If the market changes its direction and the price line goes above the resistance line or below the support line the buying or selling opportunities are generated for the traders. The validity of the blue Pitchfork was confirmed when prices hit resistance at the upper trend line in early April and found support at the lower trend line in early May. They are constructed from three consecutive highs or lows on a chart.
To illustrate this point take a look at the chart below. And as price progressed, notice in the next chart how price reacts to these levels that were initially drawn based on the Pitchfork tool. Because the pitchfork tool can serve as an early indicator of trend reversals, pitchforks can be used with Channel trading or with an indicator based trading system. The charts below show the Andrews Pitchfork tool indicated a potential reversal early on.
If only the moving average was used as a trend indicator, then as you can see traders would have missed a big amount of pips in lost trading opportunity. The next chart below shows how plotting the pitchfork within the channel offers some great insights into possible trades. Here, we see that price is within an up sloping channel; therefore we prefer to buy near the channel lows. But what is the guarantee that the lower channel line will hold, especially after there was a fake out at the lower channel line the last time it was tested partly shown on chart.
When we use the pitchfork tool and connect the swing points, we can see that price starts consolidating strongly near the median line as well as the lower channel line. Notice after price breaks out of the pitchfork, it rallies, only to retest the support level close to the lower channel line before rallying.
Traders use it to predict when an asset's direction is about to change. They are constructed from three consecutive highs or lows on a chart. For an uptrend, the pitchfork is constructed from a low and high and then a low in that order. For a down trend, the pitchfork is constructed from a high, a low and then a high in that order. The screenshot below shows what the Andrew's Pitchfork indicator looks like on a chart — you can see the highs and lows used to draw the channel:.
Mark these so-called pivot or turning points on the chart, then draw a straight line that starts from the first point and travels exactly through the middle of the following two pivot points, as the following chart shows: Then, draw two other lines that start from the second and third pivot points and run parallel with the median line.
However, once plotted, the indicator is fairly simple to use and most trading platforms help traders bypass the plotting process anyway by providing the indicator within their suites of tools. When looking to go long on an asset, or buy it, find a key low in its price, followed by a key high and finally another key low in consecutive order. You can then look for a long entry on the lower boundary of the channel.
When looking to go short on an asset, or sell, find a key high in its price, followed by a key low and finally another key high. You can then look for a short entry on the upper boundary of the channel as shown below:. Get month Premium Membership for free. Deposit and send us an email to premium tradimo. Tradimo helps people to actively take control of their financial future by teaching them how to trade, invest and manage their personal finance.
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The educational content on Tradimo is presented for educational purposes only and does not constitute financial advice. I have since gone beyond his method as have more accurate that I use! Here is an old video of Dr. Andrews teaching his last seminar: First of all I never knew that MT4 had this indicator hidden away and I really like this post of yours; Fantastic. Thanks for the comment, We wish you the best Freddie! Such a nice blog.. The strategies you described here are so simple to understand and very useful..
Your email address will not be published. Andrews Pitchfork Trading Strategy: Before we dive into the Andrews Pitchfork trading system lets define what is Andrews Pitchfork and how can we profit from this amazing technical indicator: What is Andrews Pitchfork? Jesus Asencio on October 4, at 8: Dennis Durkop on October 4, at 9: TradingGuides on October 5, at 1: That is great Dennis!
Thanks for the comment Reply. Dennis Durkop on October 5, at 1: Freddie on October 5, at First of all I never knew that MT4 had this indicator hidden away and I really like this post of yours; Fantastic Reply. Markus Heitkoetter on October 11, at 9:
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