📖William Gann

Twelve Trading Rules

🌳 Advanced★★★★☆

Risk only 10% per trade; always use stop-loss orders.

💬

Never risk more than 10% of capital on a single trade. Always use stop-loss orders. Never let a profit turn into a loss. Never average down on losing positions.

— 45 Years in Wall Street，1949

🏠 Everyday Analogy

Imagine crossing an ocean on a sailboat: Gann’s rules are your navigation manual. You first check the boat (capital protection), then read wind and currents (trend and market conditions), fix a route (plan), and stick to it despite waves and mood swings (emotions). You never risk the whole boat on one wave and always keep enough supplies to survive storms, allowing you to complete the entire journey rather than chase every glittering horizon.

📖 Core Interpretation

Strict risk management rules protect capital and ensure survival
💎 Key Insight：Gann was adamant about capital preservation. Never risk more than 10% of your trading capital on any single position. Always place stop-loss orders immediately after entering a trade. This disciplined approach ensures you survive losing streaks and remain in the game. Small, consistent losses are acceptable; catastrophic losses that wipe out your account are not.

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❓ Why It Matters

Gann knew that preserving capital was the foundation of long-term success

🎯 How to Practice

Follow these rules mechanically regardless of conviction level

🎙️ Master's Voice

Study the past to understand the future. History repeats because human nature does not change.
Gann spent years studying market history. He believed patterns repeat because human emotions remain constant. Fear and greed create the same patterns across generations.

⚔️ Practical Guide

✅ Decision Checklist

  • Have I studied relevant history?
  • What historical parallels exist?
  • What can I learn from past cycles?

📋 Action Steps

  1. Study financial history extensively
  2. Look for patterns that repeat
  3. Use history to inform current decisions

🚨 Warning Signs

  • Ignoring history
  • Believing this time is different
  • Not studying past market behavior

⚠️ Common Pitfalls

✕Equating volatility with all forms of risk
✕Oversized positions without an exit plan
✕Using leverage to compensate for uncertainty

📚 Case Studies

1
Pre-Crash Speculation in U.S. Equities (1929)
A trader buys stocks on margin in mid-1929, ignoring Gann’s rules on overtrading, trend analysis, and protective stops.
✨ Outcome：Severe losses in the October crash; portfolio wiped out due to no stop-loss and failure to follow trend-reversal signals.
2
Crash of 1983—87 Bull Market Reversal (1987)
An investor rides the strong 1980s bull market, but unlike peers, applies Gann’s rules: pyramids cautiously, sets stops, and watches time and price cycles.
✨ Outcome：Capital mostly preserved in October 1987 crash; limited drawdowns and quick recovery enabled by disciplined exits.

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