W.D.

GANN MASTERFILE: Quotes Related to Self-Mastery

HUMAN NATURE A successful trader studies human nature and does the opposite of what the general public does. *WEAKNESS OF HUMAN NATURE If you will only study the weakness of human nature and see what fools these mortals be, you will find it easy to make profits by understanding the weakness of human nature and going against the public and doing opposite of what other people do. In other words, you buy near the bottom on knowledge and sell near the top on knowledge, while other people who just guess do the opposite. *THE HUMAN ELEMENT *Greed and desire for large gains do not change. They are inherent elements of human nature, and it is the human element that beats the average man and causes losses in the business of investment or speculation. The human element prevents a man from taking paper profits when he has them. He hopes and wants too much. When a man has a loss, he hopes and refuses to sell because he expects a rally that does not come. The trouble is he does not face facts. He hopes for rallies and finally when hope gives way to despair, he sells out, and often at the bottom. Never trade when you are scared, and never trade just on hope. Success can only be attained by following definite rules. Too much hope is more dangerous than fear and will leave man in greater disaster. HISTORY: STUDY OF THE PAST When you see the clouds gather you know that it is a sign of rain, and you seek shelter, because experience has taught you that certain formations of clouds invariably indicate rain or storm. When you see the same signs in the stock market that have always meant distribution in the past, you should take it as your warning, stand from under, and protect yourself against the decline. *THREE FATAL MISTAKES (OVER-TRADING, NO STOP LOSS, AVERAGING A LOSS) *Three fatal mistakes Every trader should remember that the weakest point of all is overtrading, and the next, failing to place a stop loss order, and the third fatal mistake, averaging a loss. Eliminate these three mistakes and you will make a success.

DEFINITE RULES

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In order to make a success trading in the commodity market, the trader must have definite rules and follow them. *28 RULES OF W.D. GANN Distilled from 28 Rules of W.D. Gann 1. Amount of capital to use: Divide your capital into 20 equal parts and never risk more than one-twentieth (5%) on any one trade. 2. Always use a stop loss order. 3. Cut your losses and let your profits run. Avoid taking small profits and big losses. 4. Never overtrade. 5. Never average a loss (adding to a losing position) 6. Do not buck the trend. Never buy or sell if you are not sure of the trend. 7. When in doubt get out (lighten up). 8. Trade only in active markets. 9. Equal distribution of risk. Avoid tying up all your capital in any one commodity. 10. Do not use limit orders. 11. Never buy or sell just to get a scalping profit. 12. Avoid getting in and out of the market too often. 13. Be just as willing to sell short as you are to buy. Let your object be to keep with the trend and make money. OVER-TRADING-RISK MANAGEMENT (IGNORANCE/GREED/LACK OF DISCIPLINE) The first point to consider in operating any method on the commodity market is the amount of capital required, with which you can trade and never lose you capital over a period of 5, 10 or 15 years, and be able to make profits. A method that will make profits and never lose your capital is the kind of a method that every man should follow to make a success. CAUSES OF OVER-TRADING Ignorance/Greed/Lack of Discipline/Wishful Thinking/Pride/Fatigue (Bad Judgment) *STOP LOSS ORDERS *When you make a trade, it must be on a good rule and for a good reason. There must be the possibility of a reasonable profit within a reasonable length of time. Remember one thing, you can be wrong when you make the trade and it can go against you. Therefore, your loss must be stopped. *DO NOT BUCK THE TREND: POSITION TRADING *Let your rule be to go with the main trend and never buck it. If you dont know what the trend is, dont get in the market. If you will study the rules I give you and go back over the records far enough, you will convince yourself that profits can be made by following rules and that you cant miss making money if you go with the main trend. You will learn that there are times when it will pay you to stay out of the market and wait for a definite indication and a real opportunity, which is sure to come if you wait.

Copyright 1990-2010 Gann Global Financial All Rights Reserved

*You will always make the most profit by following the main trend and playing the long swing. You can never make much money jumping in and out of the market trying to scalp it. If you will put in time and study to determine the main trend, and then follow it the length of time that it should run and not get out until you get a definite indication of change in trend, you will make big profits. It is much better to make 3 or 4 trades each year and make big profits, than it is to try to make 100 to 200 trades a year and be wrong half the time, and finally wind up with a net loss. *You will always make the most money by following the main trend of the market, although to say that you must never trade against the trend means that you will miss a lot of intermediate moves which will make big profits. *PATIENCE: WAITING FOR A TRADE SET-UP *This is one of the very important qualifications for success in trading in commodities. First, you must have the patience to wait for an opportunity to determine a definite buying or selling point. *Remember you often make money by staying out of the market and waiting for an opportunity. *PATIENCE: EXITING A PROFITABLE TRADE *When you make a trade, you must have the patience to wait for opportunities to get out right, or to make a profit. *PATIENCE: TIME TO STAY OUT OF THE MARKET This is something important for everyone to know. You cannot make money by trading in the market every day or by getting in and out every day. There comes a time when you should stay out, watch and wait until you determine a definite change in trend. Long periods of rest and relaxation protect your health and help your judgment which will result in profits later. A study of market movements will convince you that the market has its periods of rest. Often the market has a resting period when it is a bull market and does not react much, but it consumes considerable time before the upward move is resumed. The same applies in a bear market. Often a commodity will decline and stop, move up and down in a comparatively narrow range and not have much advance, but it is simply holding, hesitating, resting, and getting ready for another downward move. In these time periods of narrow trading markets, you will make money by staying out of the market and waiting for a definite indication of trend. Once you are out of the market, you can judge it from an unbiased standpoint and form a clear picture of its future course, but when you are in the market, you are often influenced by your hopes and fears because you want to see the market go your way. When you are out you see the market as it is and it makes no difference which way it goes because you are ready to go with the trend when it changes.

*PATIENCE: TIME LIMIT TO HOLD FOR A PROFIT

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You can be wrong when the commodity does not go against you. That is, it can remain in a narrow trading range for a long time. Therefore, you should be prepared to get out when the commodities show they are not going to move. *KNOWLEGE *Knowledge Brings Success. There is only one key which unlocks the door to big profits and that key is knowledge. Money always comes to knowledge. *I cannot say too much about the gaining of knowledge. You cannot get knowledge without spending time to study. You must not look for a quick and easy way to make money in the commodity market. *I have more income than I can spend for my needs, therefore, my only object in writing this book is to give others the most valuable gift possible KNOWLEDGE. *Would I not be very selfish when I have a knowledge that can be used by thousands of people to protect them against losses and help them make profits, if I refused to sell it to them? *King Solomon, credited with being one of the wisest men that ever lived, chose knowledge and understanding above everything else. Wisdom is the principal thing: Therefore, get wisdom and with all thy getting, get understanding. STUDY Time spent in study of price, time and past market movements will give you a rich reward. HISTORY: STUDY OF THE PAST If I have the data, I can tell by the study of cycles when a certain event will occur in the future. The limit of future predictions based on exact mathematical law is only restricted by lack of knowledge of correct data on past history to work from. If you want to make a success, your object must be to know more. Observations and keen comparisons of past market movements, will reveal what commodities are going to do in the future, because the future is but a repetition of the past. HISTORY: WHY KEEP A RECORD OF PRICES You should keep charts of records of past market movements because your memory is too short. By studying past history and knowing that the future is but a repetition of the past, you can determine the cause according to the time and conditions. Sometimes it is necessary to go a long way back to determine the cause, because you must study war, its effect, the conditions before war and what follows.

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*WHY KEEP A RECORD OF PRICES: PERSONAL & CROWD BEHAVIOR *The average mans memory is too short. He only remembers what he wants to remember or what suits his hopes and fears. He depends too much on others and does not think for himself. Therefore, he should keep a record, graph or picture of past market movements to remind him that what has happened in the past can in will in the future. He should not allow his enthusiasm to get the better of his judgment and buy on hope, thinking that there will never be another panic. Panics will come and bull markets will follow just as long as the world stands and they are just as sure as the ebb and flow of the tides, because it is the nature of man to overdo everything. He goes to the extreme when he gets hopeful and optimistic. When fear takes hold of him, he goes to the extreme in the other direction. TRADING ON RULES AND FACTS You have to trade on good reasons, on basic facts and rules that have proved successful in the past. Trading on hope or fear will never help you to make a success. I have written about this often in all my books, and I feel that I cannot repeat it too often. The average man or woman buys commodities because they hope they will go up or because somebody advises them they will go up. This is the most dangerous thing to do. Never trade on hope. Hope wrecks more people than anything else. Study the market and determine the trend. Face the facts, and when you trade, trade on facts, eliminating hope. SUCCESS: PLANNING AND RULES The difference between success and failure in trading in commodities is the difference between one man knowing and following fixed rules and the other man guessing. A definite plan: Make up your mind to have a definite plan or aim in the future. Decide to follow rules when you buy or sell commodities. WATCHING THE MARKETS If you are trading in order to participate in the legs up and down, you do not need to watch the markets during market hours.

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