Gann moved to New York City in 1908. He opened brokerage offices at 18Broadway and began testing his theories and techniques in the market.Within a year, it was clear to others that Gann’s success was based onmore than just luck. A 1909 article in The Ticker Digest explained that“… Mr. Gann has developed an entirely new idea as to the principlesgoverning stock market movements.”
Developed an Entirely New Idea
Gann moved to New York City in 1908. He opened brokerage offices at 18 Broadway and began testing his theories and techniques in the market. Within a year, it was clear to others that Gann’s success was based on more than just luck. A 1909 article in The Ticker Digest explained that “… Mr. Gann has developed an entirely new idea as to the principles governing stock market movements.”
[From an article in the December 1909 issue of The Ticker and Investment Digest reprinted in the W.D. Commodities Course, Lambert-Gann Publishing Co., Inc., Pomeroy, Washington, p.178.]
In this article, Gann asserted that most traders enter the market without any knowledge or study, and that most eventually lose money. He explained that he noticed a cyclic recurrence in the rise and fall of stocks and commodities, and decided to study and apply natural laws to trading strategy. Gann indicated that months of studying at the British Museum in London revealed what he called the Law of Vibration.
This law determines the exact points to which a stock would rise or fall, and predicts the effect well before the Street is aware of either the cause or the effect. Beyond this vague explanation, Gann was reticent about his strategies and unwilling to explain his theories in any detail.
Although past success is not an indication of future results, Gann’s trading was extremely successful, at least to a point. An analysis of his trading record over 25 market days revealed that Gann made 286 trades, 264 of which were profitable. His success rate of 92.31 % turned an initial investment of $450 into $37,000.
A colleague of Gann’s said, “I once saw him take $130.00 and in less than one month run it up to over $12,000.00. He can compound money faster than any man I ever met. “It is not surprising that the press concluded “… such performances as these … are unparalleled in the history of the street.” Although Gann’s theories were apparently profitable at times, he was equally subject to the potentially substantial risk of loss that is inherent in commodities futures trading.
Gann issued annual market predictions of major moves and exact support and resistance levels. Newspapers around the country kept track of his predictions for 1921, 1922, and 1923, substantiating his accuracy.
In January 1929, he issued an annual forecast that read:
September- One of the sharpest declines of the year is indicated. There will be a loss of confidence by investors and the public will try to get out after it is too late … A “Black Friday” is indicted and a panicky decline in stocks with only small rallies. (Fig. 2)
His facility in analysis and prediction extended to areas other than the market. He predicted the exact date of the Kaiser’s abdication, the end of World War I, and the elections of Presidents Wilson and Harding. Gann also predicted the occurrence of World War II thirteen years in advance and described the stealth bomber sixty-one years before its invention.
Gann’s original reticence about his success later turned into an almost religious fervor to share his knowledge. He had begun writing during his trading career, starting with the Truth of the Stock Tape, written in 1923 (originally published by Financial Guardian Publishing Co.; reprinted by Lambert-Gann Publishing Co.) This book was intended to help traders analyze market activity using a standard stock tape. In 1927, he wrote The Tunnel thru the Air: Or Looking Back from 1940 (originally published by Financial Guardian Publishing Co.; reprinted by Lambert-Gann Publishing Co.). This seemingly autobiographical novel provides insight into Gann’s trading theories and his morals. (It also includes his predictions of World War II and the stealth bomber.) He went on to write books and courses explaining his new discoveries, including New Stock Trend Indicator, How to Make Profits in Commodities, and 45 Years in Wall Street (originally published in 1936, 1942, and 1949, respectively; all three books were later reprinted by Lambert-Gann Publishing Co.). He also created home study courses for stocks and commodities and taught weekend seminars to explain the use of special price and time calculator tools he had invented. These materials were considered valuable enough that in 1932 people were paying $1500 for his home study commodity course, and $5000 for his master price and time calculator seminar.
Gann continued to refine his techniques and teach them to others until his death on June 14, 1955. From notes and papers, some of which were dated just two weeks before he died, it is evident that Gann was continuing his pursuit of a perfect trading system. For example, there is written evidence that he was developing a three-dimensional chart that incorporated price, time, and volume and how they applied to the market.
Since his death, rumors of a $50,000,000 fortune have circulated throughout the futures and stock industries. However, this figure is unsubstantiated by the material that was left after his death. In fact, the first mention of this amount was in a 1982 Commodities Magazine article. For one thing, market movement and volatility did not offer such an opportunity. Also, brokerage statements indicate that he traded an account with a balance in excess of $2,000,000, and his will, filed in Miami, indicates a figure considerably below $50,000,000.
Most of the evidence of Gann’s trading success is found in the numerous articles by newspaper writers who witnessed and verified his short-term trading activity. These articles, which have been reprinted in many of his books, highlight his trading successes in terms of both accuracy and trading results. Since Gann was a great promoter of his trading books and courses, only his successes are highlighted. Although his losing streaks and major losses are never cited. Gann always warned about the danger of trading without stop-loss orders.
Following Gann’s work in chronological order shows that he experienced losses when he first started to trade. In addition to trading losses, Gann also lost money in bank and brokerage firm failures. These events probably played a major part in his desire to succeed in the market. Like many traders today, Gann initially derived income from selling his advisory service and his books while simultaneously trading. His obituary lists him as an author and a stockbroker; as his popularity and success grew, however, it is probably safe to assume that he turned more of his attention to trading.
[Ibid., p.180.From “1929 Annual Stock Market Forecast” in Truth of the Stock Tape (originally published in 1923 by Financial Guardian Publishing Co.; reprinted by Lambert-Gann Publishing Co.), p.36.]
As he got older, his health began to fail, which made writing and lecturing very difficult. During this time, he sold his publishing rights to Ed Lambert and formed Lambert-Gann Publishing. Based on this business deal, he was able to maintain some income by reprinting his books and courses, but, in my opinion, he focused more attention on deriving an income from the market. In May 1954, he stated “I am nearing my 76th birthday and am writing this new course of instructions, not to make money (for I have more income than I can spend)…. “
[From the W. D. Gann Commodities Course, Lambert-Gann Publishing Co., Inc., Pomeroy, Washington.]
Based on the physical evidence left behind and the substantiated articles highlighting his trading activity, Gann did trade the markets successfully but did not amass the huge fortune alleged by rumor. Nonetheless, Gann Theory is still applicable to today’s markets, however, the analyst has to be able to study and experiment in order to capture the essence of what Gann was trying to do.
If you enjoyed reading this article then it is highly suggested that you read Pattern, Price & Time (Using Gann Theory in Trading Systems) and subscribe to my newsletter, The Pattern Price Time Report. The combination of these publications will give you a better understanding as to how to apply Gann analysis to today’s new markets.
Copyright @ 1998 by James A. Hyerczyk