Trend Fan
Trend fans are an extension of the regular trend line, and accent simple trend
line trading concepts by extending the single trend line to a multiple of fan
lines that give you a better look at a trend, its retracements and market
reversals.
Take a look at this diagram. As a trend moves up in scale, a chartist will
generally draw a vertical line across price bar lows; or alternatively, when a
market is moving down, across the price bar highs.
Then, as the market continues to make its retracement, we can then 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.
You will notice how the last move of the trend, which was resistance for the
first trend line, is now support for the second trend line. Now draw the third
trend line. At this point, you can see 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.
Rule of Thumb:
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. See the example charts:
Example of a Trend Fan using Track ‘n Trade Pro
Example 2 of a Trend Fan using Track ‘n Trade Pro
Example 3 of a Trend Fan using Track ‘n Trade Pro