36 Rules for Trading Success

I have recently been reading a book called "How to Make Profits in Commodities" by WD Gann. So far, this book has been a really tough read, and it's been hard to extract much meaningful information from it.

I may discuss more about this book in a review at a later date. In the meantime, here are the main points of the book that I was able to extract:



The 24 rules:

1. Never risk one tenth of capital in one trade.
2. Always use stop loss orders.
3. Never overtrade.
4. Never let a profit run into a loss. (move stops up)
5. Do not buck the trend. (refer to my trading with the trend section)
6. When in doubt, get our or don't get in.
7. Trade only active stocks.
8. Equal distribution of risk in 4 or 5 stocks.
9. Trade market order.
10. Do not close your trades without a good reason.
11. Accumulate a surplus
12. Never buy just to get a dividend.
13. Never average a loss. (this is key)
14. Never get out/in of the market because of impatience or anxiety.
15. Avoid taking small profits and big losses. (easier said than done)
16. Never cancel a stop loss order after you placed it.
17. Avoid getting in and out of the market too often.
18. Be just as willing to sell short as you are to buy.
19. Never buy/sell just because the price is low/high.
20. Wait till the stock is very active and has crossed resistance levels before pyramiding.
21. Select stocks with small volume of shares outstanding to pyramid on the buying side.
22. Never hedge one stock by another.
23. Trade with a plan and do not get out without a definite indication of a change in trend.
24. Avoid increasing trading size after a long period of success.



The 12 rules:

1. Determine the trend
2. Buy at single, double and triple bottoms
3. Buy and sell on percentages
4. Buy and sell on 3 weeks' advance or decline
5. Market moves in sections/waves
6. Buy or sell on 5 to 7 point moves
7. Study volume to determine change in trend
8. Study time factor and time periods to determine change in trend.
9. Buy on higher tops and bottoms
10. A change in trend often occurs just before or after holidays.
11. Buy on a second reaction at a higher bottom.
12. Price gains in fast moves does not last very long.