WD Gann is one of the most famous traders of all time and has a huge amount of devoted followers – however, the fact is that Gann never made the huge profits that many of his students claimed.
He did not have a 90% success rate as is often claimed – the logic behind his methods is untenable and his predictive methods do not predict – they leave it all to subjective opinion!
Let’s take a closer look at his investment theories and see.
Let’s examine some common myths about how great of a trader Gann really was:
Many sources quote Gann’s trading profits at $50 million, but this is not true.
An interview Alexander Elder had with his son tells the truth.
First, his son confirmed that when his father died in the 1950s, his estate was valued at just $100,000 — and that included his house.
Second, his son confirmed that Gan was not able to make enough money from trading and therefore supplemented his income by writing and selling courses.
WD Gann’s predictions
Many sources quote that he had a success rate of over 90% on all his trades – again not true. We can easily infer this from the value of his property.
If he could make money trading and had a 90% success rate, he would have made hundreds of millions in his trading career – which he obviously didn’t – so he had to sell books and courses.
The only evidence of 90% success comes from a small number of trades – and is not representative of all.
Gann’s methods are predictive
Gan concludes that all natural phenomena are cyclical – including financial markets. That’s true, but it’s an obvious statement – we all know we’re going to die, but when exactly?
A predictive theory is not a predictive theory if it cannot predict.
If Gann’s theory was truly predictive, then there would be no market – as we would all know the price in advance!
Gann’s theory is subjective – and he really had no way of predicting the future with accuracy. This is all subjective analysis and this is NOT a predictive theory.
Gann’s logic
The basis of Gann’s theory is the principle that cost and time must balance.
His methods are based on the quadrature of price with time – this happens when a unit of price equals a unit of time.
Gann, for example, would take a notable market peak, convert that dollar unit into a certain time period, and project it forward. When that time is reached, price and time are squared – and a market reversal is due.
What? – How can one unit of price equal one unit of time? If you think about it and answer this question for yourself, you will see how absurd the relationship is.
That’s not the only inconsistency used in his analysis – we also have the legendary Fibonacci numbers, which are supposed to work with stunning accuracy – but they don’t, and so do all kinds of astrology and geometry that appeal to the far-fetched investment crowd. .
As we have seen, Gann was a trader who had modest success and claimed to have discovered a predictive theory – one that predicts nothing with accuracy.
Finally, we have so many subjective indicators lumped together that theory can prove anything in hindsight, but if you want a tool to trade the markets, look elsewhere.
For those of you still unconvinced – I recently saw on the internet Gann trading methods selling for under $1000!
Sounds like a deal to get trades with 90% accuracy – I wonder how many serious money managers have it on their shelf.
Enough said.