In trading there are different trading approaches and tools for their realization.

Among them there are technical indicators, which according to their algorithms calculate data from the price chart and output the results in the form of their charts, digital data, histograms and so on.

There are various approaches that judge the possible reasons for such a reaction by price movements, candlestick shapes and patterns of several bars and make their forecasts based on this.

There are also a lot of graphical analysis tools that help to determine the current trend and specific entry and exit points directly on the price chart.

The latter includes the hero of today’s article, which is known as the Gann Fan or Gann Angles. In this article we will analyze the rules of construction, the logic behind them, and ways of trading with them.

Description of Gann Angles

William Gann himself said that Gann angles do not predict market behavior, they only indicate the areas where there is a probability that the price chart will change its direction or stop, forming a flat without a clear direction of movement.

Gann angles are a standard tool, which is already included by default in MetaTrader and other trading platforms. It can be found in the “Insert -> Gann -> Gann Fan” menu.

Visually, Gann angles look like a fan of rays diverging from the initial point. Hence the second name of the angles – Gann Fan, under which they are listed in the terminal.

These rays represent support and resistance areas, which can be used as significant zones for opening and closing trades and adding volume to your positions.

Outwardly, the Gann fan and its lines resemble trend lines. But they are built differently, have more flexibility and a different principle of functioning. If the task of a trend line is to mark the boundaries of the channel in which the price is moving, the task of fan lines is to determine the areas where reversal or consolidation is likely, which may lie outside the boundaries of the current trend channel.

However, both tools help to find probable entry and exit points. In general, most tools have the same trading goal – to help the trader to trade, to indicate where to buy and sell and where to close positions.

All of the market analysis tools that Gunn introduced take into account the same characteristics, which include time and price, the range of price changes. William Gunn also said that the market has its own geometric basis that can be used for forecasting. And of course, he noted the cyclical nature of market processes, the repetition of which allows us to find the same geometric patterns again and again, which help to make trading technically sound.

Ways of application

And in the application of the fan there is a reliance on two models, without which there is no theory of the author:

The time model, where it is necessary to focus on periodically recurring time events.
The price run-up model, where support and resistance levels and pivot points are used.

The model is usually described by a pair of numbers, such as 1×1. This is how the ratio of time to price is labeled.

If 1×1, it means that a segment of time on the time scale is taken and a segment on the price scale equal to the time segment is taken and a point is put. A line will pass through the point, which will be in the middle between the scales of price and time, dividing the space in half.

Generally, there are the following models:

1×1 – 45 degrees;
1×2 – 63.75 degrees;
1×3 – 71.25 degrees;
1×4 – 75 degrees;
1×8 – 82.5 degrees;
2×1 – 26.25 degrees;
4×1 – 15 degrees;
8×1 – 1.5 degrees.

Gunn’s 1×1 ray is in a special position. It is assigned the role of a delimiter of the main trend, bullish or bearish.

If the price chart is below the line, the market should be in a downward trend, and if it is above the line, it should be in an upward trend. The moment when the chart crosses the line from bottom to top or from top to bottom is a turning point, when a trend change can occur.

If the price is at the 1×1 line, it means that in 1 unit of time on the scale, the price has changed by the same length, the same unit. If the chart is at the 2×2 line, then by analogy, the price has changed by one fraction in two such fractions on the time scale.

This is what concerns the theory. But the main reason why the lines are useful in practical trading is that they provide additional support and resistance levels in addition to historical or Fibonacci levels.

Rules of construction

The fan should be built starting from the extremum at the beginning of the trend. That is, if the trend is upward, it should be built from the bottom, and if it is downward, from the top. And further the line, on which there are 3 points, for which it can be moved, should be placed at an angle of 45 degrees. This is our 1×1 line.

Usually there are no problems with its construction, not only because 45 degrees can be set by eye without pedantic accuracy, but also because you can usually observe many bounces of the current trend from this line. If this is the case, then we are not wrong. And all the remaining lines will adjust themselves to the diagonal.

Example of work

It is already clear that this tool can be used as an additional tool to obtain confirmation of support and resistance areas and, accordingly, market entry and exit zones.

But only Gann angles should not be used. Only as an additional technique.

That is, these lines can be taken as support and resistance and watch the moment of trend change, when the price chart crosses the 1×1 line.

In the screenshot above, levels could be built when the price started to move upwards, from the lower point, and even before the price reached the first gray horizontal historical level.

Price was trending upwards, breaking through the first resistance area, approaching the second resistance area. We can see that in the area of the 1×1 line the price got support from buyers, lapping the level from below and far from going down from it. Then a doji with a long lower tail appeared, after which the price went upwards, breaking the level.

The upper level has already become a support for the price. It makes a pullback down, testing the support, and then an impulse bullish candlestick with a large body appears. This is a great moment to buy. After all, the price is showing all signs of growth and there is support in this area in the form of the historical level and support from the Gann line.

After the growth, the market draws a double top and breaks the 1×1 line from above. This is a sign that the trend may change to a downtrend.

Price shows consolidation under the line, then does a retest, leaving a large upper candlestick tail, which confirms the bears’ intentions to push the price down. Bearish candles appear, where it was already possible to enter the market.

But in this trade we should have kept in mind the recent historical levels, which can now support the price.

The next green area, where the second green arrow is, in principle, was not bad for buying, because there is support there in the form of the lower historical level and the 2×1 line. But this trade could not be taken, because, firstly, it is against the trend, and secondly, the upper historical level is very close to the price.

But the third green area, where the third arrow stands, looked more interesting for buying. There is support of the lower historical level there, there is support of the 3×1 Gann line. Besides, in this area there is a pin bar with a big lower tail, which just screams about the presence of buyers from below. And by the previous green area and by the bounce between the last and penultimate green areas, where the pin bar is also visible, we can assume that there are buyers from below, which do not allow the downtrend to develop.

This is how, in combination with other market analysis techniques, the Gann fan can be used to confirm your trading decisions.

Conclusion

The Gann fan can be useful in graphical price analysis. It can help you select the strongest support and resistance areas to trade from. It can indicate a potential trend change.

Just like any other tool, it is best not to use it alone. Without understanding the context and logic of what is happening in the market, it will not be useful to 100 percent of its potential. As they say, a raider’s best tool is his head. And if it works properly, other tools will be used wisely.