What Are Gann Fans?
Gann fans are a technical analysis technique that considers the market as geometric and cyclical. Gann angles form a gann fan. Superimposed angles on a price chart indicate probable support and resistance levels. The graphic should assist technical analysts in forecasting price fluctuations.
Calculating Gann Fans
Gann fans don’t need a formula but knowledge of slope degrees.
Imagine graph paper with many squares or grids. The price might rise to the square’s top right in a one-square time frame. It will slope 45 degrees.
Two-time boxes to climb one box (2:1) will lower the angle of ascent below 45 degrees. A higher angle than 45 degrees occurs when the price rises two box heights in one box (1:2). The Gann fan uses price-to-time angles of 1:8, 1:4, 1:3, 1:2, 1:1, 2:1, 3:1, 4:1, and 8:1.
W.D. Gann, the developer of Gann fans, believed the 45-degree angle was best for charting due to his time-price ideas.
Gann Fan Functions
Draw angled lines above and below a 45-degree center line to evaluate trend direction and intensity. A center 45-degree angle line from a trend reversal level draws Gann aficionados. Traders use Gann fans to prolong support and resistance levels after a reversal.
Prices increase or decrease at a 45-degree angle when they move one unit per unit of time, hence the 1:1 line. All other Gann fan lines are above and below 1:1. Gann fan chart traders can employ many lines above and below the 1:1 line. Other angles include 2:1, 3:1, 4:1, 8:1, 1:8, 1:4, 1:3, and 1:2 time-to-price movements.
The Gann fan’s 45-degree angle line should match the chart’s. Use the degree angle tool to find 45 degrees in your charting software.
The main indication is 1:1. Chartists can add more lines at their discretion. In both uptrends and downtrends, the 1:1 line might indicate a reversal. In a downturn, prices below 1:1 are bearish; in an upswing, prices over 1:1 are favorable. Thus, the 1:1 line may resist and support
Other Gann fan diagram lines include resistance and support lines. Gann thought the price would shift from one angle to another. If the price went below 45 degrees (1:1), it would drop to 26.25 degrees (2:1).
A price dip below 1:1 doesn’t permanently halt the rise. At 2:1, the price may support and rise. A decrease below 1:1 might suggest short-term weakness if the price drops below 2:1.
Gann Fan vs. Trendlines
Angled lines form the Gann fan. The 45-degree line should extend 45 degrees from the start. A hand-drawn trendline links swing lows or highs, extending rightward. The trendline matches recent price activity without an angle.
A diagonal line moving at a consistent pace is called a Gann angle. Creating a trendline involves linking bottoms to bottoms in uptrends and tops in downtrends. The Gann angle travels at a consistent speed, unlike a trendline. This lets the analyst predict the price on a given date.
Gann angles do not always forecast market direction. Instead, the analyst will know the Gann angle to assess trend strength and direction.
Trendlines are predictive, though. Regular changes make it unreliable for long-term projections.
Gann Fan Restrictions
Although some charting systems include the Gann fan, they may not offer an angle tool to select the 45-degree line accurately. The price of different assets may not equal 1:1 ($1 for one day). Different scales are possible.
Putting the Gann fan on numerous charts shows it’s not always beneficial. Prices may climb below the 1:1 line or stay between the levels but not reach them. The lines may not indicate support or resistance, and the price may ignore fan levels.
As they stretch out, the lines become pretty far apart. The indicator may not work if the gap between the lines is too significant since the price must move far to reach the next level or trading signal.
Use Gann fans with other technical indicators, price movement, and analytical methods.
- Early market technician W.D. Gann invented the Gann fan, a set of angled lines. The trader chooses the starting point, and the lines stretch ahead.
- Gann considered the 45-degree angle most significant, although the Gann fan also draws 82.5, 75, 71.25, 63.75, 26.25, 18.75, 15, and 7.5 degrees.
- The Gann fan starts low or high. The lines indicate future support and resistance.