The Best Gann Fan Trading Strategy
How do I use the Gann Fan indicator? How do I draw Gann Fan? these are the most common questions about this indicator. But for a good reason, though!
This trading strategy is a complex support and resistance trading strategy. It uses diagonal support and resistance levels. Unlike the traditional horizontal support and resistance levels, the Gann fan angles are mathematically calculated based on the price, time and the price range of the market. If you want to learn how to correctly trade horizontal support and resistance levels, we’ve got your back. Just read Support and Resistance Zones – Road to Successful Trading.
Our team at Trading Strategy Guides has developed the best Gann fan trading strategy. It can be applied to all markets because according to the Gann theory, financial markets move as a result of human behavior. This makes them cyclical in nature. In other words, history is a good predictor of future price action.
One of the main reasons why Gann fan angles are superior to the horizontal support and resistance levels is that financial markets are geometric in their movements. If you can spot a pattern or any other geometric shape in a chart, there is a high probability you can spot them at the Gann fan angles. Also, read my personal trading plan reviewed by Kim Krompass.
Before we get started, let’s look at what indicator you need for the job for the Best Gann Fan Trading Strategy:
The First and ONLY indicator you need is the:
Gann Fan Indicator: This indicator is notable unique because it draws diagonal support and resistance levels at different angles. At first sight, you might recognize the indicator because it’s a colorful indicator. It is much like the Fibonacci Channel indicator, which was introduced to our audience in previous months. Read more here, Fibonacci Retracement Channel Trading Strategy.
Gann Theory Explained
We have special Gann fan angles and more specifically Gann came up with 9 different angles (see Figure Above).
The most important angle is the 45-degree angle or the 1/1 line. For every Gann angle, a line is derived from that angle. We can distinguish 4 different Gann angles above the 45-degree angle and 4 other Gann angles below, as follows:
- 1/1 – 45 degree
How to Use the Gann Fan Indicator
According to Gann theory, there are special angles you can draw on a chart. They will give you a good indicator of what the price is going to do in the future. All of Gann’s techniques require equal time and price intervals. In other words, a rise of a 1/1 would imply a 45-degree angle.
This statement may sound obscure, but we’ll go through some examples shortly. You’ll get a better understanding of how to use the Gann fan indicator, and more importantly how to draw Gann fan angles.
Gann believed that when price and time move in sync, then that’s the ideal balance of the market. The biggest part of the Gann theory revolves around the fact that prices above the 1/1 line, the 45-degree line will determine a bull market and prices below the 1/1 line determine a bear market (see Figure above).
How to Draw Gann Fan Angle
Gann believed that when price and time move in sync, that’s the ideal balance of the market. The biggest part of the Gann theory revolves around the fact that prices above the 1/1 line. The 45-degree line will determine a bull market. Prices below the 1/1 line determine a bear market (see Figure above).
First, you need to draw a perfect 45-degree angle. Most sophisticated trading platforms should incorporate these tools. On the Tradingview platform, you can locate the Trend Angle tool on the left-hand side panel (see Figure below).
The next step is to select any major swing high or swing lows on the chart from where you draw the Gann fan angles. Once you have chosen your swing low point, simply utilize the trend Angle tool and draw a perfect 45-degree angle.
Once you’re done, you need to learn how to draw the Gann fan angles. In this step, use the Gann Fan indicator, which is located on the left-hand side panel (see Figure below).
Now, all you have to do is to simply place the Gann fan indicator on the chart. Make sure it overlays on top of the 45-degree line you previously drew. This is the correct way to draw the Gann fan angles. If you have been following all of these steps, all of the other Gann fan angles should comply with the Gann rules.
Now, let’s move forward to the most important part of this article. This is the trading rules of the best Gann fan trading strategy.
Before we go any further, we always recommend writing down the trading rules on a piece of paper. This exercise will step up your learning curve and you’ll become a Gann expert in no time. Here is another strategy called The PPG Forex Trading Strategy.
Let’s get started…
The Best Gann Fan Trading Strategy
(Rules for BUY Trade)
Step #1: Pick a significant High, Draw Gann Fan Angles and Wait For the 1/1 Line to Break to the Upside.
The best Gann fan trading strategy works the same on every time frame. But we recommend not going lower than the 1h chart, as you want to be able to pick significant swing high points. This can’t be seen on the lower time frames.
To draw Gann fan angles please refer to the previous “How to draw Gann fan Angle” section.
Next, let’s address our entry point:
Step #2: Wait for a Break Above 2/1 Gann angle Before Buying at the market
This step is significantly important because a reversal of the previous trend is only confirmed once the 2/1 Gann angle is broken to the upside. You want to buy at the market as soon as we break above 1/1 line.
Now, after we have our position opened, we need to do one more important thing:
Step #3: Apply again the Gann Fan Indicator on the Swing low Prior to the Breakout above 2/1 Gann Fan Angle
How to use the Gann fan indicator? Simply follow the instruction presented in the above sections. At this point, you can also get rid of the previous Gann fan angles drawn from the swing high. This will make sure your chart will not get cluttered and the price is still visible.
One of the reasons why this is the best Gann fan strategy is because we use the Gann fan indicator to track every swing in the market.
At this point, your trade is opened, but we still need to determine where to place our protective stop loss and take profit orders, which brings us to the next step of best Gann fan trading strategy.
Step #4: Place Your Protective Stop Loss below the Most Recent Swing Low Which Should Align With the Point from Where You Draw the Second Set of Gann Fan Angles.
The best Gann fan strategy has a very clear level where we should place our protective stop-loss order which is right below the swing low located prior to the 1/2 Gann angle breakout.
Next, will learn where to take profits:
Step #5: Take Profit One we Break and Close Below the 1/1 line. We Need the Close Below 1/1 line to be by at Least 20 Pips to Consider it a Valid Breakout
We want to ride the new trend for as long as possible and with the help of the Gann fan indicator, we can pinpoint the ideal time to take profits. We take profit at the earliest symptom of market weakness which is a break below the 1/1 line that signals a possible start of a bearish move.
We also want to add a buffer of 20 pips to the 1/1 Gann angle breakout just to annihilate possible false breakouts.
Note** The above was an example of a buy trade using the best Gann fan strategy. Use the same rules – but in reverse – for a sell trade. In the figure below you can see an actual SELL trade example using this strategy.
Simply follow the how to use the Gann fan indicator section to draw the Gann fan angles. We’ve applied the same Step #1 and Step#2 to help us identify the SELL trade and followed Step #3 through Step#5 to manage the trade (see next figure).
This is the best Gann fan strategy because unlike the traditional support and resistance lines the Gann angles can pinpoint significant changes in the market swing trends. We at Trading Strategy Guides have a clear understanding of what is really going on at these critical levels because we always make sure we backtesting our strategies so they have a positive expectancy.
If you want to gain a much clearer understanding of how support and resistance level really work we recommend having a look at our work here: Support and Resistance: What Is Going On At These Critical Areas.
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