The Gann Fan is the best known AT tool created by William Gann. It is based on a combination of price and time. The philosophy behind this indicator is not particularly complicated – the value of the local peak of quotations expressed in monetary units is converted into the amount of time that must take to form the next local extreme (depending on the strategy, these might be hours, but can also be weeks and any other time unit).
This technique measures the geometric angles between prices and time on the chart. According to Gann’s theory, there is a perfect balance between time and price movements, and it occurs when prices change by 45 degrees relative to the time axis – this angle is also referred to as 1 * 1. However, this is not the only significant angle in William Gann’s theory, they are also: 82.5 degrees (1 * 8), 75 degrees (1 * 4), 71.25 degrees (1 * 3), 63.75 degrees (1 * 2), 26.25 degrees (2 * 1), 18.75 degrees (3 * 1), 15 degrees (4 * 1), 7.5 degrees (8 * 1).
Breaking from the top of the middle line, i.e. the 45-degree line, which takes place in the uptrend is a signal of the weakness of buyers and vice versa, breaking it from the bottom in the downward trend is a signal of bearish momentum. The other lines represent important levels of support and resistance.
Gann lines have the same function as the Gann fan. Breaking in the downward trend from the top of the 45-degree line is a signal of loss of momentum by demand and vice versa, breaking it from the bottom in the downward trend is a signal of weakening sellers. The Gann line differs from the fan only in that it indicates only an angle of 45 degrees.
Gann’s Grid is a modification of the Gann’s lines. Its construction consists in determining an infinite number of parallel and perpendicular Gann’s lines, inclined at an angle of 45 degrees. In this way, a tool is obtained that allows you to measure the strength of the demand and supply sides after each break, using subsequent lines.
For example, at the moment of a strong rebound in the upward trend and breaking the higher Gann line, we consider this broken Gann line to be the most important. On the other hand, when the trend is reversed to a downward trend, we consider the closest parallel line to the downward trend as the “current” Gann line. The grid density must be adjusted to the chart, as in the chart below.