Gann fans aim to graphically represent the cyclical nature of price action. The fan consists of various angles that show possible support and resistance levels. Traders use these levels to anticipate when an asset might see increased buying or selling pressure in the future.
Unlike many reactive technical indicators that aim to provide traders with more information about current price action, the Gann Fan aims to predict future prices. The purpose of this article is to show you how to plot a Gann Fan on the BTSE platform and examine the more common ways to interpret the outputs.
How To Plot A Gann Fan
Step 1: Load a chart on the BTSE Platform
Step 2: Use the trendline tool to plot a line at a 45-degree angle from a recent low
Hold the SHIFT key to automatically plot at a 45-degree angle.
For a step-by-step guide on how to plot these lines, check out our article about trendlines.
Step 3: Click “Gann and Fibonacci Tools” in the side toolbar
Step 4: Select “Gann Fan” from the menu
Step 5: Drag and drop the Gann Fan so the middle line follows the previously plotted 45-degree angle
Step 6: Admire your colourful Gann Fan
Pro tip: You can also plot the 45-degree line downwards starting from a high rather than a low per the above example.
How To Interpret The Gann Fan Angles
According to W.D. Gann, when a bullish trend reverses and breaks below one of the coloured fan segments, the price is likely to continue to the bottom of the next segment.
Similarly, when a bearish trend reverses and breaks above one of the coloured fan angles, the price level is likely to go up to the nearest angle above it.
According to the above Gann Fan, traders might predict the following:
If price breaks above the red segment, it might continue to the top of the purple segment.
If price is rejected at the current red segment resistance, it might retrace to the bottom of the red segment where increased buy support is anticipated.
Limitations Of Gann Fans
Like any indicator, Gan Fans are often incorrect and should always be used with that in mind.
Traders should employ strict risk management and position sizing rules, particularly when working with predictive indicators like the Gann Fan.
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