There are numerous Gann trading systems sold online and Gann software programs are big business but before buying one, you should consider the myth and the reality. The disciples of W D Gann who sell systems and software, are keen to tell you how successful he was as a trader. Many say he had an 80% success rate and make profits which were in excess of $50 million dollars but this is not true. An interview with Alexander Elder in his book “Trading for a Living” his son, gave the reality of Gann's success.
Gann's Trading Success the Reality
His son stated that when his father died in the 1950s, his entire estate was valued at around $100,000 which is a big difference from 50 million and the estate also included his house. His son also stated his father wrote and sold courses to make extra income because he couldn't make enough money trading.
Logic which Clearly Doesn't Make Sense
If you look at the Gann trading software and systems sold online, the vendor will always tell you that's predictive and they stress that markets move to “natural law”
Gann believed all natural phenomena are cyclical and this includes any financial market.
This is to a degree true, we all know that an earthquake will hit Japan - but we cant predict exactly when. If markets really could be predicted, the market would no longer exist as we would all know what would happen beforehand and there would be no market. Financial markets are volatile and move on uncertainty and that's why they exist.
Gann's Trading Strategy
Gann's theory is totally subjective and NOT a scientific and contains some rather odd elements and here are just a few:
One of the basics of Gann theory is that price and time must balance.
He came to the odd conclusion that - a unit of price equals a unit of time. He would take a high in price, convert the price into a period of time and look forward and when the specified time is hit, price and time are squared and the market changes direction – which is rather amusing and simply not true.
Gann also used the Fibonacci method of trading which was never designed to be applied to financial markets. The method was originally devised by Leonardo Fibonacci back 1202 and sequence and was created to solve a mathematical problem - How many pairs of rabbits can be produced from one single pair, if each month each pair produces a new pair, which, from the second month, starts producing more rabbits? Its laughable that traders really think it can help them make money.
You also get lots of geometry ( i.e. various angles, fans, retracements, the Gann wheel, cycles etc.) and astrology (yes astrology!). When you use all these Gann trading techniques, you end up having to be subjective in their application which makes a Gann trading strategy one which is not scientific.
Consider This:
If a trading method is truly scientific - it should have set rules which never change and work all the time and this cannot be said of, ANY of the Gann trading strategies sold by his legion of disciples. Of course if there was anyone who knew the secret of trading success with scientific accuracy and they could make money all of the time, they wouldn't bother you by selling you the trading system – they would be making to much money and wouldn't have to sell it to you.
Final Words
Always be wary of predictive trading systems and in terms of Gann Trading systems many investors think there the “holy grail” which can make them rich in FX trading but be aware of some of the facts behind the hype before you buy one.
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