Historical Simulator Plug-in
Fans Video Clip
In this example, I want to go through and show you some of my favorite tools, which are the Fan tools.
First one I'll show you is just the Trend Fan, the simple Trend Fan. That's this tool, right here. It has a series- you can go out the tool as designed in Track n Trade can go out as many as, I think 19 or 20 waves. But generally we only use 3 and sometimes 4. What you do is you find your low of your trend. You can calculate off the tops and bottoms of these trends, where you expect markets to move. Of course, a break below the 3 line would indicate that the market has changed direction, and has become a Bearish market. So, we're looking for trend areas, or lines of resistance and breaking's of the breaking of those lines of resistance and support. Once they break through, that's an indication that the market has changed direction. So, that's just a simple speed fan in Cocoa.
Let's go to Corn and see what we've got going on in here. In Corn, let's just use this simple fan. We can do 1 maybe 2 off the top of here. You know we have maybe another one in here, a 3, and the 4th one. Right there, on a break below that number 4, of course this major bottom right here. I want to scoot that up because it is so strong. Right across that bottom, breaking of that number 4 trend fan, would indicate that the market has changed from a Bearish, or from a Bullish trend to a Bearish trend.
Now, of course there's more than just this one trend fan, there's several different kinds of fan tools. There's a Fibonacci Fan. The way we do that one, is we grab our Fibonacci Ruler, and we drag that from the top to the bottom, like this. So, the top of the trend to the bottom of the trend. We might want to- just for fun, blow this chart up a little bit so we can see just a little bit better. Then, I'm going to turn on the 24 and the 76, and I'm going to grab my Speed Fan tool. This is how I make a Fibonacci Fan. These are the Fibonacci lines, so we come across and see where I'm intersecting my fan, with my Fibonacci Ruler? Right at this vertical intersection, right here where the 24 line comes across, is where I intersect. On this one, this one, this one, this one, and then of course the top. So, that's my Fibonacci Fan tool. You can watch the market fan out through and use these areas, this fan area as areas of support and of resistance.
You'll notice that sometimes on different markets areas of support become areas of resistance, like right in here. We come down, and we have area of support, support, support, then as it breaks through, it turns around and comes back up. It's resistance, resistance, resistance, resistance. You'll find that very common, very common throughout most of the charts. You'll find where areas of support will turn and become areas of resistance. Okay?
Let's see, we've done that one- Orange Juice. Let's see what we have in Orange Juice. Let's bring our chart back in, maybe we can use our- maybe we can use a Gann Fan in here. A Gann Fan Let's come in and find the Gann Fan. The Gann Fan is meant to tell us if a market's direction is too powerful, too strong, overbought, or too weak, too slow, or undersold. So, what we need to do, is we need to square the chart, square our Gann fan, based on a 45 degree angle, based on our existing chart. So we're looking at this chart, we're going to use the background tool, so how each, or the background paper, see how each background has squares in it? We're going to put our cursor right on the corner, of those. We need to keep it in proportion, so that one to one line that's coming out of there is perfectly a 45 degree angle. We're using our background paper to determine that. So, as we go up, we want to have three across the top and three down the side, three across the top, three down the side, three across the top, three down the side. So we keep that 45 degree angle accurate. As we place this, now we move this around, we can move it and we can take our perfectly squared, our square Gann Fan, and we can take that bottom left hand corner, and we want to position it on the bottom of the trend. That's going to tell us if the trend that we're watching is either too strong, too fast, or if it's a good strong proper trend.
If the trend, again, stays between one by two and one by two in this area, it's a good trend. It's a solid trend, going up that 45 degree line. If it drops down below the one by two, it's weak, it's undersold. It needs to come back into the middle point. If it goes too high, and comes up into this area, it's over bought, it's too strong. It needs to come back and drop down into the 1 by 1 area. So this trend right here going up here, is quite a strong trend- it's above the 45 degree angle. This one down here was weak, and then when it jumped and made that great big gap, it came right up here, and it's getting quite strong, it should come back down towards that one to one line, here pretty soon. So that's how the Gann Fan works.
Of course, we can use it in both directions. You can draw a Gann Fan from the top, or from the bottom up. Or you can buy it and draw it from the top down. Then it's the same rules, you want to go with a 45 degree angle, and you'll want to measure those out and make sure that you're fan is on a 45 degree angle, and then it will tell you if these markets are dropping too quickly, or if they're dropping too slowly. Okay, so that's the Gann Fan.
Let's go to Pork Bellies, what can we do with Pork Bellies. Let's look at maybe the- it's quite a long market out there. So, maybe if it breaks and comes back down, we can watch it break below the number 3 ruler line, there; as it's got areas of support and resistance coming up that number 3 point. See if we can break below it, break down and turn into a bearish market.
We might want to also run our, we might want to run our Gann Fan against this one here. To see, how that's running. Maybe that market seems a little fast up here, dropped back down and it dropped too hard now it's down into the weak area. It has to come back up towards the 45 degree angle. Now, that market looks like it's trending just nicely right up the 45 degree angle, if it keeps waving back and forth between it, when it drops pass this one by two, that's an indicator that it's now longer a bullish pattern. It's changed to a Bearish pattern, and it's too weak, it has to turn and come back down. and continue it's downward trend, or it has to turn, reverse and come back up.
Okay, let's look at the S&P 500. S&P is long chart, we need to kind of squish it down a little bit here. But here again, we can look at this one from the top. I like these fans, they just, they're just a really nice tool to help you determine what the trends are. Here again, you'll notice areas of support and resistance, all across these fans. It's just uncanny how well they work, I like fans.
See, as they come down and hit tops all across here, and then this one even comes down, and notice how the tops and the bottoms run into each other right here? You have resistance and then it turns into support- you think oh, that's just a coincidence. But when it starts happening chart after chart, after chart, after chart, you start saying, hey maybe this guy has something here. Maybe this is something that can help me.
So you look at this, and you say wow, the market does do that. How is that going to help me predict the market direction? Well, the way you predict market direction with fans, is you use them to predict, or project- you know, where you're seeing these areas of support and resistance, coming out into the future. They're always adjustable, you can always grab them, and once the market moves and makes a different position in retraces, you can move your fan into a different area. But then it's going to help you know that the market bounces between these fan lines, and then as they break and come down below one and go into the other, they reverse the trend from bullish to bearish or if you're going to other direction, from bearish to bullish. Those are our Trend Fans, our Speed Fans, Fibonnaci Fans, and Gann Fans.
Again, go out, grab a whole bunch of charts and start running your fans off the tops and the bottoms, and determine market direction using your fans. Watch for areas where support becomes resistance, and vice versa, or your resistance becomes support.