The GGF Essential Course


Lesson 1 - Introduction: Forecasting in the Grand Tradition of W.D. Gann


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    • 1.3 - 1st Principle: Human “Weakness” at the Center of Market Movements

    In order to solve the mystery to unlocking the markets' riches, there are two foundational principles that relate to people.

    The first principle is this: When it comes to money, 98% of people are driven by the three controlling emotions of hope, desire (greed) and fear. To succeed in speculation, not only do these emotions need to be controlled, but the investor or trader must learn to do the opposite of what his instincts tell him or her to do based upon these emotions.

    When a market is declining and marketplace participants ("the crowd") are fearful, the successful speculator must be able to steel his emotions and look to buy based upon hope. When a market is advancing, and the crowd hopes for a much greater advance, the successful speculator must steel his emotions and fear the possibility of losing hard-earned profits based upon the likelihood of an imminent top.

    The twin demons of desire (greed) and fear ask questions like these:
    1. "Do you realize what you can get (freedom, wealth, power, fame) if the market continues to move in your favor and you make such and such an amount of money?"
    2. "Do you realize what you stand to lose (freedom, wealth, power, fame) if the market continues to move against you and you keep losing money?"

    In the first, the trader throws caution to the winds without regard to risk and ends up overtrading. This is the biggest mistake one can make in the market. In the second, the trader panics out, invariably at the wrong time. When market decisions are made on the basis of these two driving emotions, the tendency is for the trader or investor to buy the highs and sell the lows - decisions based on feelings rather than facts.

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