Why People Lose Trading
W.D. Gann: Rules for Trading
WHY PEOPLE DO NOT MAKE MONEY BUYING AND SELLING COMMODITIES
WD Gann: Success lies in doing the opposite of the masses. Successful traders learn to BUY HIGH and SELL LOW.
WD Gann writes:
“I have stated in my books many times the market does not best you, it is your own human weakness that causes you to defeat yourself.
The average man or woman nearly always wants to buy low and sell high. The farmer always wants to sell at high prices whatever he produces but he wants to buy what he needs at low prices. The laboring man wants high wages all the time but wants low prices for what he buys to eat and wear.
This is a violation of a fundamental economic law and it just will not work.
To make a success in speculation you cannot expect to buy low and sell high. You will make money when you do exactly the opposite of what the average man or woman wants to do or tries to do and makes a failure and loses as a result of what they are trying to do. You will make profits when you learn to BUY HIGH AND SELL LOW.
You must learn to follow the trend of prices and realize that they are NEVER too HIGH TO BUY as LONG as the TREND is UP and NEVER TOO LOW TO SELL AS LONG AS THE TREND IS DOWN.” – WD GANN
George’s Commentary:
Mr. Gann’s advice is shocking and turns the average trader’s world upside down, yet the truth of it surrounds us if we look at the historical charts of major trends.
Every higher trend had to, by definition, go higher than it’s previous highs. And, this would require BUYING HIGHER PRICES every time in order to participate in the trends movement. The same for major downtrends. Each lower low required that a trader or investor would need to SELL AT LOWER PRICES in order to follow the new downtrend.
Human Beings are wired in such a way that it requires discipline to overcome our natural tendency to delay action by waiting for bargains so we can buy low and sell higher. The bargains seldom arrive and the entire move is missed until emotion makes one jump in very late in the move (usually at the very end). This is the flaw that causes most to lose out on the big trending trades. -GR Harrison