New Stock Trend Detector

A Review Of The 1929-1932 Panic And The 1932-1935 Bull Market

W. D. Gann

• Publisher: Golden Springs Publishing
• Year: 2016
• ISBN:
  9781786259714
• Topic: Economics
• Subtopic: Banks & Banking
• Index: Economics

When I wrote TRUTH OF THE STOCK TAPE in 1923, it was because there was a demand for a book of that kind. People needed the help that I could give them and the benefit of my experience and knowledge. In that book I gave the best I had and received my reward. People appreciated my efforts. They bought the book then and they are still buying it. They say it is a good book and more than worth the money. That is very gratifying to me.After the 1929 bull market culminated there was a demand for a new book to meet changed conditions under the so-called "New Era, " so I wrote WALL STREET STOCK SELECTOR in the spring of 1930. I gave freely of my knowledge and the benefit of years of experience. This book helped others to protect their principal and make profits. People who read the book pronounced it one of the best. It is still selling, and again I have been rewarded.No man can learn all there is to know about forecasting the trend of stocks in 3, 5, 10, or 20 years, but if he is a deep student and hard worker, he learns more and knowledge comes easier after years of experience. I knew more about determining the trend of stocks in 1923 than I did in 1911. Seven more years of experience gave me more knowledge and enabled me to write the WALL STREET STOCK SELECTOR in 1930 and give my readers the benefit of my increased knowledge. Now, after five more years have elapsed, my experience and practical test of new rules have enabled me to learn more of value since 1930. The 1929-1932 panic and what has followed since, gave me valuable experience and I have gained more knowledge about detecting the right stocks to buy and sell. I cannot lose if I pass this knowledge on to those who will appreciate it.

 

NEW STOCK TREND DETECTOR

CHAPTER I—A NEW DEAL IN WALL STREET

Since writing TRUTH OF THE STOCK TAPE in 1923 and WALL STREET STOCK SELECTOR in 1930, the greatest panic that the world has ever seen has taken place, culminating with the greatest stock decline in history, reaching extreme low levels on July 8, 1932. Conditions have changed since 1929 and new laws have been passed affecting stock market movements. The passing of the law supervising stock exchanges has made a great change in the action of the stock market and made it necessary to formulate new rules to meet the changed, conditions. The Bible says, “Old things pass away and new ones come to take their places.” “A wise man changes his mind, a fool never.” The man who refuses to change when conditions change, or to see the new way of doing things is doomed to failure.

This is an age of progress. We move forward, not backward. We cannot stand still. We must go ahead with progress or retrograde into the list of the “has beens.” Henry Ford made hundreds of millions of dollars with the old Model “T” car. It was a good car in its day and Ford was satisfied with it, but time and conditions changed. The public changed and demanded an up-to-date, better car. Henry Ford, being a wise man, saw the “handwriting on the wall” and changed his mind. In the midst of the world’s. Greatest depression, Ford closed his factory and spent over $100,000,000 to develop a new and better car, or as the boys say, “He made a lady out of ‘Lizzie.’” He was not actuated by the desire for more money when he developed this new car. It was pride and ambition and not greed that urged him to keep the public’s good will by giving them a better car at a lower price. The public responded quickly and the new Ford became a leader. Each year Ford has improved his car until the 1936 Model is the best car yet produced.

Politicians with selfish motives have always preached against Wall Street and misled the public in regard to the way business is handled on the New York Stock Exchange and the type of men who handle it. There is no business in the world where a higher type of honor exists than among the men who are members of the New York Stock Exchange. No business men in the world live up to their contracts like the brokers on the floor of the New York Stock Exchange. In other lines of business contracts are made for future delivery of different classes of goods, lumber, textiles and mercantile products of various kinds. In cases of this kind, when prices advance, the buyer calls on the seller to make delivery of the products, but when prices decline he cancels his contract and leaves the seller to get out the best way he can. I quote from a letter received from a prominent lumberman:

“In marketing lumber it is impossible to profit from future price changes even should one be fortunate enough to anticipate them, for the reason the purchaser may cancel the contract if prices decline, but the saw mill is expected to fill the contract at the sale price even if prices advance above it. With few exceptions, this is the general rule governing sales by saw mills to factories that consume the major part of hardwood lumber in the United States. In the decline of the lumber market the first part of 1934, my company bad lumber orders cancelled, amounting to 1,400,000 feet. I know this must seem strange to you, having operated so long where all contracts are made binding on both buyer and seller.”

““I have a high regard for the business methods used in Wall Street. After trading there ten years, it is my opinion there is probably no place or business so free of repudiations or acts of dishonesty.”“

Such a thing as a member of the New York Stock Exchange ever attempting to cancel his contract for a stock he buys or sells is unheard of. When a broker buys or sells stocks on the New York Stock Exchange by raising his hand or nodding his head, he is bound by his honor to live up to the contract and he does. No matter how much the stock goes against him or what the loss is, he never welches. He does not attempt to cancel his contract. He makes his delivery. The brokers and the managers of the New York Stock Exchange are honest and reliable men. The public has been confused as to the position of the New York Stock Exchange, which is but the means and the machinery for carrying on transactions between buyer and seller. The brokers on the floor of the New York Stock Exchange are in no way responsible for the actions of pools or outside deals which at times have been handled by unscrupulous manipulators in the past, but the public has been led to believe that the Stock Exchange and its members were working against them. The brokers simply buy and sell for a commission and give the best service possible to their customers. The New York Stock Exchange serves a useful purpose. The greater part of the manufacturers of this country have their stocks listed on the New York Stock Exchange and every buyer and seller can know every day what the prices are. Without the New York Stock Exchange there would be no Clearing House, no place where people who need money could instantly turn their securities into cash. The fact that the New York Stock Exchange has been in existence since 1792 proves that it fills an economic need, or it would have long since been out of business.

For years Wall Street and the New York Stock Exchange and its rules and way of doing business were considered the best and needed no changes. Then came the “New Deal” and the Securities Exchange Law which compelled changes in rules. Before these laws were put into effect, the New York Stock Exchange saw the need of a new way of doing business and keeping the public thoroughly informed of the way business was carried on.

Why Blame Wall Street And The New York Stock Exchange?

The man who makes profits never gives credit to Wall Street brokers or anyone else for his profits. He takes credit for making them himself. Then, why should he blame his losses on someone else?

If you make a trade in stocks and lose money, do not let politicians lead you to believe that pool managers, manipulators, Wall Street, or the New York Stock Exchange are the cause of your losing money, because they are not. No one forces you to make a trade. You buy or sell stocks because you hope to make profits, and you would not kick if you made them; therefore, don’t play the “baby act” and blame someone if you lose. If you had carelessly run in front of an automobile and were injured, would you blame the automobile or the driver for your carelessness? Just because people have been killed by cars is no reason why laws should be passed to keep automobiles off the roads and streets. Politicians have tried to pass laws for years to restrict the useful operations of the Stock Exchange and Commodity Exchanges just because people who lost money have complained to Congressmen against the Exchanges which serve a useful purpose.

The Law Of Supply And Demand

The prices on the New York Stock Exchange, New York Cotton Exchange and the Chicago Board of Trade are governed by Supply and Demand. No matter whether the buying or selling is by the public, by pools, or by manipulators, prices decline when there are more sellers than buyers and prices advance when stocks are scarce and when there are more buyers than sellers. The members of these Exchanges do not make the markets; they only do the buying and selling for the public and large operators. The pools and large operators in the past have manipulated prices, but no blame should be placed on the Exchanges which merely act as a clearing house for the transactions.

If you could find out the rules the master market makers use to make money, you would buy and sell when they do and make profits, wouldn’t you? If you knew what the big operators were doing, you certainly would follow them. People often ask me: “How can I make some easy money?” or “How can I make some money quick?” There is no way to make easy money and there is no way to make money quickly until you have acquired knowledge yourself. You must pay for whatever you get. What is worth having is worth paying for. Getting money quick and easy does more harm than good.

You can learn what the big operators are doing by being a good Wall Street detective. You can detect what the “powers that be” are doing, by a study of Supply and Demand. The records of the total sales and the high and low prices of every stock are published daily in the newspapers throughout the country. There is no secret about it. It is just up to you to follow rules. If you study Supply and Demand and apply my rules, you can detect the trend and make money.

How New Deal Has Changed Conditions

The New Deal in Washington and the laws passed have changed stock trading so far as the public is concerned. Washed sales under the Securities Exchange Law are no longer permitted. The specialist is restricted on trades that he can make for himself. Short selling has been curtailed. A heavy increase in the amount of margin required to carry stocks has reduced the volume of trading. Taxes have been increased, both income taxes and other taxes, which causes traders and investors to hold on longer and not sell out their stocks because they would have to pay such a large amount of their profits to the Government. This changes the technical position of the market; makes it stronger at times but eventually will make it much weaker and stocks will decline much faster because the short interest in the future will be limited, pool operations will be smaller, and the support in the market by the specialist will be much smaller than it has been in the past.

There will come a time when the market will run into real heavy selling; bids and offers will be far apart. It will be hard to sell stocks when everybody wants to sell and nobody wants to buy. Another thing, heavy margins will work against the market and cause a greater decline, because when people put up 40 to 60% margin, they will hold on longer, or until the margin is nearly exhausted, then everybody will want to sell at the same time and there will be few buyers. It is my opinion that the laws passed to regulate the Stock Exchange will not prove beneficial to the public in the future, just as many laws already passed by the Administration under President Roosevelt have already proved to be detrimental and the Supreme Court has found it necessary to declare them unconstitutional.

CHAPTER II—FOUNDATION FOR SUCCESSFUL TRADING

““Wisdom is the principal thing: therefore get wisdom: and with all thy getting get understanding.”—Proverbs 4:7.”

Have you ever stopped to think and make a careful analysis why you have lost money in stocks or why you have been wrong when you made a trade? If you have, you have probably found that you traded on hope, bankers’ opinions, brokers’ opinions, or relied on tips, or you guessed yourself. Another reason, because you did not admit to yourself that you could be wrong and did not protect yourself when you made the trade. But regardless of how you made the mistake and had the loss, the fault was your own, because you had no definite rule or plan or way to know just when to buy and sell.

You should learn to trade on knowledge, which will eliminate fear and hope. Then, when hope or fear no longer influence you, knowledge will give you nerve to trade and make profits. You should learn the truth about a stock, then learn how to apply all the rules that I have given in my books TRUTH OF THE STOCK TAPE, WALL STREET STOCK SELECTOR and in this book, NEW STOCK TREND DETECTOR. Then you will have a knowledge of trading and an education that you never had before, and when you make a trade, it will be for a good and sufficient reason and on definite rules. You will neither hope nor fear then. You will trade on facts. You will protect your capital and profits by the use of stop loss orders and will make profits.

There is one way to always correct a mistake if you buy or sell a stock against the trend, and that is to place a stop loss order. A stop loss order protects you in many ways. When you buy a stock, place a stop loss order 1, 2 or 3 points away. Then if you are out of town or out of reach of your broker and some sudden, unexpected event happens to cause a sharp decline and the stock reaches your stop loss order, you are automatically sold out. The stock might go 10 points lower the same day before they could reach you. Yet, you are protected because you had your order with the broker to sell. You did not have to be there to watch it and did not have to be where the broker could reach you.

There is nothing that will give you more valuable information or enable you to tell more what a stock is going to do than to study its past actions and apply the rules that I give in my books. If you know what a stock has done in the past, it will help you to determine what it will do in the future. All of the buying and selling is recorded and registered in the price of the stock, which is influenced by Supply and Demand. Price movement, if studied correctly, will tell you more about the stock than brokers can tell you, or newspapers or any other kind of so-called “inside” information.

Learn To Be Independent

The greatest help that one man can give another is to show him how to help himself. The man or woman who depends on others for advice, for inside information or what others think about the stock market, will never, make a success of speculation or anything else. You must learn to be independent. Learn to do by doing and to know by study and application. Then you will have confidence and courage that no one else can give you.

An intelligent man will not follow blindly the opinion of others without knowing what their opinion is based on, but when he himself sees, understands and knows the rules that forecast stock market trends, then he becomes a good Wall Street detective. He detects the future trends and follows them with confidence. He no longer says, “If I knew the information I get on Chrysler was right, I would buy 500 shares instead of 100.” When he sees and understands why Chrysler gives a definite indication of an advance, he then has no fear and no hope, but has confidence and courage to buy 500 shares.

No matter what business you are interested in, learn all you can about it. The most important thing, outside of your health, for you to protect is your money. Therefore, take time to study and prepare yourself to handle your money yourself and do not depend forever and entirely upon others.

A Definite Plan

Make up your mind now...