Gann Fans

Technical trading involves looking at the movement of an asset's price, and then predicting what will happen next, judging only by its movement.

The strategy involves a lot of potential techniques. Technical traders will take a stock chart and overlay all sorts of criss-crossing lines. They then look at the stock movement compared to those lines and use their relative positions to predict potential future moves.

Enter Gann Fans. They represent one collection of lines that technical traders can use.

Using a stock's price movement so far, and pre-established angles, the Gann Fan consists of a bunch of lines, originating from a central point. Together, they resemble one of those retractable fans...the kind you might see in The Mikado, or on sale at the Tokyo airport gift shop.

The various lines of the fan indicate resistance and support levels. If the stock price reaches a line above it, history suggests a tendency for the stock's rise to halt. That's resistance. Meanwhile, if the price reaches a line of support, there's a likelihood the stock could take a bounce higher.

Gann Fans were developed by W.D. Gann, a trader who started his career early in the 20th century. Along with drawing fan shapes on stock charts, he had a penchant for astrological signs, and occasionally peppered his writings with obscure references to things like eclipses and planetary movements. His system assumes a geometric relationship of stock movement, as well as a cyclical nature of price changes.