Education > Trading tools & strategies > 17 WD Gann trading strategies rules

17 WD Gann trading strategies rules

If you are a trader or have been studying and practicing technical analysis for some time, you have likely come across the name of W.D. Gann and his trading theory. But who was Gann, and why is he still sought after 60 years after his death? Let’s take a closer look.

William Delbert Gann was born on June 6, 1878. He began his career in finance trading at the age of 24 in 1902. Gann developed numerous technical analysis tools, including the WD Gann Angles, Circle of 360, Square of 9, Hexagon, and many others. Most of his works are based on astronomy, geometry, astrology, and ancient mathematics. These tools were so powerful that they are still widely used by traders today. Gann’s theory on intraday trading is one of the most successful methods for day traders.

Rules of WD Gann

WD Gann established several fundamental guidelines to be adhered to when trading, in addition to the numerous indicators and technical tools available.

  1. If the highest price for the entire week is achieved on Friday, it is likely that prices will be higher next week.
  2. If the lowest price for the entire week is achieved on Friday, it is likely that prices will be much lower next week.
  3. In a highly uptrending market, the weekly low is typically achieved on Tuesday.
  4. If the market is in a strong downtrend (where the main trend is down), the weekly highs are generally achieved on Wednesday.
  5. When the price crosses the high of the last four weeks, it is an advance indication of more higher prices.
  6. When the price breaches the low of the last four weeks, it is an advance indication of more lower prices.
  7. In an up-trending market, if the prices break the 30 DMA and remain below it for at least 2 consecutive days, it indicates a much greater correction (vice versa).
  8. If the market rises for 5 consecutive days, there is a high probability that a correction will last for 3 days (the ratio is 5:3).
  9. When the price starts rising from a particular level, Rs. 100 or 100% rise (whichever is earlier) becomes a strong resistance.
  10. When the price crosses the high of the last 3 days, it indicates much higher prices on the 4th day. Traders can buy it on the 4th day and place an SL order Rs. 3 below the last 3 days high (vice versa).
  11. A subsequent correction greater in both price and time magnitude than the previous correction is an advance indication of a changing trend.
  12. The 50% level of the last highest selling price is a strong support area, and stocks trading below it are not useful for investment.
  13. A price rising for 9 consecutive days has a high probability of a 5-day correction (ratio of 9:5).
  14. A Double Bottom and Triple Bottom signal on a monthly chart, with a minimum gap of 6 months, is an advance indication for mid-term investment.
  15. A Double Top and Triple Top signal on a monthly chart, with a minimum gap of 6 months, is not the right place for investment/entry and may lead to price fall.
  16. In a choppy or consolidation phase, a sudden volume spike is an advance indication of a likely change in trend.
  17. When a particular stock crosses the high or low of the last quarter (in the quarterly chart), it should be considered as an early indication that the underlying trend is trying to reverse.

It is crucial that you adhere to WD Gann’s trading rules when making any trade to ensure successful trading. These rules are of utmost importance, and it is essential to review them whenever you close a trade with a loss to identify which rule you may have violated. Avoid repeating the same mistake again.

Through experience and research, you will learn the value of these WD Gann rules. Observing and studying these rules will guide you towards developing a practical and effective trading theory in stocks, commodities, and currencies.

However, it is crucial to note that these rules serve as fundamental guidelines for trading and investing in the stock markets. Without proper strategies, your efforts may be fruitless. Therefore, it is necessary to have a well-planned trading strategy to achieve success in the market.

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