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W. D. GANN’S 24 TIMELESS STOCK TRADING RULES

  
Analysis, Education
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Here are the 24 rules:

1. Amount of capital to use: Divide your capital into 10 equal parts and never risk more than one-tenth of your capital on any one trade.

2. Use stop loss orders. Always protect a trade.

3. Never overtrade. This would be violating your capital rules.

4. Never let a profit run into a loss. After you once have a profit raise your stop loss order so that you will have no loss of capital.

5. Do not buck the trend. Never buy or sell if you are not sure of the trend according to your charts and rules.

6. When in doubt, get out and don’t get in when in doubt.

7. Trade only in active markets. Keep out of slow, dead ones.

8. Equal distribution of risk. Trade in two or three different commodities if possible. Avoid tying up all your capital in any one commodity.

9. Never limit your orders or fix a buying or selling price.

10. Don’t close your trades without a good reason. Follow up with a stop loss order to protect your profits.

11. Accumulate a surplus. After you have made a series of successful trades, put some money into a surplus account to be used only in emergency or in times of panic. (more…)

THE FIVE IMMUTABLE LAWS OF INVESTING

  
  Education
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Be Patient And Wait For your Trade.  Many investors suffer from “action bias” or a desire to do something.  However, when there is nothing to do the best thing to do is nothing.

 Be Contrarian.  The herd is usually wrong.  The punch bowl of speculation is usually spiked with denial.  Be careful getting in when the getting is at the end.  Risk Is Permanent Loss of Capital, Never A Number.  Pay attention to valuation, fundamental, and financial risks and thus avoid permanent impairment of your capital.

Be Leery of Leverage.  Leverage is a dangerous beast.  It can’t turn a bad investment good, but it can turn a good investment bad.  Whenever you see a financial product with leverage as its foundation you should be skeptical, not delighted.

 Never Invest In Something You Don’t Understand.  If something sounds too good to be true it probably is.  If you do not understand where your money is going then don’t press the pedal ’cause the vehicle may be in reverse. 

Invest when the law is on your side; otherwise you may find yourself on the other side of the barbed wire fence at BROKE prison. 

10 Points For Successful Trading

  
  Education
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Trading Methodology:

  1. Winning system-Only trade tested systems with a positive expectancy in the long term.
  2. Faith– Your system has to allow you to trade your beliefs about the market.
  3. Risk/Reward-Never trade unless your profit expectations are greater than your capital at risk.

Trader Psychology:

  1. Discipline-You have to keep trading your method even when it doesn’t work for a given time period.
  2. Ego-Admit when you are wrong.
  3. Emotions-Trade the math not your emotions.

Risk Management:

  1.  Risk of Ruin-Never risk more than 1% of your total account capital on any one trade.
  2. Position Sizing-Use your capital at risk to understand the right amount to trade based on the securities volatility.
  3. Capital at risk: Never put more than 6% of your total capital at risk at any given time on all positions.
  4. Trailing stops- Always have an exit strategy to lock in your winners.
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