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Gann fans, angles, grids and cardinal squares are some of the trading tools that allowed William Delbert Gann more than $500 million in profit in the early 1900s.

A Gann fans displays lines at each one of the 9 Gann angles. A Gann grid is an 80 x 80 grid where each line is 1 x 1. As a result, the lines will be spaced 80 time periods apart. Gann centred his technical analysis forecasting methods not only on price but also on time. He stated repeatedly in many of his books that time is as important as price when it comes to analysing market behaviour. Indeed, Gann angles and fans aim at forecasting not only the trend reversal but also when it would occur. Forecasting not only the price but also when it would materialize is invariably the ultimate outcome of technical analysis, and many analysts would indeed state that this is impossible.

Gann was indeed quoted stating that “When you know how to use time with price, you know how to trade”. Whether Gann fully revealed his Gann angles and fan techniques will always remain open to debate. But the main Gann angles theories on public record can be summarized as follows:

• Time and price are one and the same. When they are in sync (i.e. in a 1 x 1 ratio) then a major trend reversal is imminent from a technical analysis perspective
• Time is the most important factor. Day/week counts usually go in 30, 45, 60, 90 and 180 time periods
• Resistance levels in both time and price are 25, 33, 50, 66 and 75 per cent of the previous range. Using Gann angles they can be extended to 100, 150 and 200 per cent.
• Trend lines do work, and Gann claims authorship for these

Gann was a strong believer in the fact that human behaviour repeats itself over time and therefore analysing past behaviour allows forecasting the future.

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One of the essential principles of applying technical analysis to forex trading in a profitable manner is that you want to see multiple confirmations for an entry point before you actually enter the market.

If you are making trading decisions based upon prominent candlestick formations on a long term chart, it would also be wise to check with a number of other indicators when you get a buy signal in order to make sure that there are no contradictions. In this article we are going to focus on how Fibonacci retracement levels coincide with support and resistance levels, and how you can use these two different technical indicators in conjunction with each other in order to yield accurate market entry signals.

Let’s start by defining what both of these types of indicators are. Fibonacci retracements are based on the number 1.618 (also called the Golden Ratio) that is found in all natural orderly systems from flowers to the human body to the financial markets. Over the years it has been proven that when the price of a currency pair has a large move and then retraces back in the direction of the previous value, it is statistically more likely to rebound at the levels of 38.2%, 50%, and 61.8% of the original price move.

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The sequence that was used as the base for Fibonacci retracements was introduced to the Western world around the 12th century. It was brought into the world by Leonardi de Pisa, otherwise known as Fibonacci. In modern times, this has been related closely with the principle of the Elliott Wave, Tyrone levels and Gartley patterns. The original pattern, on which retracements are built, is as follows: One plus one is two. One plus two is three. Two plus three is five. Three plus five is eight. Five plus eight is thirteen. Eight plus thirteen is twenty-one, and so on.

Used in technical analysis, Fibonacci retracements are based on the chance that a security or other financial asset will go back over a major part of its original movement, finding some outside force at the levels defined by the Fibonacci numbers. The outside force could be supportive, or it could be resistant. Either way, the outside force will likely occur at certain Fibonacci levels.

Calculating The Points

In order to chart the exact points where the security will likely change direction, a certain calculation should be made. When the trader draws a trend line from one extreme point to the other, the vertical distance is then divided by the main ratios derived from the Fibonacci numbers. These are as follows:

• 23.6%
• 38.2%
• 50.0%
• 61.8%
• 100.0%

Charting With Fibonacci Retracements

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