You are here

Trend Fan - Technical Analysis

Printer-friendly versionPDF version

Trend Fans are an extension of the regular trend line. They accent simple trend line trading concepts by extending the single trend line to multiple fan lines that give a better look at a trend, its retracements, and market reversals.

Trend Fan

Trend Fan
As a trend moves up in scale, a chartist will draw a line across price bar lows or, when a market is moving down, across the price bar highs.

AAs the market continues to make its retracement, we can draw another trend line across the next level of support or resistance. The line is support if the market is moving up and resistance if it is moving down.

The last move of the trend was resistance for the first trend line, and is now support for the second trend line. The third trend line shows that the market has made a solid retracement down past this third fan line.

When the market crosses the third fan line, it is considered to be confirmation of market retracement. A market that was once considered bullish is now bearish, or if bearish, would now be considered bullish. When the markets price bars cross above or below the third trend fan line, this is your signal and confirmation that the market has shifted from bullish to bearish, or bearish to bullish.

To trade a Trend Fan, place an order to enter the market on the break out past the third Trend Fan line.