William D. Gann & The Law of Vibration The Life & Work of CosmoEconomics’ most Influential Proponent

The grandfather of and most influential proponent of the tradition that we call Cosmological Economics is William D. Gann: one of the greatest market analysts and traders of all times.

Gann’s general theory behind market influence was called The Law of Vibration. It posited that the financial markets were controlled by natural laws which could be understood and used to forecast future price movements, using scientific principles like electro-magnetism, vibrational theory, and the rhythms and cycles of nature.

Gann’s Law: Presented in The Ticker

He first presented his theory and demonstrated its application over a century ago in his 1909 interview with Richard Wyckoff in The Ticker & Investment Digest, a precursor to the Wall Street Journal. For this famous interview, Gann was first audited by an accountant for the paper who monitored his trading over a 25 day period, where out of 286 trades, 264 were profitable with only 22 losses, a 92% success rate, producing a 1000% return on his initial margin in less than one month, one of the greatest documented trading records in the history of the markets.

In this article, Gann elaborated some general foundational principles which formed the basis of his system, discussing the essence of his work as deriving from the natural sciences of the late 1800’s, summarized by what he called The Law of Vibration. There can be no better introduction and summary of the subject than Gann’s own original words, so we reproduce here some of the key quotes from this interview to give a sense of the nature of this science:

“I soon began to note the periodical recurrence of the rise and fall in stocks and commodities. This led me to conclude that natural law was the basis of market movements. I then decided to devote ten years of my life to the study of natural law as applicable to the speculative markets and to devote my best energies toward making speculation a profitable profession.

“After exhaustive researches and investigations of the known sciences, I discovered that the Law of Vibration enabled me to accurately determine the exact points to which stocks or commodities should rise and fall within a given time. The working out of this law determines the cause and predicts the effect long before the Street is aware of either. Most speculators can testify to the fact that it is looking at the effect and ignoring the cause that has produced their losses.

“It is impossible here to give an adequate idea of the Law of Vibration as I apply it to the markets, however, the layman may be able to grasp some of the principles when I state that the Law of Vibration is the fundamental law upon which wireless telegraphy, wireless telephone and phonographs are based. Without the existence of this law the above inventions would have been impossible.

“In going over the history of markets and the great mass of related statistics, it soon becomes apparent that certain laws govern the changes and variations in the value of stocks and there exists a periodic or cyclic law, which is at the back of all these movements. Observation has shown that there are regular periods of intense activity on the Exchange followed by periods of inactivity. Mr. Henry Hall, in his recent book devoted much space to ‘Cycles of Prosperity and Depression’ which he found recurring at regular intervals of time. The law which I have applied will not only give these long cycles or swings, but the daily and even hourly movements of stocks. By knowing the exact vibration of each individual stock I am able to determine at what point each will receive support and at what point the greatest resistance is to be met.

“Those in close touch with the market have noticed the phenomena of ebb and flow, or rise and fall in the value of stocks. At certain times a stock will become practically stationary or inactive with a very small volume of sales. I have found that the Law of Vibration governs and controls these conditions. I have also found that certain phases of this law govern the rise in a stock and an entirely different rule operates on the decline.

“I have found that in the stock itself exists its harmonic or inharmonic relationship to the driving power or force behind it. The secret of all its activity is therefore apparent. By my method I can determine the vibration of each stock and by also taking certain time values into consideration, I can in the majority of cases tell exactly what the stock will do under given conditions.

“The power to determine the trend of the market is due to my knowledge of the characteristics of each individual stock and a certain grouping of different stocks under their proper rates of vibration. Stocks are like electrons, atoms, and molecules, which hold persistently to their own individuality in response to the fundamental Law of Vibration. Science teaches ‘that an original impulse of any kind finally resolves itself into periodic or rhythmical motion,’ also ‘just as the pendulum returns again in its swing, just as the moon returns in its orbit, just as the advancing year ever brings the roses of spring, so do the properties of the elements periodically recur as the weight of the atoms rises.’

“From my extensive investigations, studies and applied tests, I find that not only do the various stocks vibrate, but that the driving forces controlling the stocks are also in a state of vibration. These vibratory forces can only be known by the movements they generate on the stocks and their values in the market. Since all great swings or movements of the market are cyclic they act in accordance with periodic law.

“Science had laid down the principle that ‘the properties of an element are a periodic function of its atomic weight.’ A famous scientist has stated that ‘we are brought to the conviction that diversity in phenomenal nature in its different kingdoms, is most intimately associated with numerical relationship. The numbers are not intermixed, chaotically and accidentally, but are subject to regular periodicity. The changes and developments are also seen to be in many cases undulatory.’

“Thus, I affirm, every class of phenomena, whether in nature or in the stock market, must be subject to the Universal Law of Causation and Harmony. Every effect must have an adequate cause.

“If we wish to avert failure in speculation we must deal with causes. Everything in existence is based on exact proportion and perfect relationship. There is no chance in nature, because mathematical principles of the highest order lie at the foundation of all things. Faraday said: ‘There is nothing in the Universe but mathematical points of force.’

“Vibration is fundamental; nothing is exempt from this law; it is universal, therefore applicable to every class of phenomena on the globe.

“Through the Law of Vibration every stock in the market moves in its own distinctive sphere of activities, as to intensity, volume and direction; all the essential qualities of its evolution are characterized in its own rate of vibration. Stocks, like atoms, are really centers of energies, therefore they are controlled, mathematically. Stocks create their own field of action and power; power to attract and repel, which principle explains why certain stocks at times lead the market and ‘turn dead’ at other times. Thus to speculate scientifically it is absolutely necessary to follow natural law.

“After years of patient study I have proven to my entire satisfaction as well as demonstrated to others that vibration explains every possible phase and condition of the market.”

These fascinating comments, along with the extraordinary 92% success rate demonstrated to the auditor from The Ticker, provide one of the first and best documented cases of financial market forecasting ever. If Gann’s theory were true and did actually exist, it would demonstrate that some form of unknown order or causation exists behind what are considered random movements of the financial markets, proving such actions to be controlled by some kind of scientific, mathematical or natural law. Such proof would imply a form of determinism behind the mass psychology of the general populace who trade the financial markets.

Gann’s Famous September Wheat Trade

But, aside from the numerous specific forecasts and price projections that Gann gave to the auditor who observed him, many times, projecting both the upside and downside limits of the movement of the markets, there is one particular quote from the article which deserves extra attention:

“One of the most astonishing calculations made by Mr. Gann was during last summer (1909) when he predicted that September wheat would sell at $1.20. This meant that it must touch that figure before the end of the month of September. At twelve o’clock, Chicago time, on September 30th (the last day) the option was selling below $1.08, and it looked as though his prediction would not be fulfilled. Mr. Gann said, ‘If it does not touch $1.20 by the close of the market it will prove that there is something wrong with my whole method of calculation. I do not care what the price is now, it must go there.” It is common history that September wheat surprised the whole country by selling at $1.20 and no higher in the very last hour of the trading, closing at that figure.”

W.D. Gann’s September Wheat trade. One of his greatest on record.

Even more extraordinary, it would imply that there exists some kind of potential causation or order behind something as abstract as mass social and psychological patterns. This theory would be so radical and important as to redefine all of modern science and social theory, making the exploration of Gann’s work and the potential theories that underlie it, in our estimation, one of the most important and relatively unexplored avenues of investigation in modern times.

Though there are a number of researchers, analysts and teachers of Gann Theory scattered about the globe today, there are almost none who give any kind of explanation as to how Gann actually applied this kind of natural science to the markets. Most analysts use his advanced tools of Technical Analysis, explore his valuable cycle theory, or become engaged in complex explorations of subjects like Financial Astrology to try to explain his work. But most of them have utterly and completely missed the most important inner core of his system, The Law of Vibration, which Gann himself explained as the fundamental basis of his theory.

Gann’s Enduring Career in the Markets

After these first brief comments and hints as to the nature of his system given in 1909 in the Ticker Interview, Gann continued a long 45 year career, during which he is rumored to have extracted $50 million from the markets in the early to mid-1900’s. Over these years, Gann published a series of 7 books and dozens of advanced courses of private instruction, which seemingly presented only his advanced principles of technical analysis and trading.

One of these books was even a seemingly silly romantic novel, called The Tunnel Thru the Air, which turned out to present a complex hidden code that Gann enthusiasts have worked for decades to penetrate and understand, demonstrating the extreme efforts to which Gann went to veil and conceal the secrets behind his work. However, through all of this output, the underlying mechanics of his system were never openly revealed, thus leaving the scientific proof of the mathematical determinism behind market action a tightly held secret, which is thought to have accompanied him to the grave.

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