Fan Principle

What is the Fan Principle?

The fan principle is a classical charting technique in which successive trendlines 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 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 or the Gann fan, which project fixed geometric angles in advance; fan-principle lines are ordinary trendlines redrawn from real pivots as the trend flattens.

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.