Gann’s Rules of Success Part-II

Rule #8: Double Tops
Double tops offer you the best method of selling a market. What is happening is that a time and price high is being challenged. In most cases, the upward timing of the market has run out and it is in a downtrend. You should use the first rally to test the top as a selling point. In many cases, it ends up being a double top. Check back on the particular market you are trading on previous double tops and see what the market needed to do to get through and break the double top. It is usually 1-2 percent of the price of the current market. You should then set your stop based on that. The distance between double tops is important. The longer the distance the more important it is. Double tops on yearly charts are the most important, and then monthly and then daily are important. This is why you should always be looking at long term charts to see these tops.
Rule #9: Double Bottoms
Just like double tops, a good double bottom offers an excellent trading opportunity. Most major bull markets are created from these bottoms. Always keep an eye on all charts for this development. Place the orders and use your protective stops to take advantage of these trades.
Rule #10: Inside Day
Watch the markets for inside days. This means that the previous day’s market high and low is inside of the previous day’s range. You will find that after a long term price. Brokers are constantly bombard with conflicting news which distorts the current view move that this signal gives you an early warning that the market is about to reverse in the opposite direction
Rule #11: Reversal Signals
Understand and look for reversal signals. This will tell you the trend of the market short term. When the market runs up for more than five days and then gaps up, fills that gap, and closes lower for the day, it indicates low prices. You should expect the trend has changed. This is the strongest reversal signal. Another reversal is a market that runs up for 5 days or more and opens steady goes higher and then closes lower and under the previous days close. In many cases, the market will move at least 3 days in the opposite direction after one of these reverse signals.
Rule #12: Fibonacci Sequence Numbers
Gann never talked about Fibonacci Sequence Numbers, but he did use them. This was one of his secrets he kept to himself. Everything in nature and in the markets is based on Fibonacci Ratios of .382, .500 and .618. Markets will move according to the Fibonacci Numbers of 1, 3, 5, 8, 21 and so on. Watch for turns of the market on these numbers
Rule #13: The Right Broker
You should choose a broker who complements you and thinks like you. The broker should take your order and fill it with the utmost speed. In commodity trading today it is important that your order gets to the floor within seconds. The new electronic trading has helped increase the speed. The broker should be willing to give you all the technical and fundament research you need to succeed without question and in a timely manner. The broker should never question your orders as you have put in the many hours of research into this trade and you know the trend of the market much better than he does of the
market. Their only job should be to provide you with the best execution service possible.
Rule #14: Diversification
You should diversify your money so that you are in more than one group. For example, if you are a commodity trader you should have positions in grains, metals and meats. This helps to protect you from having adverse things hitting your one sector. This also destroys your confidence. In the stock market, you could have positions in different industries for protection.

One Comment

  1. shekarsrini said:

    Thanks Brameshji.

    December 27, 2015

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