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.

Related or Semi-related Video

Finance: What is Technical Analysis?12 Views

00:00

Finance a la shmoop what is technical analysis okay we have fundamental [Fundamental analyst sat at a desk]

00:08

analysts who look at what the company does for a living how hard its products

00:13

are to manufacture how much they sell for how big global demand is how [Fundemental analyst check list]

00:18

powerful their brand is what their profit margins are in their growth

00:22

prospects from there how their balance sheet looks you know stuff like that

00:25

technical analysts don't care at all about any of that stuff those are

00:30

fundamental elements of a company technical analyst view stocks only as [Technical analyst chucks the list away]

00:34

trading sardines and really couldn't care less how the companies they are [Sardines with company logos on]

00:38

trading actually make money or run their businesses technical analysts follow

00:42

stock charts with influence from all kinds of shapes made by recent [Examples of shapes on a blackboard]

00:46

historical prices on a graph made by these stocks like you have a triple top

00:51

here right like so there's a hard line is trying to break out of that line line [Top line is highlighted]

00:55

says nook smacking you back down they can't break out so it's triple top and a [Hand smacks the price back down]

00:59

lot of gravity there so no maybe I'm short that stock at the end of that

01:03

triple top all right then you have the dome yeah it just kind of goes up but it

01:07

doesn't really want to break up so it's kind of trading down and then what do I

01:11

do with the stock here I don't know I don't know then you have descending tops [End of the dome is highlighted]

01:14

where Oh tried to break out oh but now it's a lower low because they miss their

01:18

earnings ah now it's a lower low and again they missed so the stocks going [Trend line showing the price going down]

01:22

nowhere it's pretty depressing around here then you have a saucer notably

01:25

shaped like a smiley face yeah you can see the two eyeballs there so you want [Smiley emoji appears]

01:29

to be long that stock somewhere in the middle there because

01:32

then it goes up and does better and yeah life's good and color and dimension gets

01:37

added to the stock charts via other technical things like volumes of shares [Colorful 3d stock chart]

01:41

traded in a given week or day or month if you're having a mini deja vu well it

01:45

might be because you just saw our M night Shyamalan dingdong

01:49

directed video directly cleverly called what is a Chartist and while they're [Girl working behind a computer]

01:54

basically the same thing technical analyst and chart us you know

01:58

same foot so yeah fundamental analyst concerned with nuts and bolts of the

02:01

operations of a business technical analyst concerned with pretty little [Descriptions of each analyst shown next to them]

02:06

drawings of the nuts and bolts reflection on a graph and interpreting

02:09

what that all means a kind of like staring at you know animal problems in [Looking at dung through a magnifying glass]

02:14

the jungle mental health analyst well I had to get a lot of these guys in their

02:18

office sorry different kind of therapy [Both the analysts at a therapist]

Up Next

Finance: What is a Chartist?
26 Views

What is a Chartist? A chartist is a trader and/or analyst who relies on technical analysis and charts in order to make decisions for trading the ma...

Find other enlightening terms in Shmoop Finance Genius Bar(f)