Gann Fan

W.D. Gann, an early trader and market enthusiast created several technical indicators. Among the most popular was the Gann Fan, a market indicator which created support and resistance lines based on the slope market movements.

The Gann Fan measures the rate of change for a currency value. Gann described price movements with a 1×1 box setting in which one side was the amount of change, and the other side was the time period. A movement of 1 point in a 1 period time table would make a 45 degree angle.

A movement up 2 points in a single period would fit the 1 x 2 Gann box, and thus fit a 63.75 degree angle. In much the same way, a 3 point move up in 12 periods would fit a 4 x 1 box, a 15 degree angle.

Gann created the fan with nine significant angle values:

1. 1 x 8, 82.5 degrees
2. 1 x 4, 75 degrees
3. 1 x 3, 71.25 degrees
4. 1 x 2, 63.75 degrees
5. 1 x 1, 45 degrees
6. 2 x 1, 26.25 degrees
7. 3 x 1, 18.75 degrees
8. 4 x 1, 15 degrees
9. 8 x 1, 7.5 degrees

How to Use the Gan Fan

Gann suggested that prices should follow the Gann fan lines up and down. Also, he believed that each line in the fan would make up a support or resistance area. If the price fell below the 1 x 1 Gann fan angle, then the price would find support at the next angle, or 1 x 2.

A picture best describes how Gann Fan lines work:

The above picture of the Gann Fan applied on a AUDUSD forex chart shows how the Gann Fan works with real accuracy. After following the 1 x 1 line, the price fell through, finding support at the 1 x 2 line, then 1 x 3 line before rising back to chase after the 1×1 line.

The Gan Fan does require some practice. However, as the Gann Fan is a Metatrader 4 indicator, forex traders should have no problems applying this indicator to a chart.