The good, the bad and the ugly - emailed to subscribers - May 16th, 2003

Ever noticed how you can attend so many gann seminars, receive lots of gann emails, and yes you can learn lots, but no one ever really shows you their trading. You get lots of past life examples, how gann worked here, how gann worked there, how easy it all looks, you could have bought here, sold there, but did the seminar presenter ever forecast one of the moves, before it happened, and then far more importantly, trade it. This is what you never get to see, or at least I have never been to a seminar yet where this has happened.

So, the things they rarely show you:

the good, see Coffee - PDF
the bad, see Oil - PDF
the outright ugly, see Sugar - PDF

It is so easy to allow one's emotions to blind you to the work, or lack thereof, one has on one's chart. Don't hang on to the losses. (Please note, this email is not an attempt at grandstanding - just trying to help us all move forward with our studies. It is absolutely critical to review one's past trades.)

My suggestion for the class is to spend time only on your charts; time, ranges, swing charts and the maths, then trade what you see. It has to be your work, and your chart, and what you see, not someone else's forecast of the market. Also, you can spend all the time in the world searching for 'pure gann', become the worlds foremost expert about it if you want, but it will be worthless to you until you see how you handle this knowledge under the pressure of the market. Money, and the emotions, are funny things.

A few other things you might like to think about;
- In gann's day there were far fewer technical traders; today there are plenty, and it has changed markets just a little. By way of just one example, is the action now of markets at double tops and bottoms; there are more false breaks today then in Gann's era; take recent wheat double bottom, the second one in April being slightly lower. That in my view is just stops going off from underneath the first one, where Gann says to place them if you are long in that sideways move for the month. I can't know for sure of course, but Gann's old charts show far fewer of what today are called false breaks. There is an advantage here however, for the more experienced trader; the reverse move in the other direction to the false break is often substantial. You may care to ponder the mechanics of why that might be so.

- There is a lot more money around now than in Gann's time, and markets are trading at bigger numbers. This will make markets more volatile; again, can make for wider risk at times, and tougher for novices, but gann will prove exemplary in volatility. It has also made markets faster than in Gann's time. You only have to research some of Gann's Dow examples to see this. What the Dow took a week to do in the thirties, it does in an hour now. Another thing you may like to ponder; in my view the day is not far off when some markets will trade 24 hours continuously (but perhaps not 7 days per week yet), so the open and close prices may become redundant, and as for the highs and lows? This could be closer to reality than you think, once the US eventually replace the open outcry system with fully automated trading as it is in the rest of the world. Academic at this stage however, so get on with the analysis.

- Gann would have computers draw all his charts today, to give him more time at interpretation.

- There are far more markets today, with a far wider array of derivative products. Gann would test his knowledge in the biggest markets where the best trends are, and the best probable profits for least risk. Currency trading today, without doubt. You can note in Gann's later books, how he progressed to trading beans, and pointed out this market, beans, would eventually become the king market, which it did (Can't remember where he wrote this, but it is there somewhere) A gann book today would make the same forecast about currencies, not available in gann's day. Currencies trend very well, and you should pick one to study at some later time.

- In gann's book "Face facts America", where he offers his wisdom to the US government about how to get out of the then dreadful depression, he advocates lower taxes, amongst other things, to solve the problem. A better reading of the bible would have precluded such a proposition. (Gann's cycles stuff was second to none, but his understanding of economics remains flawed) As you should have learnt from my cycles class, lower taxes in an economy that has private capture of the land rent, only serves to lift land price, the very basis of the cycle Gann was advocating to remedy. See Leviticus ch 25 for the complete Lord's wisdom. The business booms and busts are man made, not preordained from some planetary motions. The boom and bust is however overlaid on a natural cyclical rhythm, and this probably is from planetary phenomenon. (ps, may I point out - and don't label me a heretic - much of what is in the bible is not original; the Indian veda's and Gita, written in sanskrit, came first. And if the Gnosis writings are accepted, Paul's description of the resurrection was done as an attempt at a power grab, but that is another story, and I had better stay out of further religious notations.)

- As a study group, I believe we will all learn the most from discussions about actual trades taken and why. And more is learnt from the losing trades than the winners. So don't be afraid to talk about this amongst ourselves. There is no shame in a bad trade, learn and move on. But above all, trade. Once you all have about 100 or so trades under your belt, we then might be able to have 'a deep and meaningful' about what is pure gann and what isn't. On the recent wheat action, have a look at pp 48 - 50 of How to make profits in commodities, especially the bit about breakaway points, and fast moves once time has run out. (I took occasion to re-read this after off loading one wheat contract at a most inopportune time) Gann's books come to life once you start trading, rarely before. Notice I said Gann's book, not my class material, not anyone else's. Pure Gann lies in Gann's original material, not books and classes that are copies thereof.

A suggestion:
put Gann's 24 never failing trading rules on the wall of your office, or better still perhaps, on the fridge door. After a loss, work out which one you broke. THEN DON'T BREAK IT AGAIN. (do this and you could limit your losses to 24 :-)
Painful but worthwhile exercise. Make sure you do it.

Mid points and repeat runs are what I found worked for me, or should I say something I readily understood from early gann reading. I still find it useful today, and you don't need to have spent hours of work drawing a chart to see them and trade them, but you do need to have pc data to view. (This is not suggesting it is a substitute for good hand drawn charts, but am merely suggesting it whilst one is in the process of drawing them up.) see the beans gif

(I have noted in hindsight that I would be more in profit if I had taken July contracts, rather than November, but I am not sure I could have done much about this presently, more trading wisdom and a better understanding of beans required probably. Trade and learn.

Compare this to sugar monthly, which I have only seen in examining my loss.

No doubt you would have seen reports of how Saddam's second son Qusay removed a reported 1 billion dollars (is that all ?) from the Iraqi central bank. What intrigued me about that was not the money, but the timing; according to the IHT, the seizure occurred at 4am March 18th. This was just a wee few hours before the first US bombs fell was it not? One has to wonder who knew what, how much, and when. You gotta really wonder don't you ???

The IHT also noted that sometimes the Saddams would demand cash from the Iraqi banks, but not in the amounts said to have been taken on March 18th. "Sometimes they would come in for just small amounts - maybe $5 million." said one Iraqi banker.

The Saudi bombing, just shortly before midnight Monday, the 12th; that date again - though one degree late off Sept 11

On the SPI, observe how the market is filling in time working its way across from the 8*1 to 4*1 angle. Observe the action here and see what happens.

Keeping your weekly Dec cotton up to date? Recent high of 62.3 was up against 1 *4 angle off 67.31, was 7/8 of the range 67.31 to 28.20, and on the monthly half the range, with some notable angles I think. Now, low at May 7,210 deg Oct 7 2002, holding the weekly (trend line) 2*1 angle off 28.20. (42+62.75) 12 = 52.38,
(45.65 Dec low + 62.75) 12 = 54.18
54 is at present above past highs of July and Nov last year, means 54 is resting above past tops at present

coffee, some gann in action, continuous chart, (57 + 71.2) 12 = 64.10, gann date 16/5, on the daily, three sections up then back to the mid point of these three sections, wheels within wheels. To be conservative, I go long if Monday's action will go higher than Friday's high, therefor risking the length of one day's bar. At least as I understand it, this is Gann's 1950's beans examples, or at least what works for me on occasions anyway, provided time and price come together. I have noted happily that coffee trades only between the hours of 9am to 11.45 am, with no night market, which seems to me to help give clearer high low and close numbers. Different to oil, say, which trades about 23 hours a day, on big volume.

Sugar Monthly - PDF
Beans Monthly - PDF

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