Gann Fan

Gann Fan is a technical analysis tool developed by W.D. Gann, a renowned trader and analyst. It is used to identify potential support and resistance levels and to predict future price movements.

Gann Fan is based on the concept that price movements tend to follow specific angles when charted on a graph. These angles are derived from the 1:1, 1:2, and 1:3 ratios, which Gann believed to be significant in market analysis.

To construct a Gann Fan, you start by selecting a significant price point on the chart, such as a major high or low. From this point, you draw a trendline at a specific angle, typically 45 degrees (1:1 ratio). This trendline represents the starting point of the fan.

Next, parallel lines are drawn from the starting trendline at different angles, such as 26.25 degrees (1:2 ratio) and 18.75 degrees (1:3 ratio). These lines create a fan-like pattern, hence the name “Gann Fan.”

The lines of the Gann Fan act as potential support and resistance levels. If the price is trending upwards and approaches one of the fan lines, it may encounter resistance. Conversely, if the price is trending downwards and approaches a fan line, it may find support.

Traders use Gann Fan to identify potential turning points in the market. When the price approaches a fan line, it can signal a reversal or a continuation of the trend, depending on whether the line acts as support or resistance. Traders may also look for price reactions at the intersecting points of multiple fan lines, as these can indicate significant levels of support or resistance.

It’s important to note that Gann Fan is just one tool within Gann analysis and should be used in conjunction with other technical analysis tools and indicators. It requires practice and experience to effectively interpret and apply Gann Fan to trading decisions.

Overall, Gann Fan is a popular tool among technical analysts for identifying potential support and resistance levels and predicting future price movements. It provides a visual representation of the relationship between price and time, helping traders make informed trading decisions.