Gann's Books

Discussion in 'Technical Analysis' started by janko, Oct 7, 2002.

  1. janko


    Hey guys, just wondering where should one start if he wants to learn about Gann? I see he wrote several books, particularly one called "How to Make Profits In Commodities" and apparently this one seems as a good start. Can any of you recomend something better or in addition to this? I have searched the site but couldnt really come up with anything, and the book forums dont have anything on him either. thnx
  2. Kaizen


    Read Gallacher's book first if you haven't yet.

    Here is one guys review.

    When a book bills itself as "brutally honest" you are usually in for some interesting reading. Gallacher wastes no time in taking on a moral tone, exposing the idiocy of emotional losers who shouldn't even be in the markets and commodity broker crooks who add no value to the process and are good at nothing other than fast talk and sales techniques. While these opening observations are based on truth, they don't seem all that necessary. Do we really need to hear that there are a lot of dummies in the markets who shouldn't be trading or that there a lot of dishonest / incompetent brokers out there? Maybe I am off base to assume this is common knowledge.

    This book is at its most interesting in uncovering the fallacy behind some highly esteemed mythical legends. Elliott, Gann and Fibonacci, when it comes down to it, have no real substance behind their methods, and Gallacher does a good job of exposing that fact. He also shines some sunlight on the seemingly ubiquitous Larry Williams, painting him as a clear and complete fraud. While not touching the subject of Williams' legitimacy, I have always wondered who would believe in the trading abilities of a guy who sends out mass mailings once a month telling people how they can make ten grand a month in 30 minutes a day. In otherwords, I see Williams as dangerous only to the people mentally slow enough to believe his "share the wealth" claims, and thus not really worthy of book treatment.

    Gallacher is neither totally wrong nor totally right in his methodical destruction of technical analysis. What he overlooks is that fundamental analysts and many technical analysts actually have a similar problem: attempts to profit from predicting the future ultimately prove futile because the higher the probability that you are right, the lower the probability that you can make money off that knowledge before others do. Pure fundamental analysts are worse off then pure technical analysts, because it is impossible to get all the hidden factors right and not get hit by surprise developments along the way, whereas a pure technical analyst will at least have a graphic representation in chart form that makes use of all traders' and analysts' opinions.

    The true way to use technical analysis is not to try to predict the future, but only to measure probabilities of an event occurring, and then to place bets only when probability shows conditions to be favorable. That is to say, if event A happens under certain conditions, then the probability of profitable scenario B occuring, while still uncertain, may have increased enough to make the trade a worthwhile risk. Many chart patterns only follow through 50% of the time- but they can still be used profitably because rewards reaped can exceed risk taken through proper money management.

    This understanding that trading is a game of probabilities in which it is impossible to win 100% of the time is why good traders aren't bothered by routine losses. When Gallacher says "deliberately preparing for a loss is perverse, pessimistic, unnatural, yet correct," he shows me that he has a personal stake in being right and does not understand that trading is above all an odds game. Is it "perverse" or "pessimistic" for a poker player to expect not to win every hand?

    There is also the argument against Gallacher that technical traders have experienced much more high profile success, while 90% of employed research / fundamental analysts are inept at trading and could not trade their way out of a paper bag. Gallacher says "All the big winning plays I have seen in the market can be traced to a correct call on economic fundamentals." He must not read much. Take Richard Dennis, for example, who turned a few hundred bucks into hundreds of millions as a pure technical analyst, or Marty Schwartz, who was a failure as a fundamental analyst for 9 years but became one of the most consistently profitable traders of all time after making the switch to TA, or Ed Seykota, who turned 5K into 15 mil with a purely mechanical system.... and so on.

    Last of all, Gallacher leans on technical analysis himself near the end of the book. If he were a true fundamentalist, he would continue holding a position that was going against him until he was convinced that the fundamentals have changed. If the fundamentals haven't changed as you know them and you get out of a market only because the price is moving sharply the wrong way- guess what, you're using technical analysis whether you meant to or not! In conclusion, I have to say that most of Gallacher's beef with technical analysis is a straw man. He actually attacks poor trading habits- overtrading, risking too much on a trade, not taking losses etc., that are the hallmarks of bad trading, not technical analysis as a method. An entertaining book but one in which emotion was given a little too much free reign.
  3. toby400



  4. Here today. Gann tomorrow.

  5. janko

    try a bit esoteric but a decent start.


  6. TSaimoto

    TSaimoto Guest

    Here's another review from Amazon:

    Previous reviewer Justice covers things pretty well except when he says, "Gallacher is neither totally wrong or totally right in his methodical destruction of TA." This is incorrect. Gallacher IS totally wrong in his critique of TA, and his is also totally, we might even say "brutally" DIShonest in presenting his case. Setting up a straw man and knocking him down is the method of someone who really does not know what he is talking about and refuses to learn. But Gallacher does worse than that--he prevaricates. To see this for yourself without buying the book you'll have to pay attention and do some work, including getting through this unfortunately but unavoidably long review.

    The cornerstone of Gallacher's case against TA is his treatment of trendlines using a chart of the June '85 Live Hogs contract, on which he draws the "true" trendline in contradistinction to the one Murphy drew on the same chart in his Technical Analysis of the Futures Market. Gallacher claims trading this "true" trendline would have had the technical trader long on the day the market went limit-down against him. This "true" down trendline connects the tops of 3 rallies between mid-Jun and early Aug '84. In mid-Aug price breaks above the DTL, dips back to the same DTL in early Sep, then bounces back up for 5 days. Gallacher rightly says that TA teaches buying this bounce because resistance, once penetrated, becomes support. So then the limit-down day comes and slams the hapless and naive technical trader with a huge loss. It does look bad.

    But it's not, and here's why. Go to, charts, and pull up LHM85, Density: High. This chart shows the situation Gallacher examines. But it also shows Gallacher's dishonesty. Note that the supposed long position was held in mid-Sep in the Jun '85 contract. I guarantee you, folks, there was not a single technical trader trading LHM85, either long or short, in Sep '84. Not one. The very first thing technical traders learn is to trade the most active contract. Hedgers are the only ones with positions in far-deferred contracts like the Jun85 was in Sep84. This is an egregious and inexcusable error. If Gallacher is simply ignorant of this elementary distinction between active and deferred contracts and who trades them, he is certainly not the one to write a vitriolic and condescending attack on TA and the people who use it.

    But that's not all. What about the technical traders who WERE trading the most active contract in Sep84 when the "massive gap down" occurred? They would have been trading the Oct84 contract. Go to futuresource charts and pull up LHV84, Density: Low. Draw a DTL connecting the highs in mid-Jul, mid-Aug, early Sep, and mid-Sep. This is one of the most perfect trendlines I have ever seen. There is NO DTL break to the upside here. In fact, following Murphy's elementary TA principle of selling on contact with a DTL would have had you SHORT, not long, when the gap-down came. Look it up! Do the charts yourself. The truth of the matter is EXACTLY THE OPPOSITE of what Gallacher says. Q.E.D.

    This is not an isolated error, but it is a glaring one, and it characterizes the poor quality of the thinking expressed throughout the book.

    If you want learn what TA is about, get Kaufman's Trading Systems and Methods, then go to futuresource or and study about 10,000 charts. That will be a good beginning and give you some idea. If you read Gallacher, you'll have no clue, except maybe that fundamentalists are irrational and disingenous in making such confident assertions about things they do not know.
  7. TSaimoto

    TSaimoto Guest

    Where to start with Gann?

    Don't start. This may seem ironic coming from a Gann guy, still I'll put my time into other aspects of analyzing the market.

    I would start after becoming a consistant profitable trader in other styles. There's so much to know about Gann before you can start using it like me.(Bragging)

    "How to make profits..." is the first step. Read all his books. Then go into the pit pricey Commodity Courses. Read all his courses. Then you'll realize, you don't understand a bit about what he's writing about (Well, you'll know but it doesn't lead to a strong edge in the market). Then decide if you want to take the next step.

    Also, all the best wishes to the family of Robert Krausz. He just passed away.
  8. janko


    well i just want to start somewhere to see what its all about. It might not be my cup of tea, but i am always open to new ideas, and if i can learn something, then why not. I just wanted to get some sort of direction and not waste money and time on silly books that think they know gann and throw few things around but no real structure to it. thnx, i guess i'll start with that first book on commodities. :cool:
  9. sharper


  10. that's what i read also, basically Gann was all about astrology and the rest of his stuff was just made up mumbo jumbo so that he wouldn't have to admit he was an astrologer. Personally I've got nothing against astrology, it is probably right about half the time and it is fun.

    I heard an astrological prediction that the Dow would hit the 6745 area in November. If that works out I may become an astrologer too :)
    #10     Oct 8, 2002