What Is a Fan Cut?

The fan-shaped line refers to connecting the lows (intermediate lows) that start to rise and the lows that are hovering in a straight line to draw more than one upward trend line.

Sector line

When the market rises over a period of time, most of the prices will fluctuate between their regions, forming some patterns. If we connect the lows that started to rise (intermediate lows) and the lows that are hovering high in a straight line, we can draw more than one

The sector line principle is based on the principle of three breakthroughs.

In an uptrend, first draw at two lows

Trend line angle change

Market trends often run to a certain stage, changing the speed of their operation, and

Fan analysis

Speed

1. This is a signal that the medium-term (or long-term) trend is reversed.

2. It is also possible to appear in rising and falling markets.

1. When the second fan line is formed, it can be expected that the third fan line will also appear, and the angle between these three lines will be very symmetrical. Therefore, when the second sector line breaks through, it is not advisable to take any buying and selling actions, and it is advisable to wait for the breakthrough of the third sector line to make a trading decision.

2. The angles between the three fan-shaped lines are very close, so when the second one is formed, the position where the third fan-shaped line appears can be estimated, so as to predict the resistance (or support) price.

Because there is very little written explanation before this analysis method, and it is not used by many investors, it can be said that there is basically no experience to learn from. The author has repeatedly verified that it is recommended to pay attention to the following factors when analyzing with a fan line (taking a falling fan line as an example):

1. In fact, this analysis method is also a triangle shape from the perspective of morphology, which consists of three adjustment waves and two rebound waves. According to the wave structure, it can be divided into five sub-waves abcde most of the time, and sometimes it may be composed of the sub-waves i and ii of the next rising wave of abc .

2. Through practice, I think this analysis method is more suitable for

If the three trend lines drawn break through, the trend will reverse. However, in practical applications, the use of sector lines is not convenient. On the one hand, drawing these trend lines is inherently cumbersome. On the other hand, after the three trend lines are drawn, there is no guarantee that the trend will reverse, because it is still a question of whether the drawn trend lines are reasonable. It usually takes three trend lines to be reversed. In addition, after the third breakthrough, prices often have fallen or increased a lot, not the best trading price, or even the next best price. This creates trouble for investors. Medium and long-term investors can use technical indicators such as trend moving averages to determine the medium- and long-term trend reversal, but it is not recommended for short-term investors to overemphasize this indicator.