Best Forex Strategy “Fan Gann”
What is a Gann fan? What is the secret of William Gann's success? How to use the Gann fan? How to build a gann fan? How to trade on the Gann strategy?
Hello friends! Many traders who begin their acquaintance with the “Fan Gann” strategy often have the following questions - how to use the Gann fan, how to build a Gann fan, how to use Gann angles in Forex trading? These are the most common questions about the Fan Gun indicator. But there is a good reason! This trading system is a complex strategy that uses diagonal support and resistance levels. Unlike the traditional horizontal levels, Gann angles are mathematically calculated based on price, time and price range of the market. If you want to learn how to trade correctly according to Gann’s strategy, take a few minutes to read this article.
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Who is William Gunn?
William Gann is one of the most famous traders of the beginning of the XX century. He was born on June 6, 1878 in the village of Lafkin (Texas) in a poor large family. At the age of 13, William Gunn earned on trains selling newspapers and cigarettes. He heard a lot in conversations about investments and forecasts of cotton prices. He was very interested in this, and at age 25 he left for New York and got a job at a large brokerage company on Wall Street. Towards the end of his life, William Gunn earned over $ 50 million.
What is the secret to Gann’s success? Contemporaries considered him a financial astrologer, since he could predict the behavior of prices accurate to the cent. So, on September 8, 1927, he made an accurate forecast of cotton prices to $ 24.4, predicted the end of stock growth on September 3, 1929 and the closure of the exchange due to a market collapse on October 3, 1931. Gann's percentage of profitable trades exceeded 90%. But his success was associated not only with market forecasts. William Gunn predicted the outbreak of World War I, the abdication of William Kaiser, and the end of the war. He often played in races and once won a large sum in the Cuban lottery, betting on a certain number.
As William Gunn himself said, the reasons for his success are the cyclical nature of time, history and markets. He devoted himself to a deep study of ancient astrology, ancient mathematics, geometry and astronomy. He was a religious man and a member of Masonic society. Gann wrote many books on stock trading and gained many supporters of his theory.
The Gann method has been successfully applied in financial markets, including Forex. This method includes the following price forecasting tools:
- fan Gann;
- gann angles;
- Gann line;
- Gann grid;
- Gann Square, etc.
In this article we will examine in detail what a Gann fan is, how to build it on a chart and use it in trade.
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What is a Fan Gunn?
We have developed the best trading strategy for Gann. It can be applied to all markets because, according to 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 changes.
One of the main reasons that Gann levels outperform horizontal support and resistance levels is because financial markets are constantly moving. If you look closely at the graph, you can see the geometric figure, through the key points of which passes the Gann fan.
How to build a fan gunn?
Before we start trading according to the Gann method, let's see what indicator you need to work with this strategy. The only indicator that you will need is the Fan Gun graphical tool, which most trading platforms have. This indicator is unique in that it draws diagonal support and resistance levels from different angles.
William Gann in his method proposed 9 different angles of the Gann fan. The most important angle is a 45 degree angle or a 1/1 line. From this angle, four lines are calculated above the angle of 45 degrees and four lines below:
- 1/1 - 45 degrees;
Gann believed that when price and time move synchronously, this is the perfect market balance. Most of Gann’s theory revolves around the fact that prices above the 1/1 line determine the bull market, and prices below the 1/1 line determine the bear market.
To build a Gann fan, you first need to draw a perfect angle of 45 degrees. Most trading platforms should include these tools. On the Tradingview platform, you can find the Trend Angle tool in the left side panel.
The next step is to select the key high or low price on the chart from which you will draw the Fan Gunn corners. For example, you select the maximum, as in the figure above, then you use the Trend Angle tool and draw an ideal angle of 45 degrees.
When you're done, you need to learn how to draw the corners of the Fan Gunn. In this step, use the Fan Gunn tool, which is located on the left side panel.
All you have to do is just lay the Fan Gunn over the 45 degree line you drew earlier. This is the easiest and most correct way to draw Gann angles.
The trading terminal MetaTrader 4 also has the “Fan Gann” tool. You can find it through the Insert - Gann - Fan Gann.
Now you know how to build a Fan Gann, and you can move on to the most important part of this article - the rules for trading the Fan Gann strategy.
Buyer Strategy for Fan Gann
Step No. 1. Choose a significant maximum, draw the corners of the Gann fan through it and wait until the price breaks the 1/1 line up.
Gann's strategy works the same on all time frames. But we recommend not to fall below the hourly chart in order to be able to choose significant highs and lows of the price. This is not visible on lower timeframes.
Step # 2. Wait until the price breaks above the 2/1 Gunn angle before opening a buy deal. This step is very important because the reversal of the previous trend is confirmed only after the breakdown of the Gann angle 2/1.
After our position is open, one more important thing needs to be done.
Step No. 3. You need to again use the Fan Gun indicator to a minimum of oscillation before breaking above 2/1 of the Gun fan angle. At this point, you can remove previous Gann corners so you don't clutter the chart.
One of the reasons this is Gann’s best strategy is because we use the Fan Gann indicator to track every swing in the market.
At this point, your purchase transaction is open, but we still need to determine where to place a protective stop -loss and take profits, which brings us to the next step of the Gann trading strategy.
Step # 4. Place your protective stop loss below the most recent low, which coincides with the point where you spent your second Gann fan. The Fan Gunn strategy has a very clear level where we need to place our protective stop-loss, which is below the minimum price, located before the break of the 1/2 angle.
Step No. 5. Take profit after breaking the price of the 1/1 line below 20 points. We need the price to break the 1/1 line by at least 20 points to make sure that it was a real and not a false breakthrough.
Gann’s strategy allows you to move on a new trend for as long as possible, and with the help of the Fan Gann indicator, we can determine the ideal time for profit. We take profit at the earliest sign of market weakness, which is a break below the 1/1 line, which signals a possible beginning of a bearish trend. To eliminate the possibility of a false breakthrough, we add 20 points to the breakthrough of the Gann angle 1/1.
Note: The above was an example of a purchase transaction using the Fan Gann strategy. Use the same rules, but in reverse, for sell deals. In the figure below you can see a real example of a short trade using this strategy.
Just follow the simple rules on how to use the Gann fan, and use steps 1 and 2 to identify the sales transaction, and then go to steps 3 to 5 to manage the transaction (see the figure below).
Gann's strategy is universal and works in all markets, including stocks and cryptocurrencies.
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The Fan Gunn strategy is one of the best strategies, because unlike traditional levels of support and resistance Gann angles can accurately determine significant changes in market fluctuation trends. With our guide, you can quickly learn how to use the Gann Fan and put this knowledge into practice. Gann’s strategy will allow you to accurately determine the entry point and take the maximum profit from the price movement.
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