The price graph illustrates the four steps we need in order to confirm the trend reversal via the Andrews Pitchfork indicator.įirst we confirm the breakout in the Pitchfork (1). Let’s illustrate the Pitchfork from the earlier image, and combine this our newly created trade execution rules. Follow basic support and resistance rules and watch out for reversal chart or candlestick patterns. Your take profit approach in this strategy could be fully price action based. Your stop loss order should be placed right above the top created when the price was testing the already broken Pitchfork as a resistance. If the price breaks this level you get your confirmation signal and you should short Forex pair. After the lower Pitchfork level is tested as a resistance, the price is very likely to return to the bottom, which was created right after the Pitchfork breakout.Then the price is likely to return to the lower level of the Pitchfork for a resistance test.When the price breaks the pitchfork, it is likely to create a bottom below the Pitchfork indicator.You should first wait for a confirmation. When you see the break, you shouldn’t instantly trade it. First, you need to identify the Pitchfork breakout.Let’s take a look at a bearish breakout of the Andrew’s Pitchfork: In order to trade these price reversals, you should first become familiar with the steps for implementing this strategy. When the price breaks the Pitchfork range in the direction, which is opposite to the trend, this gives a reversal signal on the chart. This is typically a trend reversal strategy. Click Here To Join Breakout Pitchfork Trading SystemĪ popular Andrews Pitchfork Trading Strategy entails trading breakouts outside the expected range.
Learn What Works and What Doesn’t In the Forex Markets….Join My Free Newsletter Packed with Actionable Tips and Strategies To Get Your Trading Profitable…. There are more than 10 cases where price finds support or resistance at the Pitchfork levels. The black arrows on the chart illustrate instances when the price touches the lines of the Pitchfork and then quickly reacts by bouncing in the opposite direction. Below you will see the places where the price action conforms to our Pitchfork trading indicator: The Pitchfork structure is considered valid if the price action demonstrates reactive movements off the Andrew’s lines. Now that we have constructed the Andrew’s Pitchfork study on the forex chart, we need to confirm its authenticity. Confirming the Validity of the Andrew’s Pitchfork The middle line is the Andrews Median line and the upper and the lower lines are the Andrew’s Pitchfork Channel. Voila! You have a completed Andrews Pitchfork trading indicator on your chart. When you do this, you will see the following structure on your chart: The two rays need to be parallel to the Andrews Median Line. To do this, we need to draw two rays on the chart starting from point 2 and point 3. We have half of the Pitchfork indicator on the chart, but now we also need to add the Pitchfork channel from here. This is how the median line should look on your chart: You do this by placing a ray starting from the low at point 1 through the midpoint of the blue line between point 2 and 3. One you have plotted this, you then need to draw the median line of the trend. The black mark is the midpoint of the blue line. The blue line is the straight line between the high and the low of points 2 and 3. Take the points’ high and low and connect them with a straight line. The first thing you need to do when drawing the Andrews Pitchfork indicator is to build a straight line between point 2 and point 3. The third point is the retracement of the initial swing move. The second point is a high during the emergence of the trend. For this example, the first reference point is at the beginning of the trend move. You need to take three reference points from this trend in order to draw the Pitchfork indicator. You are currently looking at a bullish trend on the EUR/USD chart. Picking the 3 Initial Points of the Andrew’s Pitchforkīefore you can plot the Andrews Pitchfork, you must first find an emerging or existing trend on the chart. If the price action begins to react to the levels of the Pitchfork, then this will help confirm the validity of the Pitchfork study drawn on the chart.