William Gann is an American economist and trader born in 1878 and died in 1955.
Gann was one of the first speculators on the financial markets and his theories on stock exchange cycles are still famous today.
In the book "45 years on Wall Street" Gann identifies "the 24 golden rules to be profitable on the markets".
Let's see them together.
1) Divide your capital into 10 equal parts and risk only one per operation at most.
2) Always use the stop loss.
3) Do not over-export (overtrade), because you would violate the rule N.1.
4) Never allow a profit to become loss. To do this raise your stop loss (or lower it if you are on the downside) as prices go up (or fall). In this way, the eventual inversion of tendency will liquidate you while you are still profitable.
5) Always follow the trend. Do not think to anticipate it. Do not intervene neither in purchase nor in sale if you are not sure of the direction of the market or of the single title.
6) If you have doubts, abstain from any operation.
7) Take action only on active securities. Forget all that does not show signs of life for a long time.
8) Distribute the risk on four to five different titles. Avoid putting all the eggs in one basket.
9) Do not limit your orders. When you have decided, buy or sell at best.
10) Do not leave a position if you have no reason. Follow the trend protect yourself with a stop loss.
11) Accumulates a surplus. After a certain number of successes, put some money aside and use it in emergencies or during periods of panic.
12) Never buy to cash a dividend.
13) Do not rationalize a loss. If the market is in the opposite direction to yours, do not say that it is a good opportunity to increase your purchases (or sales if you are on the downside). You just have to get out of your position.
14) Do not enter or leave a position only because you have become impatient.
15) Avoid making small profits and big losses.
16) Never delete a stop loss.
17) Avoid entering and leaving the market continuously.
18) Invest both up and down.
19) Do not buy just because the prices seem low or sell if they look high.
20) Be careful to increase your position at the wrong time. Wait until the stock has become very active and has pierced the resistance to buy more (or has broken through the support to sell more).
21) If you want to increase your position, remember to do so with very thin (low-floating) securities if you are buying and with very liquid (very floating) securities if you are selling.
22) Do not try to equalize. If you bought a stock that started to go down, do not sell another one just to draw. Sell the title you bought.
23) Never change position without a good reason. Only an ascertained trend reversal justifies this decision.
24) After a long period of successes do not increase the invested capital. You may risk of losing in a few operations what you have earned in a long time.
All seems to be rules dictated by common sense and experience.
What is your opinion?
Which are the ones you can not follow?
How important is the psychological and emotional aspect?