Using the stars to guide us on how to invest in the Market! Son of a GANN!
Big Bulls are the hot topics in the markets right now. Be it India’s Rakesh Jhunjhunwala or America’s Warren Buffet. They are investors who have generated massive wealth over the past years in trading/investing in the Markets. But neither of them can really time the markets, can they? No one can, right? Let’s take a quick peek back in time and talk about the person who timed the markets.
William Delbert Gann, born in 1878, was a trader and astrologer by profession and was so skilled at his work that he could time the price movements of commodities and stocks around his time. Sounds impossible, right? Let’s get technical; candlesticks are graphs with detailed price fluctuations and volumes. In school, we all studied X-axis and Y-axis on graphs and how they help plot the required point. Speaking of Candlestick, below is the daily chart of Reliance industries where the prices (on the right) indicate the Y-axis and the time (bottom) shows the X-axis.
99% of the traders in the world initiate a trade by looking at the price and the volume. That is just by using the Y-axis, forgetting about the X-axis, which goes hand in hand with the price. Gann used the X-axis to his benefit and developed multiple trading theories, which have proven to be accurate. In simple words, a point on the graph denotes (x,y), which means that point includes price and time together, but we make our decisions by just considering the price. He was the first trader to link price and time together. Brilliant but straightforward, right?
Gann’s theories consisted of 3 main parts — 1. Technical Analysis, in which he developed methods like Gann Angles & Hexagon Chart, 2. Studying Time and Price together, he tried different ways of linking time and price movement, and lastly, 3. He was linking Time with Planet Movements. Yeah! Planet Movements (now I have a theory that tells whether a person is an alien or not in 3 parts). Gann learnt about planetary movements from India. From these insights, he started using planetary movements to predict stock and commodity prices, as shown in the picture below:
One of Gann’s most controversial techniques is that he converted the price directly to zodiac degrees. For example, if a commodity is trading at $120 per share, he would convert it to 120° of the zodiac, which is 0° Leo. If the price makes a significant aspect (e.g. conjunction, trine, square, etc.), then it is believed that the price will reach a short-term top or bottom (Yeah, it didn’t make sense to me at first glance too).
He grabbed public attention when he made a statement, “on this particular day, at this particular time, cotton prices will be $$,” and his claim was right till the last decimal(hence, proved he’s an alien). His theories not only grabbed public attention but government attention as well. To check whether Gann was doing insider trading or not, the SEC set up a team to investigate him and appointed an individual to stay with him for a month. What happened next was history, and I quote the article, “During the month of October 1909, in twenty-five market days, W. D. Gann made, in the presence of our representative, two hundred and eighty-six transactions in various stocks, on both the long and short side of the market. Two hundred and sixty-four of these transactions resulted in profits; twenty-two in losses. The capital with which he operated was doubled ten times so that at the end of the month, he had one thousand per cent of his original margin.”
Gann often quoted the Book of Ecclesiastes, chapter 1, verse 9: “That which has been is what will be, that which is done is what will be done, and there is nothing new, under the sun.” He believed that everything occurring in the markets has historical reference points. That is why he studied ancient geometry and astrology to investigate how market events and specific numbers repeated across various time cycles. He identified several time cycles of importance, viewing the 60-year cycle as significant. He stated, “This is the greatest and most important cycle of all, which repeats every 60 years or at the end of the third 20-Year Cycle.” You will see the importance of this by referring to the war period from 1861 to 1869 and the panic following 1869: 60 years later — 1921 to 1929 — the greatest bull market in history and the greatest panic in history followed. In November 1928, Gann reportedly issued an “Annual Forecast for 1929”, which predicted the end of the great bull market of the 1920s on 3rd September 1929 (the crash occurred on 24th October) and the crisis that followed. He also emphasised the 90-year time cycle, which predicted the next financial crisis, i.e. 2007 Housing Crisis. He later published books and courses based on his research and experience.
W.D. Gann believed that anybody could time the markets with proper knowledge and chart patterns (guy’s beliefs belong to a parallel universe). His strategies are almost unknown in today’s world, but even 1% knowledge of his approach will help you make money in the markets. The Title now makes sense, doesn’t it?
Written by: Yash J Shah — SYBME, ISME School of Management & Entrepreneurship
Edited by: Minakshi Todi
Sources and References:
What does the Z critical value mean? — Wikipedikia …. https://wikipedikia.org/what-does-the-z-critical-value-mean/
William Delbert Gann | Carolina Living Real Estate | Roby …. https://robyrobertson.com/index.php/2021/10/24/william-delbert-gann/
The Mysterious Life of Trading Legend W.D. Gann. https://www.investopedia.com/articles/investing/091615/mysterious-life-trading-legend-wd-gann.asp
The Trading Secret the Media Won’t Tell You… — The Daily …. https://dailyreckoning.com/trading-secret-media-wont-tell/