The term “Andrew’s Pitchfork” was derived from Dr. Alan Andrews’s name, which created a forex trading style that estimates future prices using pitchfork-shape indicators.
While Andrew’s Pitchfork is more commonly applied to the stock and futures markets, it may still help forex traders locate opportunities in the intermediate and long term.
Then what’s Pitchfork Andrew, and how do you use it? Here are some of the critical details.
Andrew’s Pitchfork is a three-point centered trend channel tool consisting of three lines – a center trend line with two additional parallel trend lines equally spaced on either side.
The outside trend lines mark possible help and resistance zones, as with usual trend lines and channels. As long as the Pitchfork channel holds, a pattern stays in place. When prices burst out of a Pitchfork channel, reversals occur.
Choosing the three points
Selecting three points for drawing the pattern lines is the first move to making the Pitchfork. These points (also referred to as pivot points) are based on peaks or falls and are put at the conclusion of past trends.
There are ultimately no fixed guidelines for how to position the points and draw the networks. It’s a question of judgment and can come only from practice.
Therefore, for moderate and experienced dealers, the Pitchfork is more fitting.
Drawing a line from the first point that passes along the midpoint of the other two points produces the pitchfork form itself. There are three lines for both pitchforks, and any line begins from one of the pivot points. The lines are called the upper line (UL), the lowest line (LL), and the median line (ML).
As a fast and simple way for traders to recognize potential support and resistance levels for an asset price or currency, the Pitchfork is intended.
When trading with a pitchfork, though, the most crucial factor to note is that multiple pivot points will result in varying angles for the total Pitchfork, contributing to different outcomes when interpreting the price.
When utilizing a pitchfork, when the price sinks close to the help of either the middle trendline or the lowest trendline, forex traders can purchase a currency.
On the other side, as it crosses the resistance of either the middle line or the strongest trendline, it can sell the currency.
While the middle line may describe places where a currency may encounter help or opposition, this is not as good a reference as the two outer lines.
Prices during an upward cycle can cross the median line daily. Failure to hit this line reflects an inherent flaw that may suggest that there will soon be a pattern reversal.
Stop loss placement
Consider a case where, during the past fifth, a currency has sought help near the bottom trendline twice. This will make it a rational decision to put a stop loss just below this amount.
Should the currency break through the centerline resistance, the forex trader’s goal will then move to the top line, with the centreline being a new help.
The channel’s steepness depends on where the three drawing points are located, particularly point one, which is the beginning of the median line.
While point one typically begins with a high or low response, to maintain a reasonable pricing channel in line with actual consumer activity, it is often important to change point one.
There are no hard rules for point positioning, as described above. Instead, when drawing canals, traders must use discretion and practice.
It’s necessary to develop your forex trading capacity and understanding through experimenting, as with most technical analysis facets. The best way to master a predictor is to see what works or doesn’t work first-hand.