# Fan Principle A Trend concept (Channels, lines & geometry) in the LuxAlgo Library, with 1 indicator implementation. ## What is the Fan Principle? The fan principle is a classical charting technique in which successive [trendlines](https://www.luxalgo.com/library/concept/trendline/) are drawn from the same anchor point as a trend decelerates. When the original steep trendline breaks, price makes a new pivot and a second, flatter line is drawn from the same origin; if that breaks, a third follows. The lines fan out from one point, and each break records a loss of slope rather than an immediate reversal. The technique belongs to the classical trendline canon: it appears throughout twentieth-century charting literature and is preserved in the standard references, John Murphy's coverage of trendline analysis being the best-known modern statement of the three-line convention. Its persistence owes to what it encodes: a trend rarely reverses from full speed in one act, and the fan turns that deceleration into a countable sequence of drawn and broken lines. The classical rule of thumb holds that a break of the third fan line signals the trend has reversed. Broken fan lines also tend to swap roles, with former support acting as resistance on retests. The principle differs from pre-drawn fans such as [speed resistance lines](https://www.luxalgo.com/library/concept/speed-resistance-lines/) or the [Gann fan](https://www.luxalgo.com/library/concept/gann-fan-and-angles/), which project fixed geometric angles in advance; fan-principle lines are ordinary trendlines redrawn from real pivots as the trend flattens. Mechanically the fan is a slope diary. Each redraw connects the same origin to a later, lower-angle pivot structure, so the sequence of line slopes is a record of the trend's fading rate of progress, the drawn-geometry cousin of watching a moving average's slope flatten on an [MA slope filter](https://www.luxalgo.com/library/concept/ma-slope-filter/). The count matters less than the shape it documents: three breaks from one anchor describe a rounding turn, which is why the third break earned its classical status as the reversal cue. ## How to apply the fan principle on a chart The uptrend case is described; invert every step for downtrends. 1. Anchor at the trend's origin: the significant swing low that started the advance. 2. Draw the first trendline from that anchor under the initial rising pivots; steep early trends make this line break sooner rather than later. 3. When price closes through the line and sets a new higher-timeframe pivot, draw the second, flatter line from the same anchor through the new structure. 4. Repeat on the next break: the third line from the same origin completes the fan. 5. Treat a decisive break of the third line as the classical reversal signal, and require confirmation, a structure break or a [breakout](https://www.luxalgo.com/library/concept/breakout/) of the opposing side, before trading it. 6. Watch broken lines on retests: each one is a candidate role-reversal reference where rallies can stall. ## How traders use it - As a trend-maturity gauge: each broken and redrawn line documents deceleration, warning that the trend is losing thrust, often before a reversal pattern completes. - As a reversal trigger: the third-line break is the classical signal, usually taken with confirmation such as a structural break or volume, since fan counts alone misfire. - As a retest map: broken fan lines become candidate resistance (or support) where pullbacks can stall. - As a cross-check on regime tools: a completed three-line fan agrees or argues with formula-based reads such as a [trend regime label](https://www.luxalgo.com/library/concept/trend-regime-label/) or a flattening [MA slope filter](https://www.luxalgo.com/library/concept/ma-slope-filter/), and disagreement is itself information about how clean the turn is. - As a patience structure: because each line demands a real break and a real new pivot, the fan forces a staged reassessment instead of calling a [reversal](https://www.luxalgo.com/library/concept/reversal/) on the first trendline violation. ## Fan Principle vs other slope tools - **Trendline** (https://www.luxalgo.com/library/concept/trendline/): A single trendline is one hypothesis about the trend's slope; its break is a one-shot event. The fan principle strings three such hypotheses from one anchor, converting isolated breaks into a documented deceleration sequence. - **MA Slope Filter** (https://www.luxalgo.com/library/concept/ma-slope-filter/): A slope filter measures deceleration continuously from an average's gradient, updating every bar without judgment calls. The fan records the same fading thrust in discrete, drawn steps anchored to real pivots, legible on the chart but dependent on pivot selection. - **Trend Regime Label** (https://www.luxalgo.com/library/concept/trend-regime-label/): A regime label outputs a state (trending or not) from formulas. The fan supplies the geometric evidence behind such a state change: three progressively flatter lines failing is what a trend-to-range transition looks like drawn by hand. ## FAQ ### What is the three-fan-line rule? It is the classical guideline that once a trend's third successive fan line breaks, the trend is considered reversed. The first two breaks mark deceleration; by the third, the advance or decline has flattened enough that the prior trend structure is gone. It is a rule of thumb from classical charting, not a law, and traders typically pair it with structure or volume confirmation. ### Is the fan principle the same as a Gann fan? No. A Gann fan projects a set of fixed-angle lines from a single pivot in advance, on Gann's premise about price-time slopes. The fan principle draws no lines ahead of time: each line is a real trendline connecting actual pivots, added only after the previous one breaks. They can look similar on a chart, but one is predefined geometry and the other is redrawn structure. ### Do all fan lines have to share the same anchor? That is the defining convention: every line starts from the trend's origin pivot, so the fan shape itself displays the deceleration. Redrawing from later pivots instead produces ordinary successive trendlines, which is legitimate charting but loses the single-origin geometry and the classical three-count that the fan principle is built on. ### Does the fan principle work in downtrends? Symmetrically. Anchor at the swing high that began the decline, draw successive resistance lines above the falling pivots, and let each break record the descent flattening. The third-line break is then the classical signal that the downtrend has rounded out, with broken lines watched as support on subsequent dips rather than resistance. ### How is the fan principle different from speed resistance lines? Speed resistance lines divide a completed move into fixed fractions (typically thirds) and draw those slopes in advance from the extreme, so their placement is arithmetic. Fan-principle lines have no formula: each exists only because price broke the previous line and printed a new pivot to connect. One anticipates where deceleration might stop; the other documents deceleration that already happened. ### What confirms a third fan line break? The usual candidates: a break of the swing structure that carried the trend (a lower low after an uptrend fan), expanding volume on the breaking move, or a completed reversal pattern at the same location. The fan count alone is a maturity read. Traders who act on the third break without any confirming event accept the classical rule's known false-signal rate. ## Implementations in the Library - Linear Regression Fan (LuxAlgo): https://www.luxalgo.com/library/indicator/linear-regression-fan/ ## Related concepts - Trendline: https://www.luxalgo.com/library/concept/trendline/ - Linear-regression Channel: https://www.luxalgo.com/library/concept/linear-regression-channel/ - Parallel Channel: https://www.luxalgo.com/library/concept/parallel-channel/ - Standard-error Channel: https://www.luxalgo.com/library/concept/standard-error-channel/ - Polynomial Regression Band: https://www.luxalgo.com/library/concept/polynomial-regression-band/ - Andrews' Pitchfork: https://www.luxalgo.com/library/concept/andrews-pitchfork/ - Gann Fan & Angles: https://www.luxalgo.com/library/concept/gann-fan-and-angles/ - Gann Box: https://www.luxalgo.com/library/concept/gann-box/ - Gann Square of 9: https://www.luxalgo.com/library/concept/gann-square-of-9/ - Speed Resistance Lines: https://www.luxalgo.com/library/concept/speed-resistance-lines/ --- Source: https://www.luxalgo.com/library/concept/fan-principle/ (LuxAlgo Library, the encyclopedia of trading & technical analysis). Free to use with attribution: https://www.luxalgo.com/library/license/