Brandon Wendell, CMT
Online Trading Academy
Now that we have discussed the major, intermediate and minor tops and bottoms, we can now introduce a tool called the Gann Fan to identify potential support and resistance levels as we move in trend from those areas. This is not necessarily going to replace the supply and demand levels that you are already familiar with on your charts, but they can add to your precision when choosing entry and exit points for trades.
Gann believed that price moved in certain repeatable patterns based on price and time. In using the angles of the fan, you are looking at areas where prices are likely to turn due to a combination of the two. Since there are cycles that can be seen in all securities, a trend that is approaching the end of that cycle should turn at a predictable point. That point is the intersection of a fan.
TradeStation does have Gann Fans available on the program, but there is a catch. You will have to enter the "Points per Bar" that will set the angle of the fan and also the direction of the fan.
There is a guide as to the points per bar we should use for most securities. I have included a table here:
Let's see an example of how this works in a chart. We want to place these fans at the tops or bottoms that we are using as our starting point for the trend we are trading. That way, we can identify the supply and demand levels that are likely to reverse our security's price.
You may have noticed that both examples were on daily charts. Even the tables I showed only go as small as daily charts. So, what can we do if we are going to trade intraday? Well, we need to adjust the Points per Bar for intraday trading. You would simply do this by dividing the number of candles in a day into the daily table number. For example, there are 78, five minute candles per day. Dividing 78 into 0.25 tells us that we need to put 0.003205 into the Points per Bar for trading on a five minute candle chart. If we are using a fifteen minute chart, then we would divide 26 (there are 26, fifteen minute candles in a day) into 0.25 and use 0.009615.
So, experiment with the fans and see if they can help you as an odds enhancer for your trading. Until next time, trade safe and trade well!
This content is intended to provide educational information only. This information should not be construed as individual or customized legal, tax, financial or investment services. As each individual's situation is unique, a qualified professional should be consulted before making legal, tax, financial and investment decisions. The educational information provided in this article does not comprise any course or a part of any course that may be used as an educational credit for any certification purpose and will not prepare any User to be accredited for any licenses in any industry and will not prepare any User to get a job. Reproduced by permission from OTAcademy.com click here for Terms of Use: https://www.otacademy.com/about/terms
Editors’ Picks
EUR/USD stretches higher to test day highs at 1.1895
EUR/USD bounces up at 1.1840 to approach 1.1900 resistance area. The pair has bounced up from intra-day support at 1.1840 and is nearing resistance area in the vicinity of 1.1900. The euro appreciates against a weaker USD amid higher appetite for risk.
GBP/USD consolidates within pennant above 1.3350 as sterling awaits Brexit updates
GBP/USD is consolidating just above 1.3350 as sterling traders await further information on the state of Brexit talks. The pair has formed a short-term pennant, implying a breakout is likely, subject to fundamental confluence.
USD/JPY jumps to fresh weekly highs above 104.70 fueled by risk flows
USD/JPY is rising sharply in the early American session. Wall Street remains on track to open decisively higher. US Dollar Index turns positive on the day near 92.50.
Editors’ Picks
EUR/USD stretches higher to test day highs at 1.1895
EUR/USD bounces up at 1.1840 to approach 1.1900 resistance area. The pair has bounced up from intra-day support at 1.1840 and is nearing resistance area in the vicinity of 1.1900. The euro appreciates against a weaker USD amid higher appetite for risk.
GBP/USD consolidates within pennant above 1.3350 as sterling awaits Brexit updates
GBP/USD is consolidating just above 1.3350 as sterling traders await further information on the state of Brexit talks. The pair has formed a short-term pennant, implying a breakout is likely, subject to fundamental confluence.
USD/JPY jumps to fresh weekly highs above 104.70 fueled by risk flows
USD/JPY is rising sharply in the early American session. Wall Street remains on track to open decisively higher. US Dollar Index turns positive on the day near 92.50.
Bitcoin price majestically rockets past $18,000 as $20,000 beckons
Bitcoin rally is in full swing as investors anticipate a final leg up to $20,000. The flagship cryptocurrency has in the last couple of weeks broken key barriers to top $18,000 on Wednesday towards the end of the Asian session.
Gold consolidates above $1,800, hangs near four-month lows
Gold holds just above the $1,800 threshold while taking rounds close to four-month lows. The hopes of the US stimulus and recovery from the coronavirus (COVID-19) keep the gold bears hopeful. DJI30, S&P 500 closed at the record top, DXY eased.
RECOMMENDED LESSONS
Making money in forex is easy if you know how the bankers trade!
Discover how to make money in forex is easy if you know how the bankers trade!
5 Forex News Events You Need To Know
In the fast moving world of currency markets, it is extremely important for new traders to know the list of important forex news...
Top 10 Chart Patterns Every Trader Should Know
Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and form on the basis of underlying buying and...
7 Ways to Avoid Forex Scams
The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?
What Are the 10 Fatal Mistakes Traders Make
Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.