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GANN's 24 Golden Rules
Extracted
from " 45
years in Wall Street " one of GANN's last book and addition of personal
comments.
In order to win on
the markets the trader must have strict rules
and must follow them.
1) Divide
the capital, never risk more than one tenth of the
capital on an operation: The first objective of the trader is
too last long enough to be able to win. Then the risk on one operation
needs to be limited.
2) Use
stop-loss orders: Stop-loss orders should be adjusted
according to the variability and
the volatility of the market.
3) Do not
overtrade: The winning positions need time to perform to the
optimum. Do not try to recover quickly from losses. It will just add
more losses.
4) Do not to
let a
profit become a loss: It is psychologically difficult to
accept
that a gain can become a loss.
5) Do not go
against the trend: Do not try to anticipate the inflection
points of the curve. Do not try to predict the future.
6) If you
have a
doubt leave the market:
Do not stay in the market if you don't understand what is happening or
if the conditions of the market don't correspond with what you expected.
7) Trade on
markets that have a good liquidity: Forex is definitively
appropriate.
8) Do not
put all
your capital on only one value, only one sector, only
one market: Have a diversified portfolio
9) Do not
put limit orders, pay the market price: For that one I would
say that it really depends on your strategy, but the idea is "do not to
try to get few more dollars with a limit order".
10) Do not
close your position without a good reason: You had a good
reason to open the position, you need to have a good one to close it.
11) Save
money
for the emergency cases: Do not reinvest all your
benefits. A part of your gains should remain yours.
12) Do not
buy solely
to box a dividend: That applies only for the stock market.
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13) Do not
averages down. If you go against the trend and average it
down several times, you can loose everything.
14) Do not
be impatient either to open or close a position: You need to
follow your trading rules and be self-disciplined.
15) Avoid
the small
profits and the heavy losses: Cut the losses
quickly and to let run the profits whereas the behavior of the human
nature inclines to make the opposite.
16) Never
cancel a stop-loss: I would say except to put it closer wend
the price is going your way (trailing stop). Once you have fixed at the
beginning the
maximum loss, it is necessary to keep it.
17) Go in
direction
of the trend: The market is right always.
18) Avoid
entering and going out of the market too often
: Too many orders will decrease your benefits because of the
spread.
19) Do not
buy only
because the price is low: If the price is low, there is
probably a good reason for it.
20) Before
buying
more, await the break of a resistance: Before adding to your
position you need to have an extra favorable signal. Do not add too
much too quickly.
21) Choose
your
values well before building pyramids: As said above add to
the winning positions carefully, do not get too excited because of the
good position.
22) Manage
each order
separately: The profits of an order are not to
compensate the losses of another.
23) Do not
change your
opinion without a good reason: Follow with
confidence the plan that you have established. The emotional discipline
is
essential.
24) Avoid
increasing
the size of your poitions after a period of profits: If you
got several successes in a row it is probable that it will not last for
ever and that you will get a loss soon.
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