The 28 rules in Gann's theory refer to Gann's own futures trading experience. In fact, they are trading rules that Gann wrote for commodity futures traders:
Rule 1: Divide your capital into 10 equal parts. It is not advisable to risk more than 1/10 of your capital in any transaction.
Rule 2: Set a stop loss order. If the price is always 1 to 3 cents away from the trading price, you can set a stop loss order for protection, with a distance below 5 cents; the stop loss order for cotton should be between 20 and 40 points, and the distance should not exceed 60 points.
Rule 3: Over-trading is not advisable. Over-trading will lead to violations of the trading rules related to the principal.
Rule 4: Don't do anything that will turn your profit into a loss. Once the profit reaches or exceeds 3 cents, you need to keep raising the stop loss price so that the principal will not be lost. For cotton, assuming that the profit gradually reaches or exceeds 60 points, you need to gradually set stop loss orders at positions that will not cause us to lose money.
Rule 5: Don't fight the trend. If you can't accurately determine the trend based on your charts and trading rules, don't buy or sell stocks.
Rule 6: When in doubt, exit the market immediately. Never enter the market when in doubt.
Rule 7: Trade only in active markets, improve your insight, and stay away from dull, dead futures contracts.
Rule 8: Evenly spread the risk. If possible, investors should trade 2-3 types of commodity futures and try to avoid putting all their capital in one commodity futures.
Rule 9: Never use limit orders to trade, and do not set buy and sell prices. Generally, you should use market orders.
Rule 10: Do not close your positions without reason, always set stop-loss orders to protect your profits.
Rule 11: Accumulate surplus. After successfully completing this series of transactions, save some funds in a surplus account so that you can use them in emergencies or panic periods.
Rule 12: Never buy a stock just to make a small profit.
Rule 13: Never choose to average your losses. This is one of the biggest mistakes a trader can make.
Rule 14: Never exit a market on impulse, and never enter a market because you can’t wait.
Rule 15: Avoid small profits and big losses to a certain extent.
Rule 16: If you place a stop-loss order on a trade, never cancel it.
Rule 17: Avoid long-term entry and exit from the market.
Rule 18: Keep your intention to go long and short consistent, and try to align your goals with the trend and make money from it.
Rule 19: Do not buy a commodity simply because its price is relatively low; do not sell a commodity simply because its price is high.
Rule 20: We must be careful not to add positions at the wrong time. We must wait until the commodity futures become very active and can successfully cross the resistance level before adding positions to buy; we must wait until the commodity futures fall below the distribution range before choosing to add positions to short sell.
Rule 21: When going long, choose commodity futures contracts that show a very strong upward trend to increase your position; when going short, choose commodity futures contracts that show a relatively clear downward trend.
Rule 22: Never hedge. If you are long a commodity futures contract and it starts to go down, never hedge by shorting another commodity futures contract. Sell at the market price, then take the loss and wait for the next opportunity.
Rule 23: Never change your position in the market without reason. When you trade, you must have a very good reason, or according to the investor's clear trading plan, and do not leave the market until there is a clear sign of a trend change.
Rule 24: Avoid increasing your trading size after a long period of success or profitability.
Rule 25: Don’t guess when the market will reach its peak, let the market itself prove where the top is; don’t guess when the market will reach its bottom, let the market itself prove where the bottom is.
Rule 26: Never follow the advice of someone unless you know he is more knowledgeable than you.
Rule 27: Reduce your trades after your first loss, never increase them.
Rule 28: Effectively avoid wrong entries and wrong exits; to a certain extent, avoid right entries and wrong exits. This is doubling down on mistakes.
If we intend to make a transaction, we must try our best to make sure that we do not violate these 28 rules; if we close a position due to a loss, we must check these rules to see which one we have violated.
