Gann Angles, or Fans, are used to show trend lines of support or resistance. To use a Gann Angle, units of price must equal units of time on a price chart. This means that every unit of price is the same distance as one unit of time.
So, for example, to create the most significant Gann angle, which is known as the 1x1 angle, you draw a line that starts at the intersection of the x- and y-axes, continually moving up one unit of price for every unit of time, to create a line at a 45 degrees angle to both axes.
Though 1 x 1 (45 degrees) is considered to be the most important angle, the following eight additional angles are also thought to be significant:
1 x 8 - 82.5 degrees
1 x 4 - 75 degrees
1 x 3 - 71.35 degrees
1 x 2 - 63.75 degrees
2 x 1 - 26.25 degrees
3 x 1 - 18.75 degrees
4 x 1 - 15 degrees
8 x 1 - 7.5 degrees
When Gann Angles are plotted on price charts where prices are trending either up or down, they can be used to show levels of support and resistance. For example, during an uptrend, the 1 x 2 angle can act as a line of support, where the highest prices along the trend line will hit up against the 1 x 2 angle. If prices broke through the 1 x 2 angle support line, the next largest angle, or 1 x 3 at 71.35 degrees, would act as the next line of support. Over time, prices have tended to consolidate within these geometric areas.
The strategies described in this article are for information purposes only, and their use does not guarantee a profit. None of the information provided should be considered a recommendation or solicitation to invest in, or liquidate, a particular security or type of security. Investors should fully research any security before making an investment decision. Securities are subject to market fluctuation and may lose value.