The Gann Fan Indicator

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Gann Fans

What are Gann Fans?

Gann fans are a form of technical analysis based on the idea that the market is geometric and cyclical in nature. A Gann fan consists of a series of lines called Gann angles. These angles are superimposed over a price chart to show potential support and resistance levels. The resulting image is supposed to help technical analysts predict price changes.

Key Takeaways

  • The Gann Fan was developed by W.D. Gann.
  • The Gann Fan is a series of angled lines. The user selects the starting point and the lines extend out into the future.
  • Gann believed the 45-degree angle to be most important, but the Gann Fan also draws angles at 82.5, 75, 71.25, 63.75, 26.25, 18.75, 15, and 7.5 degrees.
  • The Fan is started at a low or high point. The resulting lines show areas of potential future support and resistance.

How to Calculate Gann Fans

Gann fans don’t require a formula although they do require an understanding of slope degrees.

Think of a piece of a grid paper, with lots of little squares on it. If the price ascends the height of the square, within a one square time frame, a line can be drawn from the bottom left to the top right of the square. That line’s slope degree will be 45.

If it takes two time boxes to ascend the height of one box (2:1), the angle of ascent will be flatter than 45 degrees. If the price ascends two box heights within the time frame of one box (1:2) that angle is steeper than 45 degrees. The Gann Fan incorporates angles based on price-to-time moves in the following ratios: 1:8, 1:4, 1:3, 1:2, 1:1, 2:1, 3:1, 4:1, and 8:1.

What Does a Gann Fan Tell You?

Angled lines are drawn above and below a central 45-degree line to help determine trend direction and strength.

Gann fans were developed by W. D. Gann. In his research, he found the 45-degree angle to be the ideal angle for charting based on his theories regarding the balance of time and price.

Gann fans are drawn from a central 45-degree angle line that extends out from a specified trend reversal level. Traders will draw a Gann fan at a reversal point to see support and resistance levels extended into the future.

The 45-degree angle line of the Gann Fan should be aligned with a 45-degree angle on the chart. To find the 45-degree angle, use the degree angle tool on your charting platform.

The 45-degree line is known as the 1:1 line, because the price will rise or fall at a 45-degree angle when the price moves up/down one unit for each unit of time. All other lines in the Gann fan are drawn above and below the 1:1 line. Traders can use a varying number of lines above and below the 1:1 line in a Gann fan chart. The other angles are associated with 2:1, 3:1, 4:1, 8:1 and 1:8, 1:4, 1:3, and 1:2 time-to-price moves.

The 1:1 line is the primary indicator. However, chartists have choices for adding additional lines at their discretion. In both an uptrend and a downtrend, the 1:1 line can help to detect a reversal. In a downtrend, a price that stays below the 1:1 line is considered bearish. In an uptrend, a price that stays above the 1:1 line is considered bullish. Thus the 1:1 line can serve as a resistance and support line.

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Additional lines drawn in a Gann fan diagram are also used as resistance and support lines. Gann believed that if the price moved through one angle, it would likely head to the next angle. For example, if the price dropped below the 45-degree angle (1:1), it would drop to the 26.25-degree angle (2:1). A price that drops below 1:1 doesn’t necessarily mean the overall uptrend is over. The price may find support at 2:1 and then keep rising. That said, the fall below 1:1 could indicate at least short-term weakness if the price drops to the 2:1 line.

The Difference Between a Gann Fan and Trendlines

The Gann Fan is a series of lines drawn at specific angles. The 45-degree line should extend out 45-degrees from the starting point. A hand-drawn trendline connects a swing low to a swing low, or a swing high to swing high, and then extends out the right. The trendline is matched to recent price action and is not drawn at a specific angle.

Limitations of Using the Gann Fan

While some charting platforms may provide the Gann Fan, they may not provide an angle tool in order to set the 45-degree line at a true 45-degree angle for that chart. Since different assets have different prices, they may not be scaled at 1:1 ($1 for one day, for example). They could be scaled quite differently.

Upon placing the Gann Fan on multiple charts, it is evident that the Gann Fan isn’t always useful. The price may stay between the levels, but not reach them, or the price may continue to rise even though it is below the 1:1 line, for example. The lines may not mark important support or resistance areas, and the price may seemingly disregard the Fan levels.

The lines continually spread out of the time, making the distance between the lines extremely large. The distance between the lines may become so large that the indicator does not function for trading purposes since the price would need to move a considerable distance before reaching the next level/trading signal.

Gann Fans should be used in conjunction with other technical indicators, price action, and other forms of analysis.

The Best Gann Fan Trading Strategy – A Winning Strategy

How do I use the Gann Fan indicator? How do I draw Gann Fan? these are the most common questions about this indicator. But for a good reason, though!

This trading strategy is a complex support and resistance trading strategy. It uses diagonal support and resistance levels. Unlike the traditional horizontal support and resistance levels, the Gann fan angles are mathematically calculated based on the price, time and the price range of the market. If you want to learn how to correctly trade horizontal support and resistance levels, we’ve got your back. Just read Support and Resistance Zones – Road to Successful Trading.

Our team at Trading Strategy Guides has developed the best Gann fan trading strategy. It can be applied to all markets because according to the Gann theory, financial markets move as a result of human behavior. This makes them cyclical in nature. In other words, history is a good predictor of future price action.

One of the main reasons why Gann fan angles are superior to the horizontal support and resistance levels is that financial markets are geometric in their movements. If you can spot a pattern or any other geometric shape in a chart, there is a high probability you can spot them at the Gann fan angles. Also, read my personal trading plan reviewed by Kim Krompass.

Before we get started, let’s look at what indicator you need for the job for the Best Gann Fan Trading Strategy:

The First and ONLY indicator you need is the:

Gann Fan Indicator: This indicator is notable unique because it draws diagonal support and resistance levels at different angles. At first sight, you might recognize the indicator because it’s a colorful indicator. It is much like the Fibonacci Channel indicator, which was introduced to our audience in previous months. Read more here, Fibonacci Retracement Channel Trading Strategy.

Gann Theory Explained

We have special Gann fan angles and more specifically Gann came up with 9 different angles (see figure above).

The most important angle is the 45-degree angle or the 1/1 line. For every Gann angle, a line is derived from that angle. We can distinguish 4 different Gann angles above the 45-degree angle and 4 other Gann angles below, as follows:

How to Use the Gann Fan Indicator

According to Gann theory, there are special angles you can draw on a chart. They will give you a good indicator of what the price is going to do in the future. All of Gann’s techniques require equal time and price intervals. In other words, a rise of a 1/1 would imply a 45-degree angle.

This statement may sound obscure, but we’ll go through some examples shortly. You’ll get a better understanding of how to use the Gann fan indicator, and more importantly how to draw Gann fan angles.

Gann believed that when price and time move in sync, then that’s the ideal balance of the market. The biggest part of the Gann theory revolves around the fact that prices above the 1/1 line, the 45-degree line will determine a bull market and prices below the 1/1 line determine a bear market (see Figure above).

How to Draw Gann Fan Angle

Gann believed that when price and time move in sync, that’s the ideal balance of the market. The biggest part of the Gann theory revolves around the fact that prices above the 1/1 line. The 45-degree line will determine a bull market. Prices below the 1/1 line determine a bear market (see Figure above).

First, you need to draw a perfect 45-degree angle. Most sophisticated trading platforms should incorporate these tools. On the Tradingview platform, you can locate the Trend Angle tool on the left-hand side panel (see Figure below).

The next step is to select any major swing high or swing lows on the chart from where you draw the Gann fan angles. Once you have chosen your swing low point, simply utilize the trend Angle tool and draw a perfect 45-degree angle.

Once you’re done, you need to learn how to draw the Gann fan angles. In this step, use the Gann Fan indicator, which is located on the left-hand side panel (see Figure below).

Now, all you have to do is to simply place the Gann fan indicator on the chart. Make sure it overlays on top of the 45-degree line you previously drew. This is the correct way to draw the Gann fan angles. If you have been following all of these steps, all of the other Gann fan angles should comply with the Gann rules.

Now, let’s move forward to the most important part of this article. This are the trading rules of the best Gann fan trading strategy.

Before we go any further, we always recommend writing down the trading rules on a piece of paper. This exercise will step up your learning curve and you’ll become a Gann expert in no time. Here is another strategy called The PPG Forex Trading Strategy.

Let’s get started…

The Best Gann Fan Trading Strategy

(Rules for BUY Trade)

Step #1: Pick a significant High, Draw Gann Fan Angles and Wait For the 1/1 Line to Break to the Upside.

The best Gann fan trading strategy works the same in every time frame. But we recommend not going lower than the 1h chart, as you want to be able to pick significant swing high points. This can’t be seen on the lower time frames.

To draw Gann fan angles please refer to the previous “How to draw Gann fan Angle” section.

Next, let’s address our entry point:

Step #2: Wait for a Break Above 2/1 Gann angle Before Buying at the market

This step is significantly important because a reversal of the previous trend is only confirmed once the 2/1 Gann angle is broken to the upside. You want to buy at the market as soon as we break above 1/1 line.

Now, after we have our position opened, we need to do one more important thing:

Step #3: Apply again the Gann Fan Indicator on the Swing low Prior to the Breakout above 2/1 Gann Fan Angle

How to use the Gann fan indicator? Simply follow the instruction presented in the above sections. At this point, you can also get rid of the previous Gann fan angles drawn from the swing high. This will make sure your chart will not get cluttered and the price is still visible.

One of the reasons why this is the best Gann fan strategy is because we use the Gann fan indicator to track every swing in the market.

At this point, your trade is opened, but we still need to determine where to place our protective stop loss and take profit orders, which brings us to the next step of the best Gann fan trading strategy.

Step #4: Place Your Protective Stop Loss below the Most Recent Swing Low Which Should Align With the Point from Where You Draw the Second Set of Gann Fan Angles.

The best Gann fan strategy has a very clear level where we should place our protective stop-loss order which is right below the swing low located prior to the 1/2 Gann angle breakout.

Next, will learn where to take profits:

Step #5: Take Profit One we Break and Close Below the 1/1 line. We Need the Close Below 1/1 line to be by at Least 20 Pips to Consider it a Valid Breakout

We want to ride the new trend for as long as possible and with the help of the Gann fan indicator, we can pinpoint the ideal time to take profits. We take profit at the earliest symptom of market weakness which is a break below the 1/1 line that signals a possible start of a bearish move.

We also want to add a buffer of 20 pips to the 1/1 Gann angle breakout just to annihilate possible false breakouts.

Note** The above was an example of a buy trade using the best Gann fan strategy. Use the same rules – but in reverse – for a sell trade. In the figure below you can see an actual SELL trade example using this strategy.

Simply follow the how to use the Gann fan indicator section to draw the Gann fan angles. We’ve applied the same Step #1 and Step#2 to help us identify the SELL trade and followed Step #3 through Step#5 to manage the trade (see next figure).

Conclusion

This is the best Gann fan strategy because unlike the traditional support and resistance lines the Gann angles can pinpoint significant changes in the market swing trends. We at Trading Strategy Guides have a clear understanding of what is really going on at these critical levels because we always make sure we backtesting our strategies so they have a positive expectancy.

If you want to gain a much clearer understanding of how support and resistance level really work we recommend having a look at our work here: Support and Resistance: What Is Going On At These Critical Areas.

Thank you for reading!

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Gann Fan

Predictions and Analysis

Gann Fan

The Gann Fan is a technical analysis tool created by WD Gann. The tool is comprised of 9 diagonal lines (extending indefinitely) designed to show different support and resistance levels on a chart. These angles -drawn from main tops and bottoms- divide time and price into proportionate parts and are often used to predict areas of support and resistance, key tops and bottoms and future price moves. Please note that the chart needs to be scaled properly to ensure the market has a square relationship.

The method is based on the notion that markets rotate from angle to angle and when an angle is broken, price moves towards the next one. The most noteworthy angle is the 1×1 or the 45° angle, which represents one unit of price for one unit of time. A change in the direction of price is expected when the market reaches an equal unit of time and price, up or down. During an uptrend, if price remains above an ascending angle, the market is considered bullish and vice versa. TradingView has a smart tool that allows users to draw up to 9 customizable angles on a chart.

Gann Fan

Contents

APPLICATION

Gann Fans are technical analysis tools which were developed by the famous 20th century technical analyst W.D. Gann around 1935. A Gann fan is comprised of a series of nine diagonal lines called Gann angles. These angles are drawn over a price chart, designed to show different support and resistance levels of a financial instrument.

Each Gann angle (which extends indefinitely) divides time and price into proportionate parts. The most noteworthy Gann angle is the 1×1 or the 45° angle. According to Gann the 1×1 angle represents one unit of price for one unit of time. The idea behind the 1×1 line is that it is a perfect 45° which ascends 1 point every 1 day. There are additional important angles such as the 2×1 (moving up two points per day), the 3×1, the 4×1, the 8×1, and the 16×1. All of these different Gann angle lines combine to create the Gann Fan.

Fans are typically drawn from changes in trend or reversal points such as tops or bottoms and are a good way to measure a market’s trend or strength. During an uptrend, if price stays in the space above an ascending angle without breaking below it, the market is considered bullish. During a downtrend, if price remains below a descending angle without breaking above it, the market is considered bearish.

The angle that is above or below current prices determines the perceived relative strength or weakness of the market. For example, if the price is above the 2×1 the market has shown itself to be much more bullish than if it is above the 1×1. Gann believed that when an uptrending price reverses and breaks under an ascending angle, the tendency of the price is to go to the next nearest angle below it. The opposite is also true. When a downtrending price reverses and breaks up through a descending angle, the tendency of the price is to go to the next nearest angle above it.

HOW TO USE IN TRADINGVIEW

  1. Navigate to https://www.tradingview.com/
  2. On the landing page, enter a symbol and click “Launch Chart”
  3. Drawing Tools are located along the left hand side of the chart. Select the Drawing Tool that you would like to add to your chart.
  4. You can access the Formatting Window by right clicking on the Drawing Tools in the chart itself and selecting “Format”.

Style

Lines

Can toggle the visibility of specific lines. Can also change their color, thickness and line style.

Background

Can toggle the visibility of background colors as well as change their opacity.

Show Labels

Toggles visibility of labels.

Coordinates

Price 1

Allows for the precise placement of the gann fan’s first point (Price 1) using a bar number and price.

Price 2

Allows for the precise placement of the gann fan’s second point (Price 2) using a bar number and price.

Visibility

Allows to configure a drawing to be displayed on particular intraday and daily timeframes on chart. For all weekly and monthly timeframes you can select either to show it, or to hide.

The Gann fan Indicator

William Delbert Gann considered that markets move in accordance with the laws of geometry. One of his major geometrical instruments was the line at an angle of 45º. He also use angles built on the basis of this line. The Gann line is also called a balance angle (1×1), in which one price range corresponds to one time period.

Structure of the Gann fan indicator

Besides the 1×1 angle Gann also distinguished 8 more angles:

1×1 – 45º (1 price range and 1 time period)

1×2 – 26,75º (1 price range and 2 time periods)

1×3 – 18,75º (1 price range and 3 time periods)

1×4 – 15º (1 price range and 4 time periods)

1×8 – 7,5º (1 price range and 8 time periods)

2×1 – 63,75º (2 price intervals and 1 time intervals)

3×1 – 71,25º (3 price ranges and 1 time periods)

4×1 – 75º (4 price ranges and 1 time periods)

Img. 1 – Ascending Gann angles (upward Gann fan)

Img. 2 – Descending Gann fan

Building the Gann fan

Let’s consider how to draw The Gann fan.There are several ways to build it. In Meta Trader 4 you need to choose “Insert – Lines – Trendline by Angle” and draw a line at the angle 45° from the Low value (upward) or the High Value (downward). Then choose “Insert – Gann – Gann fan” and apply the balance line of a fan to the Gann line that you have already built.

This method is not the best one, because the Gann line is sensitive to the scale and the scrolling makes it shift. In this case fan needs to be adjusted with the line, and the rest angles will shift as well.

Another method is to choose “Insert – Lines – Trendline by Angle” and mark two points. Initial and terminal points should be marked on extreme values of the price (low – low , high – high, low – high etc.) The best option is to draw the fan along the trend line (after the first correction).

This method is better than the original but still scrolling of the chart can make the price shift.

The reason is that the Gann fan doesn’t scale. But this problem is solved by another, relative, instrument, which is built on the basis of percentage. This instrument is called the Fibonacci fan. To convert the angles according to settings of the Fibonacci fan, you need to deduct the tangent of required angle from tangent of 45º angle (equal to 1).

We will obtain below coefficients:

1×1 – 45º › 0,875

1×2 – 26,75º › 0,75

1×3 – 18,75º › 0,667

1×4 – 15º › 0,5

1×8 – 7,5º › 0

2×1 – 63,75º › -1

3×1 – 71, 25º › -2

4×1 – 75º › -3

8×1 – 85,5º › -7

In the toolbar you need to choose “Insert – Fibonacci fan”, remove all previous values and will put in the obtained values.

Now we will built a “new” Gann fan, which will not be sensitive to the scale.

Img.6 The Gann fan built with the help of the Fibonacci fan

How to use the Gann fan

So, let’s interpret our fan. If the price is above the angle 1×1, it means that the trend is bullish, if it is less than balance angle, the trend is bearish. Upon reaching one angle, its price breaks through it and moves to the next, or bounces and moves back to the original level. It is also important to take into account the points of intersections of angles of two fans with the same time period.

The Gann fan theory is a very strong analytical instrument for the financial markets. A trader’s main goal in building it is to find the correct scale that will help to predict turning points with a great precision.

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