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17th October
2006 |
A man who never changes his mind will
have no change to mind
William D. Gann
My recent
general observation of the worlds stock markets has been that they were in
balance at or near heavy upside resistance as calculated by Gann's mathematical
rules. It was pointed out that such levels point to three obvious
possibilities. Firstly a fall from these levels, a break out to the upside or
the least welcome of all a move into a range under the problem area. The
essential criteria is to know in advance where these decision levels are
located. A simple exercise for a Zenith subscriber either from his own
calculations or from those supplied by Gann Mgt.
In view of various
other factors it has been my view that a move to the downside was the more
likely but one thing was for certain that this is a time for extreme vigilance.
At such times I always refer to the observations of my investment gurus with my
attention being directed to the experiences of the greatest of traders William
D Gann and the greatest of managers Paul Tudor Jones.
The title of this
article points to the most difficult of disciplines I have had to conquer over
the past 30 years. An experience in the early ’80’s was brought to
mind by recent events. In May ‘81 the FT 30 topped out at 597 and once
again attacked the level in Nov ’82 and then clearly went through to new
highs. At that time, as I did recently, I had a bearish personal view expecting
a fall in the index. Due to my inability to recognise the inflexibility of my
personal view I suffered...fortunately the use of stop losses protected my
portfolios but losses were unnecessarily suffered. I also failed to take
advantage of the break. A lesson was learned to be humble at all times
especially after periods of success.
When doubts arise I scamper to my
most favoured reference book ‘Market Wizards’ and refer to the
interviews conducted by Jack D Schwager. On page 119 Schwager reports on his
interviews with Paul Tudor Jones where in his first interview Jones had been
extremely bullish on the S & P. When he returned two weeks later he had
completely reversed to a bearish stance. He was impressed by his ability of
Jones to change his mind in such swiftly.
If the greatest of managers
can change his mind then so must I. I have had to do so of late. My heart still
tells me to be in cash but I have been buying in response to clear Gann buy
signals. I am now 100% invested with further buys on the horizon. Of the
positions held the vast majority are already in profit. For instance, the
Spanish market broke clear of my resistance level accompanied by a personal
reaction not dissimilar to that in ’81. I did not feel at all confident
but there again what do I know? If the market tells me to buy then I buy.
Investors must learn from past experiences but most suffer from the affliction
of persistently repeating past mistakes. I have learned not to do so and bought
the I-share for the Spanish market as soon as it signalled. My basic instinct
had to be overturned and my doubts overruled. Thanks to William D & Paul
Tudor I have become an unemotional trading machine...it feels good. You should
try it but it doesn’t come easy and for almost everybody it never does.
Gann Mgt can help.
This weeks
world market analysis reveals 18 markets attempting to break through our
resistance levels. However, short term trends have not yet been established
over the resistance areas. This is a vital ingredient in the process of
avoiding the hurt of confidence sapping whipsaws. I have many times experienced
market positions as they are today where temporary breakouts have been swiftly
reversed.
Know the level at which to act but then follow the market and
not your hopes. Furthermore don’t try to anticipate the breakout or double
guess it. One of the leading attributes of the great traders is that of
patience and the ability to wait for opportunities to develop rather than go
rushing into the unknown.
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