William Gunn and his golden rules of successful trading
William Gann's name has long been legendary in the financial world. Having begun his market research back in 1902, Gann became the founder of the brokerage firm WDGann and Co. in New York in 1908. Gunn continued his market research until his death in 1955.
William Gunn developed rules that, without exaggeration, can be called golden for a successful trader.
Rule #1: Pursue success
Aspiration trader to success is one of the most important factors in his work. It implies making certain efforts to optimize one's trading. A trader should always have both short-term and long-term plans of presence on the market. They should be corrected every day, it is desirable to keep the trader's diary.
Rule #2: The market owes no one anything
Everything depends only on the trader himself. Neither the market nor the broker is obliged to warn the trader about any important news or changes, and what to expect from them. It is noteworthy that Gunn himself has never subscribed to any news bulletins or recommendations.
The market gives the trader the right to buy or sell, but he does not care whether he earns or loses. The trader must have his own trading tactics and know how he should act in this or that situation.
Rule #3: Planning is the way to profit
Gunn always knew exactly what he was doing in the market. When trading, a trader must have a clear plan for entering and exiting the market. The plan must be meaningful and clear enough so that no ambiguous situation will mislead the trader. Without having a precise plan, the trader, in the end, starts to be guided by rumor, hope and fear.
Rule #4: Risk to Profit Ratio
The trader must calculate in advance the possible losses on each transaction, to determine a clear setting levels stop loss and take profit. Gunn recommended to keep the risk to profit ratio as 1/3.
Entry into the position should be based on time and a clear target for the price. If the price has not reached its target by a certain time interval, the trader should immediately exit the market.
Rule #5: Trade for yourself
A trader should not share his open positions with anyone. In Gunn's opinion, by opening a position and giving it to someone to discuss, the trader deprives himself of concentration and undermines his confidence in understanding the market.
Rule #6: Margin Risk
Under no circumstances should you open a position if the risk of loss is 10% of capital.
Rule #7: Double Top
The appearance on the price chart of the technical analysis pattern "Double Top" suggests the best place to enter the sale. Gunn recommended to consider figures on large timeframes and monitor the situation in the long term.
Rule #8: Double Bottom
Вместе с «двойной вершиной» — хорошая возможность последовать за начинающимся трендом.
Rule #9: Fibonacci Numbers
Gunn never commented on the use of the Fibonacci sequence, but actively used it, which was one of his secrets.
Rule #10: Choosing a broker
In fact, the meaning of electronic trading comes down to the choice of broker that provides the most comfortable conditions for trading: the maximum speed of execution, the lack of slippage, stable communication, etc.
Rule #11: Capital Diversification
Gunn recommends splitting your capital between different instruments. If you trade on the commodities market, invest not only in metals, but also, for example, in meat and grain. This will be your insurance against negative and force majeure factors.
Rule #12: Trading Positions
A trader can take three positions in the market: long, short and neutral, that is, he is out of the market. There's no need to be afraid of being out of the market. The market sometimes enters phases in which there is simply no normal signal to enter.