William Delbert Gann (1878-1955) was an outstanding stock and commodities trader. He was also a prolific teacher of how to make speculation a profitable profession, writing some seven books and producing two courses on trading the stock and commodity markets. However Gann's superlative skill was his ability to forecast accurately the stock and commodity markets.

Chapter 1 : Is It More Difficult to Make Profits Now Than Before 1932?

Many people write me and ask this question. My answer is—No, you can make just as great profits now as you ever could, provided you select the right stocks to buy and sell. Changed conditions have changed market actions somewhat. The laws passed by the government regulate trading in stocks and require higher margin. The income tax laws make it necessary to trade for the long pull swings in order to escape paying too much income tax. It no longer pays to try to scalp the market because swings in a short period of time do not warrant it. Remaining in the broker’s office and trying to read the tape is out of date. You will benefit by spending your time making up charts and studying them.
Many stocks that have been listed for a long time have become seasoned and move more slowly. This cuts out the possibilities for quick profits in a short period of time. There is no longer a large list of stocks selling at high prices above $100 per share and making wide fluctuations.
1949, June 14, when stocks reached extreme Low there were about 1,100 issues traded in that day. There were only 112 stocks selling above $100 per share. Many of these were preferred stocks held by investors and this class of stocks moves in a narrow range. On June 14 there were 315 stocks selling below 20, 202 selling below 10, and 83 selling below $5.00 per share, making a total of 600 selling below 20 per share, or more than 50% of the total issues traded. With so many stocks selling at Low Levels, you can only make money by taking a long-pull trading position.
During recent years many of the high-priced stocks have declared stock dividends, splitting up the stock and putting more stocks in the low-price range.

Larger Profits on same Amount of Capital

You can make more money today than you could several years ago using the same amount of capital. For example: When a stock was selling at $100 per share and you bought 100 shares you had to put up $10,000 or pay for it outright. And at the time you could buy it on the 50% margin, if it advanced 10 points, you made a profit of $1,000 or 20% on your capital. At the present time, suppose you should buy 1,000 shares of a stock selling at $10 per share on a 509-c margin, this would require $5,000 capital. If the stock advances 5 points you will have made a profit of $5,000 or 100% on your capital investment. With so many stocks selling at Low Levels with good prospects for future enhancement, you have opportunities for making profits just as fast today as ever before.

Volume of Sales Smaller

The total volume of stocks traded on the New York Stock Exchange during recent years is much smaller. This is because people buy stocks and hold them longer. There are no longer any pools or manipulation in stocks since the passing of the Security Exchange Regulations. This does not mean that there cannot be Big Bull markets and large advances in the future. As time goes by stocks pass into the hands of investors who hold them for a long period of time. The floating supply is gradually absorbed. Then, when something suddenly happens to start a buying wave, buyers find the supply of stocks scarce and have to bid them up. It always happens that the higher prices go, the more people want to buy. This causes a final grand rush and a rapid advance in the last stages of a Bull Market. History repeats on Wall Street and what has happened in the past will happen again in the future.
In January, 1946, the U. S. Government made a rule compelling everyone who bought stocks to put up 100% margin, or in other words, pay for them outright. Stocks were already selling at very High Levels and had been advancing for three and a half years. Did this ruling by the government stop the public from buying stocks? It did not. The Averages advanced more than 20 points and the advance lasted five months longer to May 29, 1946, when final High was reached, which proves that the government could not stop the advance in stocks as long as the people were in the mood to buy. In fact, a lot of traders believe that the government took this action because it thought there would be a runaway advance in stocks and traders believing this continued to buy stocks regardless of the margin required.
My experience has taught me that nothing can stop the Trend as long as the Time Cycle shows Up-Trend. Nothing can stop its decline as long as the Time Cycle shows Down. Stocks can and do go Up on bad news and go Down on good news.
1949 in March, the government reduced the marginal requirements on stock to 50% margin. Many people thought this was very bullish and that it would start a Bull Market, but it did not. Stocks rallied for two days to March 30, then declined over 18 points on the Averages until June 14. They went down because the Trend was down. The Time Cycle had not run out for Bottom.

Cross Currents in Stocks

In recent years the market has been more mixed than for a long time. Some groups of stocks advance while others decline at the same time. This is due to various causes arid conditions in the different industries. You can determine these cross currents and get the Trend of any individual stock if you keep up a Monthly High and Low Chart and study it and apply the rules which I give you.

Why you have Lost Money in Stocks AND How to Make it Back

Why do the great majority of people who buy and sell stocks lose? There are three main reasons:

1. They overtrade or buy and sell too much for their capital.


2. They do not place stop loss orders or limit their losses.


3. Lack of Knowledge. This is the most important reason of all.

Most people buy a stock because they hope it will go up and they will make profits. They buy on tips, or what someone else thinks, without any concrete knowledge of their own that the stock will advance. Thus, they entered the market wrong and did not recognize this mistake or attempt to correct it until too late. Finally, they sell because they fear the stock will go lower and often they sell out near low levels, getting out at the wrong time, making two mistakes, getting in the market at the wrong time and getting out at the wrong time. One mistake could have been prevented, they could have gotten out right after getting in wrong. They do not realize that operating in Stocks and Commodities is a business or a profession, the same as engineering or the medical profession.

Why you should Learn to Determine the Trend of the Market

You may have tried to follow market letters and like many others either lost money or failed to make profits, because the market letters gave a list of too many stocks to buy or sell and you picked the wrong one and lost. A smart man cannot follow another man blindly even though the other man is right, because you cannot have confidence and act on advice when you do not know what it is based on. You will be able to act with confidence and make profits when you can SEE and KNOW for YOURSELF why STOCKS should go UP or DOWN.
That is why you should study all of my rules and make up charts for yourself on the individual stocks, as well as the averages. If you do this you will prepare yourself to act independent of the advice of others, because you will know from Time-Tested Rules what the trend of the market should be.

Chapter 2 : Rules for Trading in Stocks

To make a success in trading in stocks you must get the knowledge first; you must learn before you lose. Many traders go into the stock market without any knowledge and lose a large pact of their capital before they learn that it is necessary to go through a period of preparation before they start trading. I am giving you the benefit of more than 45 years of experience in the stock market and laying down rules which, if you learn and follow, will make you a success.
The first thing for you to realize is that when you make a trade you can be wrong; then you must know what to do to correct your mistake. The way to do that is to limit your risk by placing a Stop Loss Order 1, 2 or 3 points below the price at which you buy. Then if you are wrong you will automatically be sold out and will be in position to enter the market again when you have a definite indication. Do not guess; make a trade on definite rules and according to definite indications based on the rules which I lay down; this will give you a better chance to make a success.
Read all of the rules and examples in my books, “Truth of the Stock Tape”, “Wall Street Stock Selector” and “New Stock Trend Detector”, and study 12 and 24 rules which are bound with this book “45 Years in Wall Street’. The rules are good and will benefit you if you study them. Remember that you can never learn too much. Always be ready and willing to learn something new; never have a fixed idea that you know it all. If you do, you will not make any more progress. Times and conditions change and you must learn to change with them. Human nature does not change and that is the reason history repeats and stocks act very much the same under certain conditions year after year and in the various cycles of time.

Rule 1. Determining the Trend

Determine the trend of the Dow-Jones 30 Industrial Averages or the 15 public utilities averages or the average on any group of stocks that you intend to trade in, then select the stock in the group in which you want to trade and see if its Trend indications conform to the Trend indicated by the Averages. You should use the 3-Day Chart for the Averages and the 9-Point Average Swing Chart as outlined later in the book, and apply all of the rules for determining the right time to buy or sell.

Rule 2. Buy at Single, Double and Triple Bottoms

Buy at Double and Triple Bottoms or on Single Bottoms when they are nearer previous Old Bottoms or Tops or resistance levels. Remember the rule: Tops or ceilings which are selling points become floors, supports or buying points after these tops have been crossed and the market reacts to them, or sells slightly below them. Sell at or against Single, Double or Triple Tops and, remember, that after an Old Top is broken by several points and the market rallies up to or near it again, it becomes a selling point. After you have made a trade, determine the proper and safe place to place a Stop Loss Order, and give it to your broker immediately. If you do not know where to place a Stop Loss Order, do not make the trade.
Do not overlook the fact that the 4th time the averages or an individual stock reaches the same level it is not as safe to sell, because it nearly always goes through. Reverse this rule at the bottom. When stocks decline to the same level the 4th time in most cases it breaks the bottom and continues down.

The Meaning of Double Tops and Bottoms

A Double Top on the Averages can be in a range of 3 to 5 points. However, most Double Tops form in a range of from 1 to 2 points except at great extremes. The same way at an extreme bottom. If there has been a previous bottom around this same level many years back, the Averages can decline 4 to 5 points below the previous bottom without indicating that they are going lower, and this can become a Double or a Triple Bottom.
Individual stocks usually make a Double Top in a 2 to 3 point range and sometimes within a 1 to 2 point range. The same at the bottom; they make a Double Bottom in a 2 to 3 point range and sometimes the range is only 1 to 2 points below the different bottoms. Stop Loss Orders should be placed on individual stocks 1 to 3 points above Double and Triple Tops, depending upon how high stocks are selling. Stop Loss Orders should be placed under Double and Triple Bottoms 1 to 3 points away.
A Triple Top or Bottom occurs when the Averages or an individual stock has reached the same level the 3rd time. This is often the safest place to buy or sell because the market moves away from a Triple Top or a Triple Bottom much faster.

Rule 3. Buy and Sell on Percentages

Buy or sell on a 50% decline from any high level or a 50% advance from any low level so long as these reactions or rallies are with the main trend. You can use the percentage of the individual stocks as well as the percentage of the Averages to determine the resistance levels and buying and selling points. You can use 3 to 5 per cent, next 10 to 12 per cent, next 20 to 25 per cent, 33 to 37 per cent, 45 to 50 per cent, 62 to 67 per cent, 72 to 78 per cent and 85 to 87 per cent. The most important resistance levels are 50% and 100% and the proportionate parts of 100%. (See examples under Chapter on Percentages of High and Low Prices.)

Rule 4. Buy and Sell on 3 Weeks’ Advance or Decline

Buy on a 3 weeks’ reaction or decline in a Bull Market when the main trend is up, as this is the average reaction in a strong Bull Market. In a Bear Market sell on a rally of around 3 weeks after you know the trend is down.
After a market advances or declines 30 days or more, the next time period to watch for tops and bottoms is around 6 to 7 weeks which will be a buying or selling level, protected, of course, with Stop Loss Orders according to resistance levels. After a market rallies or declines more than 45 to 49 days, the next time period is around 60 to 65 days which is about the greatest average time that a Bear Market rallies or a Bull Market reacts.

Rule 5. Market Moves in Sections

Stock market campaigns move in 3 to 4 Sections or waves. Never consider that the market has reached final top when it makes the first section in a move up, because if it is a real Bull Market it will run at least 3 Sections and possibly 4 before a final high is reached.
In a Bear Market, or declining market, never consider the market as final bottom when it makes the first decline or Section because it will run 3 and possibly 4 Sections before the Bear campaign is over.

Rule 6. Buy or Sell on 5 to 7 Point Moves

Buy or sell individual stocks on reactions of 5 to 7 points. When a market is strong, reactions will run 5 to 7 points but—will not decline as much as 9 or 10 points. By studying the Industrial Averages, you will see how often a rally or reaction runs less than 10 points. However, it is important to watch 10 to 12 point rallies or declines for buying or selling levels on the average. The next important point to watch is 18 to 21 points up or down from any important Top or Bottom. Reactions of this kind in the Averages often indicate the end of a move.
When to Take Profits—After you have bought stocks or sold them, the next thing you need to know is when to take profit. Follow the rules and do not take profits until there is a definite indication of a change in trend.

Rule 7. Volume of Sales

Study the total volume of sales on the New York Stock Exchange in connection with the time periods and study the rules under volume of sales later on in the book. Study the volume of sales on individual stocks based on the rules given, as the volume of sales will help in determining when the trend is changing.

Rule 8. Time Periods

The time factor and time periods are most important in determining a change in trend because Time can over balance Price and when the Time is up the Volume of sales will increase and force prices higher or lower.
Dates for Change in Trend—The stock market averages and individual stocks follow a seasonal change in trend which varies in different years, but by knowing the important dates and watching them you will be able to determine a change in trend very quickly by applying all the other rules. The important dates are as follows:
January 7 to 10, and 19 to 24. These are the most important at the beginning of the year, and changes in trend that last for several weeks, and sometimes several months, occur around these dates. Check the records and prove it for yourself.
February 3 to 10, and 20 to 25. These are next important to the dates in January.
March 20 to 27. Minor changes occur around this date and sometimes major tops or bottoms occur.
April 7 to 12, and 20 to 25. Not as important as January and February, but the latter part of April is often quite important for a change in trend.
May 3 to 10, and 21 to 28. The changes this month are of as great importance as those that occur in January and February, and many major Tops and Bottoms have occurred around these dates in the past and a change in trend has taken place.
June 10 to 15, and 21 to 27. Minor changes in trend occur around these dates and in some years extreme highs and extreme lows occur. Example: 1948, June 14, extreme high; 1949, June 14, extreme low, up to the time of this writing.
July 7 to 10, 21 to 27. This month is next in importance to January because it is at the middle of the year when dividend payments occur and seasonal changes and crop conditions have some effect on the change in trend of stocks.
August 5 to 8, and 14 to 20. This month is as important in some ways as February for change. Check the back records and you will see how important changes occur around these dates.
September 3 to 10, and 21 to 28. These periods are the most important of any in the year, especially for Tops, or final highs in a Bull Market, as more highs have occurred in September than any other month. Some minor changes, both up and down, have occurred around these dates.
October 7 to 14, and 21 to 30. These periods are quite important and some major changes have occurred between these dates. They should always be watched if a market has been declining or advancing for some time.
November 5 to 10, and 20 to 30. These are very important for changes in trend as a study in past history will prove. In election years a change in trend often occurs in the early part of the month, and in other years low prices are recorded between the 20th and 30th.
December 3 to 10, and 15 to 24. The latter period and running into the January period for a change in trend has shown a high percentage of changes over a period of years.
Refer to the 3-day chart tables showing exact dates when extreme high and low price has been reached and check these past dates and watch them each month in the future.
When looking up dates for Change in Trend, consider whether the market has run from any high or low price 7 to 12 days, 18 to 21, 28 to 31, 42 to 49, 57 to 65, 85 to 92, 112 to 120, 150 to 157, or 175 to 185 days. The more important the top and bottom that these Time periods start from, the more important the change.
Market Over-Balanced—The Averages or individual stocks become over-balanced after they have advanced or declined a considerable period of Time, and the greater the Time period, the greater the correction or reaction. When a Time period on a decline exceeds the Time period of a previous decline it indicates a change in trend. When the price breaks a greater number of points than the previous decline or reaction it indicates that the market is Over-Balanced and a change in trend is taking place.
Reverse this rule in a Bear Market. When stocks have been declining for a long period of Time, the first time that a rally exceeds the Time period of a previous rally it is an indication that the trend is changing, at least temporarily. The first time that the price rallies a greater number of points than a previous rally, it indicates that the Space or Price movement is Over-Balanced and a change in trend has started. The Time change is more important than reversal in price. Apply all of the rules to see if a change in trend is due at the Time when these reversals take place.
When the market is nearing the end of a long upswing or a long downswing and reaches the 3rd or 4th Section, the swings upward will be smaller in price gains and the Time period will be less than the previous Section. This is an indication that a change in trend is due. In a Bear or declining market, when the loss in points becomes less than the previous Section and the Time period is less, it is an indication that the Time cycle is running out.

Rule 9. Buy on Higher Tops and Bottoms

Buy when the market is making higher Tops and higher Bottoms which shows that the main trend is up. Sell when the market is making lower Tops and lower Bottoms which indicates the main trend is down. Time periods are always important. Check the Time period from previous Top to Top and from previous Bottom to Bottom. Also check the Time required for the market to move up from extreme low to extreme high and the Time required for prices to move down from extreme high to extreme low.
Monthly High and Low Charts—When markets are slow and narrow, and especially for low priced stocks, all you need to do is keep up the monthly high and low chart; when activity starts you can start keeping a weekly high and low chart and for stock selling at very high levels, keep the daily high and low charts, but remember that the 3-Day Swing Chart is much more important as a Trend Indicator than a daily high and low chart.

Rule 10. Change in Trend in Bull Market

A change in trend often occurs just before or just after holidays. The following dates are important. January 3, May 30, July 4, the early part of September, after Labor Day, October 10 to 14, November 3 to 8 in election years, and November 25 to 30, Thanksgiving, and December 24 to 28. This latter period may run into the early part of January, before a definite change in trend is indicated.
When prices on the Industrial Averages or the individual stocks break the last low on a 9-Point Swing Chart or break the last low on the swing on a 3-Day Chart it is an indication that the trend is changing, at least temporarily.
Bear Market: In a declining market when prices cross the Top of the last upswing on a 9-Point Chart, or cross the top of the last upswing on a 3-Day Chart, it is the First Signal for a Change in Trend. When prices are at High Levels there are usually several swings up and down; then when the market breaks the Low of the Last Swing it indicates a reversal and change in Trend.
At low levels prices often narrow down and remain in a narrow trading range for some Time, then when they Cross the Top of the last upswing it is important for a Change in Trend.
Always check to see if the market is exactly 1, 2, 3, 4 or 5 years from any extreme High or Low price. Check back to see if the Time Period is 15, 22, 34, 42, 48 or 49 months from any extreme or low price, as these are important time periods to watch for Change Jn Trend.

Rule 11. Safest Buying and Selling Points

It is always safest to buy stocks after a definite Change in Trend has been established. After a stock makes bottom and has a rally, then follows the Secondary Reaction and it gets support at a higher bottom. When it starts to advance and crosses the Top of the First Rally, it is the safest Place to Buy because the market has already given an indication of uptrend. Stop Loss Orders can be placed under the Secondary Bottom.
Safest Selling Point—After a market has advanced for a long time and made Final High and has the First Sharp quick Decline, then rallies and makes the Second Lower Top, and from this Top declines and Breaks the Low point of the First Decline, it is then Safer to Sell because it has given the Signal that the main Trend has changed to the Down side.
2-Day Reactions and Rallies: This is a most important time period in very fast active markets. Reactions will only run 2 days and not decline into the third day. This will happen many times before there is any indication of a Change in Trend. When a stock or the Averages react only 2 days, it is in a very strong position. You will find some of these 2-day moves shown in the table for the 3-Day Chart.
In an active, Fast Declining Market, rallies will be sharp and fast, only lasting 2 days. Study the table for the 3-Day Chart and you will find many rallies of this kind during the fall of 1929 and during 1930-31 when the big Bear Market was under way.
Remember stocks are never too High to Buy as long as the Trend is Up and they are never too Low to Sell as long as the Trend is Down; but do not overlook the fact that you must always use a Stop Loss Order for your protection. Always Go with the Trend and not against it. Buy-stocks in Strong Position and Sell Stocks in Weak Positions.

Rule 12. Price Gains in Fast Moves

When markets are very active and advancing or declining very fast they average about 1 point per calendar day. When the Movement on Averages or individual stocks is 2 points or more per day, it is far above normal and does not last very long. Movements of this kind occur when there are Short Time Periods and a quick corrective reaction or decline in a Bull Market. When the Trend is down in a Bear Market these quick fast rallies correct the position in a short period of time. Read the information and examples under “Short Time Periods Correct Prices.”
I want to impress upon you strongly that if you expect to make a success in the stock market you must put in plenty of time studying, because the more time you put in, the more knowledge you gain, the more profits you will take out later. Over 45 years of practical experience in trying and testing rules have proven to me what is required for your success. I have given you the rules that will work; you must do your part; you must learn the rules, act on them at the right time and put them into execution.