Know Treaty trade from
Realisy that the information which cones Tron these techniquos
is only vagtul when one hae a knowledge of How ané nnen they Wark.
Goreaimy there are mony hinge to know, aod there are meny” cringe
fo consider, out the anin thrust ie to keep the work simple, ‘Don't
puch yourself to prove a turning point in tine, ‘merely because you
want it to be there. If your simple methods presanted herein, do
Tet show it, donst trade st "rhe trade nay be there, but any force
Te'when” you cam tind a trade easier tn srother stock or market?
lion sald thst gonius was one parvant inspiration and ninety
nine percent. perepiration, nd You wail have 10. work fo make this
sotnon a success,” It requires « good deal vof time, to cetablish
Grading charts and Keep ‘then up fo Gate, but, work reveals the
Tonards “The methods explained <n this bask are put to Use in the
Biddle’ and Iatter' chapters, in combination with tha “separate
Paokige ‘of charts, “‘terafcre, "you can sea how the toglé come
Rogether to give you sxcelieme ‘trading oppertunsties.
Turge you to try this eathod on Say eeock on commodity. an
giving you the, necessary. informacion te start your work, but you
GeMol non that dt works, oF realaas bow Le works Until you Use
the wethods yourself
Take ‘he tine to bring « chart up to date, then find the
turning points in tha past, and. find tha ones in the futuray and
you will"sea the method. fhare is no better way to prove this to
Yourselt Thin Dy Teuna it, "in a Gass: ie toa yeate of work op
ndrede of chats tovtind tha applications. cf pectic, rules. °F
would axpact thet it will also take you sone taney although this
Took otputd epeed the process: “Gnee'you have proven ite ou can
Erave fron it tn this text I neve attempted vo. recuce ‘all of
Gennes mothods down to. those which are easy ao use. ond work often.
‘Kasp R simple!
That is the rule
Why theae methods work, I will not attempt to fully explain.
Such an attempt would probably do nothing more than confuse. Let
ne brush that acide by saying that like many things in life, these
are excellent tools. You do not have ta know how or where a” hammer
wae Torged in order to drive a nail. But, if you have an intense
desire to know why it works, you ara in for years of study.
Tn oy stuoies of Gann's’ writing, Phave found that he wrote in
the game manner ag the ancient mystics, This method gives a major
promise, and possibly a minor pranige, ‘the truth is given, and from
that, you have to draw the conclusion. You have to’ earn the
kaonledge that is givan, a3 it is not spelled out directly. They
wanted ypu to werk far the knowledge. I studied tho ancient
qasters for years, and W.0. Gann wrote as they did. Perhaps, that
ie why it easy for me to read hie work, I knew that he was
speaking in syllogisms. Me did not give you the conclusion. What
PAGE 4
be did in the cave of the number ninety, or in virtually any of the
ather cases, was give you an idea similar to, "You can look far top
90 to 99 days after a tove etarte.* That is not 100 percant true,
if you take every move in a market or stack, and you look for top,
or @ change in trend 90 to $9 days after the atart of the move, it
going to happen only occasionally. But, there are circumstances
where it works almost perfactly.
One last point that is very important. The foundation to
succesatul trading ia knowledge of price movement and volune- the
ability to view a chart and know if thare is a probability of a top
or bottom the understanding of "blowoffs* and the opportunities
they represent. Therefore, a portion of this text will be devoted
‘to an understanding of pribe movanent.
‘THE PSYCHOLOGY OF THADING
UASTERING HOPE, FEAR AND GREED
Generally, when a trader writes ebout the psychology of
trading it 1s directly from his own experiences in the market.
Usually ‘there “is other added” information from the. trader's
Observations of the setione of ather traders, Woot, if not all of
These "perspectives cone’ from personal. experience, ‘and they
generally repeat in each individual "a trading patterns: , Wr Gann’
Hiret"book, written in 1928 and titled, ‘Truth of the Tiokers mas
just such 9 Writing. In this book he ‘emphasized the pitfalls to
duscesstul ‘trading which cone from hunan emotions,
T'teo have gone through most ail of the emotions which Gann
arecentad in’ tha? 1923 book- hope, fear, greed, the need far
Patience, and the need for both nerve (or courage) and knowledge.
Trading is un many waye an art rather than a selene. tho
importance af being able to master yourself is far greater than aay
syten of anslyeis. Tf you have a’ cystenstic approach that Tinds
Eraing gttueelens wnicn alll be right 89 percent of the Time, you
may still loose money. You have to be able to execute the trade,
ard this is where many traders go wrong.” Many cither wait too
Tong, which is a problen with courage on fear. Or ‘they don’t have
the patience to wait untai the time is right, and enter the trade
fa gariy.” The moet important part of trading the markets is
nacterang yoursel?.
Gann 3aid that you aust be prepared for hope, fear, and greed,
and you must be aware of when you are trading trom a basis of thesé
anotiona,
Successful trading requires virtually every trader to change
certain habite and attitudes. In most cates, identitying and
changing hese ateatuden tea di¢ticut propooktion. What makes you
Suooeeeful in business and life is ditforent than what makes you
Successful in trading. In noraal situations ‘success cones from
being able io contrpl sircunstances, subordinates, machines and 2
forth. You'maks “depisions, stick’ by’ thom, make, plano) work and
manage your “subordinates.” control is shat helps. make you
Succrscfl. If you sake decisions and you don't play out the plan,
fou Looge,) But the minket io dittaren’ ta that you cannot “sonttod
We market. You may find yoursel? trying te control it with
expectations, and thie will lead to trauble,
‘As you sant control the market, you must flow with it, You
yon probably find, if you have, not found this already, that you
Tava {to change yoursel? to trade successfully. Tha reasons Tor
This are numerous, and 2g 1 am pot a psychologist, I can only touch
upon thon Tt dame “that many things, thal, g/porson naturally
matures with, and learns fron years outoide of the markets, da not
apply. ta the markets. Everyone, I do not care who they ‘are, or
what they've done, has to change in some way to hocome 2 successful
Xrader Te just doesn't come naturally.
PAGE S
Of the mistakes that traders maks, emotion oan be one of the
areatest.” ‘Greed, the desire to gain qore than 2, podltion will
Raturally give is’ore of these probion aneae, Greed can cause one
fo overstay profitable position, You tay tind yoursoit thinking,
STC I jued moves three more points I've gota 100 percent. profitt
When you find yourcelf thitking in ‘thee feehiga, or routing. ~
Cheering fara Harker which as moving your direotion, be careful.
Areecond effect gros’ has upan many tradera is to cause them €3
Qvae position, orvtake a larger position in a trade than should be
fakan if good danay managomant Le being used. When you put more
inte" that" position than you kagw you can afford,” you may find
yourself ina panio to got our of what ould Stherwise be
profitable. trade
You should plan your trading in such a fashion ae to Koop
yourself out of Stressful situation.” {your norwal position is
fen percent of your trading account and you seo that great trade
Somig up, ard you put in titty percent ‘of your money, you wilt
pranably ganio if the trade. starve to move againet you. "You may
EXose out" such 2. trade beTore your plan is complete, before your
protective stop is hit, only 10 find you havo cold out of « Long
Position st ‘the Jow of 3 gounter trend navenont, a0 out of a shore
Poaition st the intra day high and that your plan you devised while
Tha narkote were not ¢rading ws correct after all. It 1s One
thing. to be “certain that a trade ig a good trade and take a
position, but it ie another thing, entirely, to be greedy and ov
pogittan’ in that trade. "if your wrong) you will loans tao much,
Bnd i? your ‘trade ia correot, you sift Wnd-yoursel? constantly
Goncerned with 1 and probably ‘Loose sight’ of the original plan:
Some individuals can 'warage theneelvee val in thes type ot
situation, but thie is not the norm, If you find that you aro
Concerned with 9 trade to the poitt of not being able to sleep, or
thinking of that one position constantly, greed 1s a problen. Over
positigning, or investing too much capital in a trade, can be a
Rraderve worst mistake.
Hope, OF expectations, Nill also manifest itself in euch
fashion as to fell. ag excellent trading plan. tt you ‘buy
Security “tn the hope that it will go us zn price and you will
profit, with no method or evidence, or buy on a ‘tip’, what you
fight think Lo a bit of inside knowlédge, then you hava catered the
market on the wrong Basis. Roaonbar, whan hope io the basis for
dhvastaent strategy- beware. Reason’ and evidence. should be tho
bacis for trading. A ssoand effect of haps ie when @ position
moves against you and you have fot Used 4 protective stop. “In this
Situation you kay find yourobit hoping that the price moves back,
replacing Zotion wth hope. *
Fear is another problem that auct be conquered, I believe
nost psychological problens are fear besed. rear’ of mincing the
move ali cause you Yo position early and iakely stopped out at the
Point You should be gotcrng pooitioned. Tt can caues you to trade
Eut'or's Long position near the Low, or exit @ short position cea
PAGE @
the high. On the other hand, @ healthy fear of the market ean help
you trade by a plan. Gann gaid that a fear of the market was the
first sign of a successful trader. On the other hand, you must rot
fear taking a loss. Respect of tha market helps to give you the
discipline to trade only when you have the right plan and
Circumstance, Gut, fear of taking a lone will often result in the
failure to taka a trade, So, here you hava to develop a balance
which gives you a respect of the macket, so that you trade from
Guidende ane plan, and courage to take "that trade’ when the tine
is eight.
fost traders cun into a problen when they nake a loving trad
When you make that losing trade and you take the lose, and you
don"t becone enotional abeut it, then you are doing well. “But it
you sake that losing trade, (which 19 inevitable), and you punish
yourself, or feel bad, Gr. start locking at your checkbook,
@tcstera, then you probably had better take ome time to assess
your situation
Plan to keep yourself out of trouble, Oo not involve your
self esteem in your trading, Try not to tail paople what you are
‘trading and why, because this Will involve your self esteem, and
you mil find hope coming into your mind. Try not to’ make
Bredictions of events trom your work. Qf course with this work,
You willl Find it hard to ‘not do ‘that, but If you avoid tefling
People what you feel will happen in the market, you will avoi
Gpectations "in your trading. If you have wads a cortain
prediction, your expectations of that happening wil! increase. You
wall want it to happen. Hope becomes involved again, and this will
uagie. your thinking. | By Keeping your thoughts to yourself, your
self esteom is not involved, and you will not have to tight that
peychological problem. Do your best to avoid the omotional
problens that trading can being on.
You will know that you have reaohed a point of bein
peyoholagically able to trada, when you ‘can maka’a plo ‘and ol
change it. When you can watch tho market move against you, with
your plan in actfon- your stop in the market, and not have the
Geaire to get out before the warket hite it, you are ready. You
should make your plan whon you are not emotionally involved in the
market. When the market starts to gyrate, if you have the urge to
Phange’ your plan and you don’t, then you are ready.
There. is a cycla that many tradere go through. Often, a
erador wall start dut with a feabondble plan. ‘He usea good obey
managenont and dosen't expect more fron a trade than it ML!
Teasonably give hin, He starts to maka money, only trading what he
should trade, and when he should trade it, Ho has respect for the
market, ‘but ‘no fear of taking a loss, or of trading from good
Ovidence when the tine is right. He begins by doing well, making
money, catching sone good moves in the stocks or options or
Sommiities, ahd he otarte To" fool ao if he te 2 pretty, good
trader.
‘At one tine on another, this trader looses his respect of the
warket. He begins to overpceition and lodse eight of the oripinal
PAGE 7
plan. We starts loosening yp on stops, and avoiding plans,
posvibly even ignoring his Work on’ the market because now he is
Gortain that he 1s right. The looses start to catch up mtn this
trader, and possibly at one tune on another, he gives back all of
the money he had page previously, Now, he starte aver again, with
a graater respect for the market. He goes back and ascumés the
original plan and the sycie’ ie completed
OF all of the valid tines to trade that I will give you in
this Book, and thove that you know or Mill learn for yourself over
Hise, ahold) there cone a/-Eine’ won you that, you are net veing
then) Gut are trading just fo trade, watch out.” ‘The market wil
have’ your money. When trading Seems silddanly to ba so easy, Where
baors it ‘seomad so hard, take a good look.” it 1s not eagy, and
you must do the work. Maintaining the alan, and having the
Patience to malt for tho setup to trade from 19 essential to making
money in the marker.
Frog our earliest days we are taught that to be wrong, wrong
in school, wrong our judgemeat of any situation, is undesirable-
bag. the’ idea ‘that being wrong is bad, mfich ost people carry
with then forever, mist not stop you from admitting that you are
‘rong an trading.’ "Being wrong in trading means ‘taking A 103%,
Rduigting defeat. Wa are taught in our youth that tbe wrong 8
fot acceptable, but in tha trading business, we are going to be
Wrongs flan fer At. Taka, the loca shen you are wrong and make, it
Unemgéional, “When you oan take 9 Lose and st is unemotional, then
you have reached the staga where you can trada successfully.
‘one wore problem that 12 caused by the psychology of the
individual, io having a bullish on boatioh Ding, T fave analyzed
ay on trading record for this and discovered that 1 have a three
3S ‘one tendency towards short trades. You may have a similar
fondency, or one towards long positions, but it is important that
you, realize your oom tendency.” In a BOLT market, my fearishnans
Aorks agains? me, while ina bear market, it worke for me. Thin is
just ona aore reason that T have found to trade from evidence and
plan rather than foglings about the market or stock.
‘The paychology of trading is an excaptionaliy important part
of the ducinege, aad is sonething that you should alvays be aware
of. "Hope, far, and greed, are major factors, and must be
conquared. ’ Expectations ano part of hope, and I would Like to say
Sorething about expectations.
Tr'd Zola you that. this was 2 book on how to play golf, and
that after reading this book; you could expect to go out an the pro
Your and make a Living, whet would you think? You would know that
Pellvould fave to put n'a’ lot ot practice, you would nave to play
‘urnanonts, and, if you have ever played golf tor money, you know
that you cah choke ona twp foot put. It is @ gama of matering
performance under pressure. Ik is paychology, as well as,
Knowledge, skill and practice. The sane io true Of trading,
Tn'this book Tan going to present you with tools, with setups
or situations that are Grasable, If you follow the method, taking
Only trades which are based on the setups, and use 2 good ‘trading
