The prime problem with trading indicators is that an indicator that performs well in a short term time frame does not necessarily work well in a long-term time frame, and the same is true in the reverse scenario as well. Against this backdrop, the big question is, “is there any indicator that can perform equally well in both short-term and long-term time frames?” Such a question naturally leads to an answer, and that is the Gann Fan indicator. This is one such indicator that can be used in any type of time frame and any market conditions. Don’t you feel that you should learn about this indicator? Let’s delve into everything you should know about this amazing indicator known for its high success rate. Are you ready?
1. Gann Fan Defined
The Gann Fan is an amazing indicator in crypto technical analysis that assists cryptocurrency traders in analysing where the price might turn around or break out by identifying key points. It is drawn on a price chart to highlight possible support and resistance levels. The tool was developed by W.D. Gann, a renowned stockbroker, who is the creator of the Gann Theory.
1.1. What’s The Gann Theory
The Gann Theory is a set of principles in technical analysis. It involves using mathematical and geometric concepts to analyse and predict price movements in financial markets. Gann Fan is an indicator created based on this theory.
1.2. How Does Gann Fan Work
The Gann Fan indicator looks like a set of diagonal lines fanning out from a central point, helping traders identify potential support and resistance levels based on specific time-to-price relationships. It is made up of nine diagonal lines. The primary Gann Angle is set at 45 degrees, known as the 1:1 line. This angle signifies that for each unit of time, the price will move up or down by one unit, creating a diagonal path. The other lines in the indicator are drawn both above and below the 1:1 line and are associated with different time-to-price moves, such as 2:1, 3:1, 4:1, 8:1, as well as 1:8, 1:4, 1:3, and 1:2.
2. Launching Gann Fan on a TradingView Chart
Here are the steps to launch the Gann Fan indicator on a TradingView chart.
- Log in to your TradingView account.
- Choose the cryptocurrency or asset you want to analyse.
- Identify a significant high or low point on the chat.
- Look for the drawing tool menu on TradingView.
- Select the Gann Fan tool from the drawing menu.
- Click on the chosen high or low point to start the Gann Fan.
- Adjust angles if needed, especially the primary 45-degree angle.
- Extend lines to cover the desired time frame.
- Analyse how the Gann Fan lines interact with price movements on the chart.
3. Primary Rules to Use Gann Fan
Here are the primary rules to use the Gann Fan indicator:
- Determine the trend of an asset’s price.
- Locate a high or low point as the starting reference for the Gann Fan.
- Draw the 1:1 line at 45-degree angle from the starting point to the current price.
- Draw additional lines at angles like 2:1, 3:1, 4:1, 8:1 and their inverses.
- Look for points where price intersects with Gann Angles form potential support and resistance.
- Always combine Gann Fan with tools like trend lines and moving averages for conformation.
4. How to Use Gann Fan
There are many ways to use the Gann Fan indicator. The popular ones are:
Prices may bounce or reverse when reaching these angles so they function as support and resistance levels.
- Price Movement Strength
Steep angles indicate strong moves, while shallow angles suggest weak ones.
Apply the angle to the trendline to estimate future price levels.
Steep, quick angels indicate a strong trend, while shallow angels suggests a weak one.
Endnote
The Gann Fan, a creation of W D Gann rooted in the Gann Theory, stands as a remarkable tool for crypto traders. Its unique geometry, depicted by diagonal lines, aids in pinpointing potential price reversal or breakout points. By incorporating principles of time-to-price relationships, this indicator unveils support and resistance levels. Traders can seamlessly launch the Gann Fan on TradingView, applying it with precision to analyse trend strength, identify support or resistance, and estimate future price levels. When combined with complementary tools, the Gann Fan empowers traders to navigate crypto markets with heightened insights and strategic prowess.