Gann fan

Gann fan

W.D. Gann stated that markets move in a full conformity with geometry laws. One of major geometrical instruments of master was the line built at 45º angle and angles built on the line basis. Gann line is also called balance angle (1×1) when one price interval corresponds to one time interval. The rest more flat and round angles are proportional to the main line and are used to separate price and time.

Structure of Gann fan

Except for 1×1 angle. Gann also distinguished 8 more angles:

1×1 – 45º (1 price interval and 1 time interval)

1×2 – 26,75º (1 price interval and 2 time intervals)

1×3 – 18,75º (1 price interval and 3 time intervals)

1×4 – 15º (1 price interval and 4 time intervals)

1×8 – 7,5º (1 price interval and 8 time intervals)

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

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

4×1 – 75º (4 price intervals and 1 time intervals)

8×1 – 85,5º (8 price intervals and 1 time intervals)

Pic. 1 – Ascending Gann fan

Pic. 2 – Descending Gann fan

Building Gann fans

There are several options of building Gann fans. One of the methods: in Meta Trader 4 you need to choose "Insert – Lines – Trendline by Angle" and lay up the line for the angle 45° from Low value (upward) or High (downward). Then you need to choose "Insert – Gann – Gann fan" and apply balance line of fan to already built Gann line.

 

Pic. 3

This method is far from being the best, because Gann line is sensitive to the scale and as scrolling makes it shift. In this case fan needs to be adjusted with the line, and the rest angles will suffer.

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 price (low - low , high - high, low – high etc.) The best option is to lay fan along trend line (after the first correction)

Pic. 4

This method is better than the original but still scrolling of chart can lead to shifting of price. The reason is that Gann fan is an absolute instrument against the scale. But this problem is solved by another, relative, instrument, which is built on the basis of percentage. This instrument is called Fibonacci fan. In order to convert angles according to settings of Fibonacci fan, from tangent of 45º angle (equal to 1) you need deduct the tangent of required angle.

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

 

Pic. 5

Now we will built a "new" Gann fan, which will not be sensitive to the scale, and we will check how angels will behave:

Pic. 6 - Gann fan built with the help of Fibonacci fan

Fan interpretation is following. If the price is above the angle 1×1, it means that prevailing 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. Also crossing points of angles with two simultaneously built fans.

Gann fans (angles) perform as very strong analytical instruments for financial markets. Trader's main goal in building them is to find correct scale that will help tp predict turning points to a high precision.