Fibonacci Fan Lines are used to help identify key Support and Resistance Trend Lines.
Similar to the Fibonacci Retracement, support and resistance lines are calculated by drawing a trend line between a significant low and a significant high. This trend line is set as the 0% line. The Fibonacci Fan tool then plots 3 diagonal trend lines fanning out from the first extreme point, the diagonal trend lines corresponding to the Fibonacci percentage levels 38.2%, 50% and 61.8%.
As per support and resistance rule, if prices breaks a resistance level, it will increase until a previous level of resistance is reached or a new level of resistance established; and if a prices breaks a level of support, it will drop sharply until a prior support level is reached. Fibonacci Fan Lines are particularly useful in helping to identify where those next support or resistance trend lines may be.
In an uptrend, if the price falls below a Fibonacci Fan trend line, then the price will usually continue to drop until it finds support at the next Fibonacci Fan trend Line down. And vice-versa, in a downtrend, if the price breaks above a Fibonacci Fan trend line, then the price will continue to rise until it finds resistance at the next Fibonacci trend line up.
For example, see the daily candlestick chart of euro-dollar. We plotted Fibonacci Fan Lines from low of 1.0850 made in May 2017 lows to high of 1.21 made in September 2017. And on chart we can see that, euro had taken support at 38.2% support trend line and hit record high of 1.21. Until we saw breakdown below it in September and in October broken trend line of 50% and tested 61.8% which was 1.15 that time and then uptrend resumed and euro trending higher and higher and recorded high above 1.25 in 2018. See here also euro respected 61.8% support trend line and given 1000 pips rally.