W.D. Gann is one of the most famous traders of all time, and has a huge devoted following – however the fact is, Gann never made the huge profits many of his disciples claim.
He did not have a success rate of 90%, as is often claimed – the logic his methods are based upon are unsound, and his predictive methods don’t predict – they leave everything to subjective opinion!
Let’s examine his theories of investment in more detail and see.
Let’s look at some shared myths about how great a trader Gann truly was:
Many supplies quote Gann’s trading profits at $50 million dollars, however this is not true.
An interview that Alexander Elder had with his son tells the truth.
Firstly, his son confirmed that when his father died in the 1950s his estate was valued at just $100,000 – and that included his house.
Secondly, his son confirmed that Gann was unable to make enough money from trading, and consequently supplemented his income by writing and selling courses.
W.D. Gann’s Predictions
Many supplies quote he had a success rate in all his trades of over 90% – again not true. We can easily deduce this from the value of his estate.
If he could make money trading and had a 90% success rate, he would have made hundreds of millions in his trading career – and he clearly did not – that’s why he had to sell books and courses.
The only evidence of a 90% success rate came from a small number of trades – and was not representative of them all.
Gann’s Methods are Predictive
Gann came to the conclusion that all natural occurrences are cyclical – including financial markets. This is true, but this is an obvious statement – we all know we’re going to die but when exactly?
A predictive theory is not a predictive theory if it can’t predict.
If Gann’s theory really is predictive, then there would be no market – as we would all know the price in improvement!
Gann’s theory is subjective – and he really had no way of predicting the future with accuracy. It’s all subjective examination and this is NOT a predictive theory.
The basis of Gann’s theory is the rule that price and time must balance.
His methods are based on the squaring of price with time – this occurs when a unit of price equals a unit of time.
Gann for example would take a noticeable high in the market, transform that dollar unit into a stated period of time and project it forward. When that time is reached, price and time are squared – and a market turn is due.
What? – How can one unit of price equal one unit of time? If you think about and answer this question for yourself, you will see how ridiculous the connection is.
This isn’t the only inconsistency used in his examination – we also have the mythical Fibonacci numbers which are supposed to work with dramatically accuracy – but they don’t, and neither do all sorts of astrology and geometry, that appeals to the far out investment crowd.
As we have seen, Gann was a trader who had modest success, and claimed to have discovered a predictive theory – which predicts nothing with accuracy.
Finally, we have so many subjective indicators cobbled together, that the theory can prove anything in hindsight, but if you want a tool to trade the markets look in other places.
For those of you nevertheless not convinced – I recently saw on the Internet, Gann’s trading methods selling for under $1,000!
Sounds like a bargain to get trades with 90% accuracy – I surprise how many serious money managers have it on their bookshelf.