Does It Work All the Time

In this section are 19 charts illustrating Retracement Zones and Gann's 50%, 63%, 75% and 100% levels.

There are various markets, including the S&P 500 Index, Treasury Bonds and Swiss Franc. These three markets generally are the more stable and rhythmic. Agriculturals, metals and those subject to foreign influence may not be as desirable for a beginning trader, because of sensitive fundamentals (such as weather) and governmental influences.

Time periods include intraday (5- and 15-minute intervals), daily, weekly, monthly and yearly.

On all the charts, Gann geometric angles and Retracement Zones are used to project price targets and trends. Those that appear are the most obvious. They are by no means the ONLY Gann geometric angles and Retracement Zones. You can practice charting other Retracement Zones by following the methods presented. Using different colored pens will help in seeing the Retracement Zones' inter-relationships.

The following Gann rules can be seen in the charts' price activity:

1) Prices will significantly react at the 50% retracement level.

2) If prices exceed the 50% retracement level, the next level at which they will react is the 62-1/2% retracement level.

3) If prices exceed the 62-1/2% retracement level, the next level at which they will react is the 75% retracement level.

4) If prices exceed the 75% retracement level, the strongest level of support or resistance will be the 100% level.

5) Support and resistance levels also occur at multiples of 50%, 62 1/2%, 75% and 100%.

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PART XII Getting Started

"Trading financial instruments is arguably the purest way on earth to make money. There is a certain Zen to any occupation which requires you to render no service, and produce no product and yet, by simply gathering information and making decisions, allows you to profit. Of course, the rub is that to be successful, you must be able to collect that information and interpret it better than the next guy."

Steve Notis

"Technical Analysis of Stocks & Commodities" Magazine

While trading futures can be very profitable, itis also extremely volatile and speculative. For this reason, there are several "caveats" about futures trading that must be made.

1) USE ONLY RISK CAPITAL - MONEY YOU CAN AFFORD TO LOSE.

There must be sufficient financial security - savings, a home, insurance, college fund. Whatever your needs may be for personal financial security, they must be satisfied before risking capital on futures trading.

Most firms require an initial margin of anywhere from $5000 to $20,000. While it's exciting to put up a $3500 margin for a contract of T-Bonds, knowing that Bonds "only have to move 1%" for you to make $1000, that $3500, AND MORE, CAN BE JUST AS EASILY LOST.

The money in your account can be multiplied many times over in future months and years. It can also be lost in hours.

In his book, WALL STREET STOCK SELECTOR. Gann includes a section titled "Can a man lose $100,000,000" (pgs. 33-34). Gann lists some huge, huge losses by experienced investors. Here are just a few.

• Daniel Drew lost $13,000,000 and died broke.

• Thomas W. Lawson was worth between $30,000,000 and $50,000,000 - and lost it all.

I think it's a fair statement that many of you reading this may never be in a position to lose eight or nine figures. The point, however, is crystal clear. Don't mortgage the farm to play with futures.

2) KNOW YOUR BROKER.

The brokerage business is one of big competition and big bucks. The greatest majority of brokers, especially futures brokers, are honest, competent money managers who have only their clients' best interest at heart. My own broker described his position to me this way:

"Sometimes, I think my most important job is not to write tickets or trade futures, but to keep my clients from hurting themselves."

(Send me a stamped, self-addressed envelope. I'll send you his card.)

Deal with a broker who you can meet. For the beginning trader, having a full-service broker - one who knows the markets and can advise you when to get in - AND WHEN TO STAY OUT - is worth many times the higher commissions you may pay.

One broker cannot service all clients. The broker who might be good for your friends may not be right for you. You will have to find one with whom you share common interests and will feel comfortable.

With a good broker - one that's good for vou - you will make a friend as well as dollars.

3) LEARN FROM ALL THE MATERIAL THAT'S AVAILABLE.

Appendix D is a list of information sources including books, charting services, commodity exchanges, computer hardware and software, and periodicals concerning futures trading.

Read the listed books, contact vendors for their information, and research and talk to people involved in the commodities industry. There may be material that, like brokers, is right for you, and not for others.

Whatever information you receive, however remote you may think it is at the time, is important. By reading this far, you have certainly shown an interest in futures trading. Capitalize on that interest and read all that you can on the subject.

4) LEARN FROM YOUR MISTAKES.

There will be losses; that's the only sure thing of futures trading. But what you do about those losses is important.

You could forget about them and hope they will go away.

Or you could accept them as a learning experience, go back over the charts you've maintained (as I know you have), and find out what went wrong. More often than not, you'll find out the losses happened not because of the markets, but because of what Gann described as "fear and greed."

Gann felt that, when a trader finds himself in a losing position, he will refuse to accept his position out of fear of losing money and hold onto that lost cause, rather than getting out of a bad position and learning from his mistakes.

Greed causes one of Gann's "Twenty-Four Never Failing Rules" to be violated - never let a profit turn into a loss. Out of greed, a trader will hold on to a winning position "just a little bit longer." Unfortunately, that"... little bit longer ..." often reverses profits into losses.

Making mistakes is part of learning futures trading. There is nothing wrong with making mistakes as long as you learn from those mistakes.

If you are just learning about the futures markets and the large number of technical studies that exist today, you may not have access to a computer and the software to generate charts, or know where to find charts (aside from those companies in Appendix D). I have a suggestion.

Most major libraries have business sections. Take $5.29, go to the Business Section and ask them for their book of commodity charts. You will find intraday, daily, weekly and monthly charts. Xerox $4.00 worth of charts. It doesn't matter which contracts or time periods you choose, but choose those contracts and time periods that have a fair amount of up-and-down, rather than sideways, action.

Go to a local office-supply store and buy a protractor with the remaining $1.29.

Take the charts and PRACTICE, PRACTICE, PRACTICE! "Paper trade" a $10,000 account for yourself. Cover the right portion of the chart and project 50% Retracement Zones. It may surprise you how often, and predictable, Gann Retracement Zones occur.

While paper trading, you may want to remember some of Gann's rules and suggestions:

1) TRADE FOR THE LONG TERM

Leave the intraday trading and scalping to the professional traders who have the time, knowledge and capital to trade in this way.

2) TRADE WITH THE TREND

If the market is going up, trade only the long positions from bear reactions. If the market is falling, trade only the short positions from bull reactions.

"The trend is your friend."

3) TRADE FOR A REASON

Never trade just to trade. Know why the trade is being made. "If in doubt, stay out."

4) TRADE AT THE MARKET

Never limit your orders, fix a buying or selling price, or think the market "has to" go up or go down. The market doesn't "have to" do anything; it does not care how much cash you have at risk.

The Retracement Zones illustrated here and those that you will calculate are only targets. There can be some assurance, BUT NO GUARANTEE, that prices will always act as desci-ibed in this publication.

It is for this reason that, while Gann's 50% Retracement Rule is a good rule, it should not be the ONLY rule used to trade risk capital.

PAST PRICE PERFORMANCES ARE NOT A GUARANTEE OF FUTURE PRICE ACTIVITY.

In writing this book, I tried to include some lighter comments. However, understand this:

COMMODITY TRADING IS A DEADLY-SERIOUS VENTURE. VAST AMOUNTS OF MONEY CAN BE MADE - AND LOST - IN A MATTER OF MINUTES.

FOR THIS REASON, LEARN AS MUCH AS YOU CAN ABOUT TRADING BEFORE ENTERING EVEN ONE TRADE.

AND ONCE YOU ENTER THAT TRADE, NEVER ASSUME ANYTHING ABOUT PRICE MOVEMENTS AND TRENDS.

GANN SAID IT ALL:

"NEVER TRADE ON HOPE AND FEAR. KNOW WHY THE TRADE IS BEING MADE."

And remember . . . practice makes perfect - and profits.

Good luck and good trading.

APPENDIX A

Futures Markets Information

(Information believed to be accurate. Check with your broker for any changes.)

MARKET INFORMATION

Trading Hours Delivery Contract Price Mln. Price Maximum Commodity_Central Time Months_S|ie_Quoted In_Pt. Value_Fluctuation Dally Limit

CHICAGO BOARD OF TRADE

Trading Hours Delivery Contract Price Mln. Price Maximum Commodity_Central Time Months_S|ie_Quoted In_Pt. Value_Fluctuation Dally Limit

Corn

9:30-

1:15

H,K,N,U,Z

5,000 bu

«/bu

=

$50.00

1/4«

=

$12.50

10« = $500

Crude Oil

9:30-

1:30

G,J,M,Q,V,Z,*

1000 bbls

$/barrel

1 Pt

=

$10.00

=

$10.00

$1 = $1000 = 100pts

GNMA

8:00 •

2:00

H,M,U.Z

$100,000

32nds/pt

1/32

=

$31.25

1/32

=

$31.25

64/32nds = $2000

Gold, Kilo

8:00-

1:30

G,J.M,Q,V,Z,"

32.15 troy oz

$toz

10pts

=

$3.215

10«/oz

=

$3.215

$50 = $1607.50

NASDAQ 100

8:15-

3:15

H.M.U.Z,"

$250 xIndex

100th/pt.

.01

=

$ 2.50

.05

=

$12.50

none

Major Market

Index

8:15 •

3:15

H,M,U,Z,"

$100 x Index

1/8ths ofpt. 1/8

=

$12.50

1/8 =

= 12.50

none

Maxi Major

Market Index

8:15 ■

3:15

H,M,U,Z,"

$250 X Index

100ths/pt.

.01

I =

= $2.50

.05

=

$12.50

none

Municipal Bonds

8:00-

2:00

H, M, U, Z

$100,000

32nds/pt.

1/32

=

$31.25

1/32

$31.25

64/32nds = $2,000

Oats

9:30-

1:15

H,K,N,U,Z

5,000 bu

t/bu

=

$50.00

1/4«

=

$12.50

10« = $500

Plywood

10:00

-2:15

F,H,K,N,U,V

76,032 sq ft

$/m sq ft

1 Pt

=

$ .76

10pts

=

$ 7.60

$7 = $532 = 700 pts

Silver, New

8:05-

1:25

G,J,M,0,V,Z

1,000troy oz

«/oz

1 pt

=

$ .10

10 pts

=

$ 1.00

50« = $500 = 5000 pts

Soybean Meal

9:30 •

1:15

F,H,K,N,Q,U,V,Z

100 tons

$/ton

1pt

=

$ 1.00

10pts

=

$10.00

$10 = $1000 = 100 pts

Soybean Oil

9:30-

1:15

F,H,K,N,Q,U,V,Z

60,000 lbs

«/lb

1 pt

=

$ 6.00

1 pt

=

$ 6.00

1« = $600 = 100 pts

Soybeans

9:30-

1:15

F,H,K,N,Q,U,X

5,000 bu

t/bu

1 Pt

=

$50.00

1/4«

=

$12.50

30« = $1500

Treasury Bonds

8:00-

2:00

H,M,U,Z

$100,000

32nds/pt

1/32

=

$31.25

1/32

=

$31.25

64/32ndS = $2000

Treasury Notes

8:00-

2:00

H,M,U,Z

100,000

32nds/pt

1/32

=

$31.25

1/32

=

$31.25

64/32nds = $2000

Wheat

9:30 -

1:15

H,K,M,U,Z

5,000 bu

C/bu

=

$50.00

1/4«

=

$12.50

20« = $1000

NEW YORK COFFEE, SUGAR & COCOA EXCHANGE

Cocoa (Metric)

8:30

2:00

H,K,N,U,Z

10Mton

$/M ton

1pt

=

$10.00

1pt

=

$10.00

$88 = $880 = 88 pts

Coffee "C"

8:45

1:30

H,K,N,U,Z

37.500 lbs

«/lb

1pt

=

$ 3.75

1pt

=

$ 3.75

4C = $1500 = 400 pts

Sugar

9:00 -

12:43

H,K,N,U,V

112,000 lbs

«/lb

1pt

=

$11.20

ipt

=

$11.20

NEW YORK COTTON EXCHANGE

Cotton

9:30

2:00

H.K.N,V,Z

50,000 lbs

«/lb

1pt

=

$ 5.00

1pt

=

$ 5.00

2C = $1000 = 200 pts

Orange Juice

9:15

1:45

F,H,K,N,U,X

15.000 lbs

C/lb

1pt

=

$ 1.50

5pts

=

$ 7.50

5C = $750 = 500 pts

Propane

9:45

2:15

F,H,K,N,U,Z

100,000 gal

«/gal

1pt

=

$10.00

ipt

=

$10.00

1C = $1000 = 100pts

INTERNATIONAL MONETARY MARKET & INDEX AND OPTION MARKET

Br. Pound

7:20

1:24

H,M,U,Z

25,000 BP

«/BP

1pt

=

$ 2.50

5pts

=

$12.50

5« = $1250 = 500 pts

Can. Dollar

7:20

1:26

H,M,U.Z

100,000 CD

«/CD

1pt

=

$10.00

1pt

=

$10.00

75« = $750 = 75pts

Cert of Deposit

7:20

2:00

H,M,U,Z

$1,000,000

basis pts

1pt

=

$25.00

1pt

=

$25.00

80 pts = $2000

Deutschemark

7:20

1:20

H.M.U.Z

125,000 DM

«/DM

1pt

=

$12.50

1pt

=

$12.50

1« = $1250 = 100 pts

Eurodollar

7:20

2:00

H,M,U,Z

$1,000,000

basis pts

1pt

=

$25.00

1pt

=

$25.00

100 pts = $2500

French Franc

7:20

1:28

F,H,J,M,N,U,V,Z

250,000 FF

«/FF

1pt

=

$ 2.50

5pt

=

$12.50

500 pts = $1250

Japanese Yen

7:20

1:22

H,M,U,Z

12,500,000 J Y

«/JY

1pt

=

$12.50

1pt

=

$12.50

1« = $1250 = 100 pts

S&P 500 Index

8:30

3:15

H,M,U,Z

500xS&P Index

100ths/pt

1pt

=

$ 5.00

5pts

=

$25.00

none

Swiss Franc

7:20

1:16

H,M,U,Z

125,000 SF

«/SF

1pt

=

$12.50

1pt

=

$12.50

1.5« = $1875 = 150 pts

T-Bills (90 Days)

7:20

2:00

H,M,N,U,Z

$1,000,000

basis pts

1pt

=

$25.00

1pt

=

$25.00

60 pts = $1500

S&P OTC 250

8:30

3:15

H.M.U.Z

500 x Index

100ths/pt

ipt

$5.00

5pts

=

$25.00

none

COMMODITY EXCHANGE INC. (NY)

Copper

8:50

1:00

F,H,K,N,U,Z

25,000 lbs

«/lb

1pt

=

$ 2.50

5pts

$12.50

5« = $1250 = 500 pts

Gold

8:00

1:30

G,J.M,Q,V,Z

100 troy oz

$/oz

1pt

=

$ 1.00

10pts

=

$10.00

$25 = $2500 = 2500 pts

Silver

8:05

1:25

F,H,K,N,U.Z

5,000 troy oz

«/oz

1pt

=

$ .50

10pts

=

$ 5.00

50« = $2500 = 5000 pts

Aluminum

8:30

1:15

F,H,K,N,U.Z"

40,000 lbs

C/lb

1pt

=

$ 4.00

5pts

=

$20.00

5« = $2000 = 500 pts

Trading Hours Delivery Contract Price Min. Price Maximum Commodity_Cantral Tim« Months_Size_Quoted In_Pt. Value_Fluctuation Daily Limit

CHICAGO MERCANTILE EXCHANGE

Trading Hours Delivery Contract Price Min. Price Maximum Commodity_Cantral Tim« Months_Size_Quoted In_Pt. Value_Fluctuation Daily Limit

Cattle, Fdr.

9:05

1:00

F,H,J,K.Q.U,V,X

44,000 lbs

$/cwt

1pt

= $ 4.40

2'/ipt s

= $11.00

1.5c

= $660

= 150pts

Cattle, Live

9:05

1:00

F.G.J. M.Q.V.Z

40,000 lbs

$/cwt

1pt

= $ 4.00

2'/jpts

= $10.00

1.5c

= $600

= 150 pts

Hogs

9:10

1:00

G,J,M,N,Q,V,Z

30,000 lbs

$/cwt

1pt

= $ 3.00

2Vjpts

= $ 7.50

1.5C

= $450

= 150 pts

Lumber

9:00

1:05

F.H.K.N.U.X

130,000 bd tt

$/m/bd tt

1pt

= $ 1.30

10pts

= $13.00

ui II

$650 =

500 pts

Pork Bellies

9:10

1:00

G,H,K,N,0

38,000 lbs

c/lb

1pt

= $ 3 80

2'/ipts

= $ 7.60

2C =

$760 =

200 pts

KANSAS CITY BOARD OF TRADE

Value Line Index

8:30

3:15

H.M.U.Z

$500 x Index

100ths/pt

1pt =

$ 5.00

5pts =

$25.00

none

Mini-Value Line

8:30

3:15

H.M.U.Z

$100 x Index

100ths/pt

1pt =

$ 1.00

5pts =

$ 5.00

none

Wheat

9:30

1:15

H,K,N,U.Z

5.000 bu

C/bu

1C =

$50.00

1/4C =

$12.50

25c

$1250

NEW YORK MERCANTILE EXCHANGE

Crude Oil

8:45

2:10

H.M.U.Z"

1000 bbls

S/bbl

ipt =

$10.00

1pt =

$10.00

$1 =

$1000

100 pts

Gasoline. Leaded

8:30

2:00

H.M.U.Z" *

42,000 gal

C/gaiions

ipt =

$ 4.20

1pt =

$ 4.20

2c =

$840 =

200 pts

Gasoline Unleaded

8.30

2:00

H.M.U.Z"

42,000 gal.

c/gallons

1 pt

$4.20

1pt

$4.20

2C =

$8.40 =

200 pts

Heating Oil

8:50

2:05

H.M.U.Z"

42,000 gal

it/gallons

ipt =

$ 4.20

1pt =

$ 4.20

2c =

$840 =

200 pts

Palladium

7:50

1:20

H.M.U.Z

100 troy oz

$/02

ipt =

$ 1.00

5pts =

$ 5.00

$6 =

$600 =

600 pts

Platinum

8:00

1:30

F,J,K.M.N,V

50 troy 02

$/oz

ipt =

$ .50

10pts =

$ 5.00

$20

$1000

= 2000 pts

Potatoes. New

8:45

1:00

F.H.J.K.X

100,000 lbs

c/50 lbs

ipt =

$20.00

1pt =

$20.00

40c

$800

40pts

MID AMERICA COMMODITY EXCHANGE

British Pound

7:20

1:34

H.M.U.Z

12,500 bp

c/bp

1pt

=

$ 1.25

5 pts

=

$

6.25

5« = $625 = 500 pts

Canadian Dollar

7:20

1:36

H.M.U.Z

$50.000

c/cd

1pt

=

$ 5 00

ipt

=

$

5.00

75« = $375 = 75pts

Cattle Live

9:05

1:15

F,G,J,M.Q.V.Z

20.000 lbs

$/cwt

1pt

=

$ 2.00

2'/aptS

=

$

5.00

1.5« = $300 = 150pts

Corn

9:30

1:30

H.K.N,U,Z

1,000 bu

c/bu

1C

=

$10.00

1/4«

=

$

2.50

10c = $100

Deutschemark

7:20

1:30

H,M,U,Z

62,500 dm

c/dm

1pt

=

$ 6.25

1pt

=

$

6.25

1« = $625 = 100 pts

Gold

8:00

1:40

F,H.J,M,N,U,V,Z

33.2 troy 02

$/oz

1pt

$ .33

10pts

=

$

3.32

$50 = $1660 = 5000 pts

Hogs

9:10

1:15

G,J,M,N,Q,V.Z

15,000 lbs

$/cwt

1pt

=

$ 1.50

2'/¡pts

=

$

3.75

1.5c = $225 = 150 pts

Japanese Yen

7:20

1:32

H,M,U,Z

6,250,000 jy

c/jy

1pt

=

$ 6.25

ipt

=

$

6.25

1« = $625 = 100 pts

Oats

9:30

1:30

H,K,N,U,Z

1,000 bu

c/bu

1C

=

$10.00

1/4«

$

2.50

10« = $100

Silver

8:05

1:40

G,J,M.Q.V.Z

1,000 oz

c/oz

1pt

=

$ .10

10pts

=

$

1.00

50c = $500 = 5000 pts

Soybeans

9:30

1:30

F,H,K,N.Q.U.Z

1,000 bu

c/bu

1pt

=

$10.00

1/4«

=

$

2.50

30c = $300

Swiss Franc

7:20

1:26

H.M.U.Z

62.500 sf

c/sf

1pt

=

$ 6.25

Ipt

=

$

6.25

1C = $625 = 100 pts

Treasury Bills

8:00

2:15

H.M.U.Z

$50,000

basis pts

ipt

=

$12.50

1pt

=

$12.50

600pts = $750

Treasury Bonds

8:00

2:15

H.M.U.Z

$500,000

32nd/pt

1/32

=

$15.62

1/32

=

$15.62

64/32nds = $1000

Wheat

9:30

1:30

H.K.N.U.Z

1,000 bu

C'bu

1C

=

$10.00

1/4c

=

$

2.50

20C = $200

NEW YORK FUTURES EXCHANGE_

NYSE Index_8:30-3:15 H.M.U.Z_500 x Index 100th/pt_1pt = $ 5.00 5pts = $25 00 none

Key • Delivery Months Key ■ Maximum Daily Limit

Jan —

F

May -

K

SEP -

U

Plus

first 5 months — "

* — No limits front 2 months

Feb -

G

June-

M

Oct —

V

Plus

first 3 months — "

Vi (50pts) all other months

Mar —

H

July —

N

Nov —

X

Apr —

J

Aug —

O

Dec —

Z

Daily Market Prices

Now that you're ready to begin trading, it might be a good idea to become familiar with the daily futures market prices.

On the following page is a list of the futures' market prices from the Wall Street Journal of4/25/89. (If people know that you are now a futures trader, you should at least carry this paper around with you.) There is a wealth of information here that becomes invaluable as you become more familiar with the markets.

The section for Treasury Bonds, with explanations for the various columns and numbers, appears below.

1) Commodity (Exchange traded); contract size; unit dollar value.

2) Contract month.

3) Opening price of the trading session.

4) Highest price reached during the trading session.

5) Lowest price reached during the trading session.

6) Closing price of the trading session.

7) Difference between the current closing price and the closing price of the previous session.

8) The highest price reached during the entire time that the contract is trading.

9) The lowest price reached during the entire time that the contract is trading.

10) The open interest for that particular contract month.

11) The estimated volume for that trading session; the volume for the previous trading session; the total open interest for the previous trading session; the net change in open interest between the current and previous trading session.

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