Gann fans, named after creator W.D. Gann, are a form of geometric technical analysis based on the assumption that markets are cyclical in nature. Gann fan theory suggests that prices and time form derivative patterns. For example, the most important Gann line is a 45-degree line stretching from the present and extending throughout time, forming an ideal balance of time and value. Gann believed that this 1 price unit x 1 time unit relationship was a natural line of support when price trends are ascending.
The fans of Gann fan theory are different relationships between time and important price tops or bottoms that are represented by lines drawn at different fan angles from the main 45-degree fan line. Bullish fan lines are drawn above the 45-degree line, and bearish fan lines are drawn below the 45-degree line.
There is no specific formula for drawing Gann fan lines. Gann identified nine basic angles that can serve as predictable support/resistance thresholds when a price top or bottom corresponds with one. These nine angles are: 1x8 (82.5 degrees), 1x4 (75 degrees), 1x3 (71.25 degrees), 1x2 (63.75 degrees), 1x1 (45 degrees), 2x1 (26.25 degrees), 3x1 (18.75 degrees), 4x1 (15 degrees) and 8x1 (7.5 degrees).
The underlying premises of Gann fans have been called into question over time, and this form of technical analysis is not used very frequently. Many believe that markets do not operate in such geometrically clean patterns; even if they did, the subjective nature of individual traders drawing fan lines across a price chart would make Gann fans very difficult to use correctly.