Lines of Gann Fan are
built at different angles from an important base or peak at the price
chart. The trend line of 1х1 was considered by Gann the most important.
If the price curve is located above this line, it is the indication of
the bull market, if it is below this line it is that of the bear
market. Gann thought that the ray of 1x1 is a powerful support line
when the trend is ascending, and he considered the breaking this line
as an important turn signal. Gann emphasized the following nine basic
angles, the angle of 1x1 being the most important of all:
-
1х8 — 82.5 degree
-
1х4 — 75 degree
-
1х3 — 71.25 degree
-
1х2 — 63.75 degree
-
1х1 — 45 degree
-
2х1 — 26.25 degree
-
3х1 — 18.75 degree
-
4х1 — 15 degree
-
8х1 — 7.5 degree
The considered ratios of price and time increments to have
corresponding angles of slope in degrees, X and Y axes must have the
same scales. It means that a unit interval on X axis (i.e., hour, day,
week, month) must correspond with the unit interval on Y axis. The
simplest method of chart calibration consists in checking the angle of
slope of the ray of 1х1: it must make 45 degrees.
Gann noted that each of the above-listed rays can serve as support or resistance depending on the price trend
direction. For example, ray of 1x1 is usually the most important
support line when the trend is ascending. If prices fall below 1х1
line, it means the trend turns. According to Gann, prices should then
sink down to the next trend line (in this case, it is the ray of 2х1).
In other words, if one of rays is broken, the price consolidation
should be expected to occur near the next ray.
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Trend Lines Indicator Considering T. Demark's Approach
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