Gann Fans

What is Gann Fans?

Gann Fans definition implies Technical Analysis featuring multiple lines that move up and down. They are known as Gann Angles or Geometric Angles. The resulting image in Gann Angles helps people ascertain the movements in the price of the stock.

All you got to do is pick a selection point. The line will keep extending from that point as new trends emerge in the Industry. Gann Angles is one of the popular technical analysis developed by WD Gann in the 20th century. Even though it was disproved and questioned by many analysts, the Gann Angles theory is still considered to be the base for all types of traditional and modern technical analysis.

The 45-degrees Angle on the Trend Chart

According to WD Gann, a perfect balance between the time and price is achieved when the angle is drawn at 45 degrees. It could be started with an up-move or down-move trend. The line will extend according to the current price movements and trends in this industry. Let’s understand the concept with an example.

Take a grid paper featuring multiple small squares. If there is an up-move in the price of the stock or security, then you can draw the line starting from the bottom and moving to the top of the square. Now, this line will display a 45-degrees angle.

However, if the value of the stock grows by one point in two days, then the time to price ratio of the stock will be 2:1. This means the line you draw on the chart will appear steep. Likewise, the angle will seem a little Flat if the price of the stock grows by 2 points every day. This will give us a ratio of 1:2, which means the value of the security is moving at a great speed.

So, the angles are drawn depending on the movement in the prices with respect to time. As mentioned above, the balance is achieved when the price of the stock and time moves identically. In other words, it is best when 1:1 is achieved.

How is the Gann Fan Drawn?

In order to find out the direction of the trend, analysts can draw a line either above or below the 45 degrees angle. Introduced by WD Gann, the Gann Fan helps you understand the connection between time and price movement of the stock. He believed that 45 degrees is the best state as it suggests a perfect balance between the price and time movement.

Since this theory helps you ascertain the future stock trends according to the past movements in the stock value, the Gann Fan supports a line that starts at a 45-degree angle and extends according to the current trend. Now, these lines are being drawn at a reversal point to determine future trends. 45-degrees is a straight angle since the movements of the stock will either go up or down from here.