Natural Law in Markets - William Gann

💬
Markets follow natural laws and mathematical principles. Understanding geometry, proportions, and vibrations reveals the hidden order in seemingly chaotic price movements.
— The Tunnel Thru the Air，1927

🏠 Everyday Analogy

Imagine the market as an ocean governed by tides and the moon. Waves (price swings) look chaotic at the surface, but beneath them are predictable rhythms of high and low tide (cycles of time and price). Surfers who study the tides can catch the right wave instead of fighting the sea. Gann’s natural law is this tide table for prices.

📖 Core Interpretation

Markets are not random but governed by discoverable mathematical laws

💎 Key Insight：Gann believed markets weren't random but governed by universal laws like those in physics and astronomy. Geometric patterns, Fibonacci ratios, and astrological cycles all influence price movement. Understanding these underlying principles gives traders an edge. This holistic approach combines science, mathematics, and philosophy to decode market behavior and predict future movements.

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❓ Why It Matters

Gann believed markets reflect universal laws found throughout nature

🎯 How to Practice

Study sacred geometry, Fibonacci ratios, and astronomical cycles

🎙️ Master's Voice

Never risk more than ten percent of your capital on a single trade.

Gann set strict position sizing rules. By limiting risk per trade, you ensure survival through inevitable losing streaks. Capital preservation enables long-term success.

⚔️ Practical Guide

✅ Decision Checklist

How much of my capital is at risk?
Could this loss be catastrophic?
Am I following position sizing rules?

📋 Action Steps

Set strict position size limits
Never exceed maximum risk per trade
Size positions for survival

🚨 Warning Signs

Excessive position sizes
Single trades risking too much capital
No position sizing discipline

⚠️ Common Pitfalls

✕Confusing a low price with true cheapness

✕Using one metric without business context

✕Overly optimistic assumptions that erase margin of safety

📚 Case Studies

Pre-Crash Distribution Pattern (1929)

Gann observes repeated geometric and cyclical signals of exhaustion in leading industrials before the 1929 crash, aligning with his natural law timing cycles and price angles.

✨ Outcome：Reduces long exposure and initiates short positions, profiting significantly as the market collapses into 1932.

War-Time Low and Cyclical Turn (1942)

Amid WWII pessimism and panic selling, Gann’s time cycles and natural law of vibration signal a major low in U.S. equities around April–May 1942.

✨ Outcome：Accumulates quality stocks near the lows, capturing the early phase of the long post-war bull market.

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