Gann’s fan is a technical analysis tool that is formed by trend lines with different angles of inclination.
A traditional stock market trend line is a line that joins at least two points. Gann’s fan does not follow traditional tracing rules. The layout in this case is governed by the angles with respect to the ordinate axis. That is, with respect to the vertical axis. Its appearance is as follows:
The name of the angles comes from its creator WD Gann. Gann was a stock market analyst who in the twentieth century wrote his foundations for trading in his work “The basis of My Forecasting Method.” This work, which consists of just over 30 pages as a manual, was published in 1935.
Gann fan angles
Gann established a baseline trend line. That line is the trend line with an inclination of 45 degrees. From it the other lines are generated. Gann’s fan consists of 8 lines in addition to the 45-degree one.
Trend lines above 45 degrees
There are 4 lines above that of 45 degrees. They are the trend lines with greater inclination and are useful for the short term, for the beginnings of a trend or for very pronounced stock trends. They are called from the right left: 1 × 2, 1 × 3, 1 × 4 and 1 × 8. Sometimes instead of an x it is also named such that: 1: 2, 1: 3, 1: 4 and 1: 8.
They represent units of time per units of price. For example the 1 × 2 line, wants to travel two units in the price for each unit of time.
Trend lines below 45 degrees
In the same way there are 4 lines below that of 45 degrees. These lines are longer term lines, have much more utility and are used for the general market trend.
It is called from the right left: 2 × 1, 3 × 1, 4 × 1 and 8 × 1. Sometimes instead of an x it is also named such that: 2: 1, 3: 1, 4: 1 and 8: 1.
They represent units of time per units of price. For example, the 2 × 1 line wants to go through a unit of the price for every two units of time.
Trading with Gann angles
The usefulness of the techniques proposed by Gann have been highly questioned by both traders and technical analysts. However, it is a very popular and widely used tool today. Gann established his method three factors to study that are reflected in the angles:
- Study of the price.
- Study of time
- Chartist pattern analysis.
In this sense, Gann used these lines as support and resistance. And, after that, complementary patterns were helped to operate on daily, weekly and monthly charts. One of the simplest uses is to first establish the general market trend. For example:
In the previous graph it established that the trend was bullish, through various tools different from their angles. With this in mind, I would use the 45 degree lines and the ones below for support: