# Fibonacci Fans Indicator Explained

Definition

Fibonacci Fans, otherwise known as Fibonacci Projections, share some kind of similarity to Gann Lines and Angles.

They are displayed on the charts by following the same principles of drawing the Fibonacci retracement points: drawing a trendline from one price extreme to another, either from a peak to a trough, or from a trough to a peak. The trace also produces a vertical line through the second price extreme level. Three trendlines then fan out from the first price extreme point, passing through the vertical line at the 23.6 %, 38.2 %, 50.0 %, 61.8 %, 76.4%, or 100% Fibonacci levels.

So we have the following at the end of the trace:

1. Rising fan lines which pass from a trough along the various retracement levels to the peak. These fan lines serve primarily as support levels for rising prices, or resistance when a particular line has been broken downwards.
2. Falling fan lines which head down from a peak along the retracement levels and get down to a trough. These fan lines can serve as resistance levels .

Components of the Fibonacci Fan

Fibonacci fans are trend lines which extend in the shape of a hand-held fan either upwards (in an uptrend) or downwards (in a downtrend). These trend lines correspond to the Fibonacci retracement levels. The only difference between the Fibonacci fans and Fibo retracement levels is the direction of the lines. Two Fibonacci fans are recognized:

Rising Fibonacci Fan
The fan lines are seen as follows:

• Fan Line 1: Price trough to 38.2% retracement level
• Fan Line 2: Price trough to 50% retracement level
• Fan Line 3: Price trough to 61.8% retracement level

Additional fan lines can be traced when the trader makes the adjustments and exercises the option to add these levels using the indicator editing tool (Ctrl + I).

Falling Fibonacci Fan
The fan lines are seen as follows:

• Fan Line 1: Price peak to 38.2% retracement level
• Fan Line 2: Price peak to 50% retracement level
• Fan Line 3: Price trough to 50% retracement level

Indicator Settings

The Fibonacci fans tool is listed  on the MT4 among the Fibonacci group of indicators. To attach it to the MT4 chart, click on Insert -> Fibonacci -> Fans

The modifications to the indicator can be either to increase or reduce the retracement levels as well as changing the colours and the thickness of each line for better visibility.

Usage of the Fibonacci Fans in Forex Trading

The primary use of the Fibonacci Fans is for support and resistance trading. There are several opportunities to trade using each Fibonacci fan line as entry and exit levels. The beauty of this system is that these Fibonacci lines can promote trade in both directions: long trades in a rising fan and short trades in a falling fan.

We will now demonstrate the use of the Fibonacci fan in setting different kinds of trades in different scenarios.