What Should You Do with Andrew’s Pitchfork?

Zahir Shah |

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On a chart, whenever you see three parallel trend lines, you’ve got yourself a useful trading strategy for the foreign exchange market. With careful observation, you’ll notice that they form a familiar figure – like a handle and prongs. And, as it seems, they are somehow indicative of an uptrend and downtrend; they also hint at regression, support and resistance levels.

These three trend lines really come in a bunch of three parallel lines – a bunch that is popularly known as Andrew’s Pitchfork.

About Andrew’s Pitchfork

Andrew’s Pitchfork, or median line studies to some, is a technical indicator that focuses on the establishment of different profitable opportunities on the forex market. Particularly, it addresses the common concerns of forex swing traders. It can be applied for both short-term and long-term trades, and can evaluate the market condition over a long period.

The concept behind Andrew’s Pitchfork was developed by the trader and teacher Alan Andrews. According to its developer, it emphasizes the importance of two lines that will serve as support and resistance levels. Based on which line where the median will gravitate toward, it implies incoming market activity.

How to Draw the Pitchfork

When drawing Andrew’s Pitchfork, the identification of a low or a high is required. Once an extreme point is chosen (i.e. a point that will serve as the handle), a pair that consists of a low and a high should be drawn to its right (i.e. a set of points that will serve as the prongs); the next step is to isolate these three points. Once the points are isolated, you can start using the technical indicator.

Reading Between the Lines (Systematic Procedures)

A plus side of Andrew’s Pitchfork is that it can be used for trading either inside or outside the trend lines. Both ways can be means of a capitalization strategy for an eventual swing trade. Regardless of the preferred approach, it can yield profitable results for your forex trading career.

Inside the trend lines:

  1. Identify the price action that is near the median.
  2. Determine whether the median is rising; if so, it is indicative of an uptrend.
  3. Place a stop order position; as recommended, place it around 30 pips below the support level.

Outside the trend lines:

  1. Identify the price action that is near the median.
  2. Determine whether the median is declining; if so, it is indicative of a downtrend.
  3. Place a stop order position; as recommended, place it 50 pips above the entry level.

Content Sources: http://www.admiralmarkets.com/education/articles/forex-indicators, https://en.wikipedia.org/wiki/Candlestick_chart

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

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