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Technical Tools: Understanding The Andrew’s Pitchfork

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Classic Technical Tool

Among the core range of technical tools and indicators available on most MT4 platforms, the Andrews Pitchfork remains a firm favourite. Long used by technical analysts as a precise way of measuring trend and capturing turning points, the tool is celebrated for both its simplicity and effectiveness.

The tool consists of three lines which are drawn by selecting three points on the charts which are typically reaction highs or lows. As with regular trend lines and channels, the lines of the Andrew’s Pitchfork denote areas of support and resistance as well as providing a visual aid for trend direction. So long as price remains inside the pitchfork, the trend remains intact. Once price breaks out of the pitchfork, a reversal is  likely underway.

Bearish Pitchfork

When applying a bearish pitchfork, traders need to consider the following three points

  • Initial high
  • Reaction low
  • Secondary high

pitch2

Once these points are selected, the tool will then apply the lines of the pitchfork. You will note there is an upper resistance trend line, a lower supporting trendline and also a median line which bisects price action and is equidistant to the upper and lower lines. As the tool is a discretionary tool you might find that you need to adjust the lines so that they properly account for price action and give a realistic and relevant slope, as sometimes the tool might initially plot lines that are too steep.

Bullish Pitchfork

When applying a bullish pitchfork, traders need to find the following three points

  • The initial low
  • The reaction high
  • The secondary low

pitch1

Once these points are selected, the tool will then apply the lines of the pitchfork. You will note there is an upper resistance trend line, a lower supporting trendline and also a median line which bisects price action and is equidistant to the upper and lower lines. As the tool is a discretionary tool you might find that you need to adjust the lines so that they properly account for price action and give a realistic and relevant slope, as sometimes the tool might initially plot lines that are too steep.

Once the trend lines are in place trader can use them as they would regular trend lines, and channels looking to buy trend line support and sell trend line resistance. In a bullish trend, the median line can also be used to provide support, and in a bearish trend, the median line can also be used to provide resistance.

As with regular trend lines and channels, it is important to update your trend lines as price action unfolds. Once a pitchfork is broken, and traders anticipate a reversal is underway traders can then look to trade a retest of the broken pitchfork.  Where price breaks out above a bearish pitchfork, traders can look for price to trade back down and find support at the broken pitchfork which can be used for a long entry.

Similarly, where price breaks down below a bullish Pitchfork, traders can look for price to trade back up and find resistance at the broken pitchfork which can be used as a short entry.

pitch3

In the example, above you can see that we have a clear bullish Pitchfork in play, having identified our three selection points. After testing the lower supporting trendline of the pitchfork twice, price eventually breaks down below the pitchfork indicating a likely bearish reversal. Note how price then trades back up to retest the broken lower trend line of the pitchfork where price finds resistance and ultimately sells off. This dynamic often plays out with broken pitchforks and can be a fantastic way for traders to capitalize on a shift in market direction.

As with all tools and indicators, they can only form part of your trading system and traders should spend the necessary time developing sound risk management practices to help develop a positive returns strategy. The Andrew’s Pitchfork can be a fantastic tool for helping traders frame trend direction and identify potential trade locations and can either be used alone or in conjunction with other technical indicators and tools.

 

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