W D Gann is seen by many as a guru who found the mathematical code, to predict the future in financial markets and his theory is taken seriously by many but does it work? Let's look at his trading methods in more detail and look at there potential for profit.
Let's look at the life and works, of W D Gann and his trading strategies in more detail. Let's see of they can make you a profitable Forex trader from home.
Gann an Introduction
Gann is now dead but there are a huge amount of his disciples, selling everything from courses, to trading software and cashing in on his name but are they really cashing in or is Gann theory one which will help lead you to success?
After reading this article, you will come to the conclusion, its worth reading his notes on trader psychology but stay, well clear of his trading method - because its based on unsound logic and he never made money from it ( and we will look at this in a moment, as many people think he did) and we will look at better trading systems and strategies to use.
Not only, did Gann not make the money his disciples claim, their simply cashing in on the myth and you can be sure, they won't be trading any Gann trading strategies themselves. They just want to promote the myth to make money.
Gann Theory an Introduction
"If we know the cause of the effect, then there can be no doubt about predicting the future event or effect. I have always looked for causes and when once I determine a cause I can always be sure of the effect or future event which I predict." (W D Gann)
If this were true of course you would never lose a trade – if you are “sure” of the effect, it means, you should always make money as you know what the outcome will be. Therefore, financial markets would cease to exist and the reason why is obvious – Any financial market, moves on uncertainty NOT certainty! If we knew what would happen in markets in the future they simply wouldn't move. Of course, this is obvious to anyone apart from the disciples of Gann. Let's look at, ridiculous quote from Gann which is to do with the nature of market movement:
"If we wish to avert failure in speculation we must deal with causes. Everything in existence is based on exact proportion and perfect relationship. There is no chance in nature, because mathematical principles of the highest order lie at the foundation of all things. Faraday said: `There is nothing in the Universe but mathematical points of force.” (W D Gann)
I don't think Faraday, was thinking of humans when he made this quote – he is dealing with science and human behaviour is NOT scientific in absolute terms at all.
Gann believes that humans conform EXACTLY to some higher force which makes prediction a sure thing. We know that's not true because if it were, we would win every trade but we already know if this was possible, the Forex markets or any other financial markets for that matter would not move at all. Now lets move to the most ridiculous idea behind Gann's theory of price movement.
What is price measured in?
You would probably reply, dollars and cents or the local currency you are dealing in but Gann of course has a different view. Forget dollars and cents - price is measured in time, here is his view:
"TIME is the most important factor in determining market movements and by studying the past records of the averages or individual stocks you will be able to prove for yourself that history does repeat and that by knowing the past you can tell the future. There is a definite relation between TIME and PRICE" (W D Gann)
The above is complete nonsense price by its very nature is just off the wall but so to is the whole trading strategy and what it contains so let's take a look at it in more detail.
Gann Trading Methods and Techniques
Gann's method combines the Fibonacci number sequence, astrology, angles and a huge number of chart formations which all require subjective judgement by the users which seems odd if prices are moving to a natural law which he discovered because you would simply follow the same equation all the time but this is the world of Gann trading – its based on logic which clearly isn't true and doesn't work.
Gann is dead now but there are a huge number of sellers of Gann tools,software, courses, seminars, indicators and of course a vast number of books which he wrote. The acid test of any system is – did it make money?
Do The Methods Make Money?
Gann was supposed to have amassed a fortune of over 50 million dollars and had an accuracy on his trades of over 80% but there is no evidence to support this and I was interested to read an article in which his son, put his fathers estate at a more modest $250,000 when he died. His son also said that his father did not support his money from a trading account but by selling courses and books
If you still want to try his trading methods do it in a demo account first, before using real money and you will see, this so called scientific method of market movement which should predict the future EXACTLY as that's what scientific methods should do – doesn't at all in fact its a theory which simply doesn't work.
We have looked a Gann, Fibonacci and Elliot Wave in our scientific scam articles, where vendors sell the idea of universal law and a code to beat the market and its actually surprising how many sensible people take Gann's theory and other systems, based on prediction seriously. If you want to make money with your trading signals, make sure you get a trading system based on trading the odds, rather than universal law which doesn't apply when trading currency markets.