Understanding Andrew's Pitchfork Trading Strategy
Andrew's Pitchfork is a Forex trading strategy that can predict protracted market swings and help you in identifying potential market trends that can indicate potential exit and entry points. With Andrew's Pitchfork trading strategy, you get a better understanding of the significant market reversal points and it is a good supporter of the trend trading strategy. This particular Forex trading strategy is also helpful in identifying stop-loss positions. Let's discuss everything you need to know about Andrew's Pitchfork:
What is Andrew's Pitchfork Trading Strategy?
Andrew's Pitchfork trading strategy uses parallel trend lines in the Forex charts to identify all the possible support and resistance levels. This strategy also provides a trader with the potential breakdown and breakout points. The Andrew’s Pitchfork lines are drawn by placing three different points at a previous trend's end and then drawing a line starting from the first point, running through the middle of the second and third points. This series of three trend lines are used to identify the market trend and reversals.
- The higher trend lines refer to the higher price in the Forex market
- The lower trend lines refer to the support price in the Forex market
- As soon as the Forex price reach the lowest of the trend line, a trader can enter into an extended position to minimise losses
- As soon as the Forex price reach the highest of the trend line, a trader can enter into a short position to maximise profits
How to calculate Andrew's Pitchfork?
- Identify the three pivots in the Forex chart.
- The first pivot point is the starting point of a market downtrend or uptrend.
- The second and third point in the chart is the reaction high and reaction low, respectively, in the uptrend and downtrend.
- Go back to the first point, and identify it as the median trend line's starting point.
- Identify the distance between the second point and third point as the channel width in the chart.
- Start drawing a line from the first pivot/point and extend it through the midpoints of the second and third points.
- Once the line is extended and goes along with all the three pivots, it is time to extend the trend lines again, starting from the second and third point but going parallel with the median trend line in the chart.
- Change the slope of Andrew's Pitchfork by changing the first point.
- The market price action at this point could incline towards the median line most of the time, but the overall trend remains intact, providing you with the entry and exit signals as required.
Two methods of trading the Andrew's Pitchfork Trading Strategy
Trading within the lines
When a currency pair price goes beyond the trend line in the middle and rises to the uppermost level of the trendline, the rising-buying movement slowly starts to fade away. You can identify a Doji candlestick formation confirming the downtrend. You place the entry point as soon as the currency pair prices start falling, just below the end of the third trend line. As soon as the downtrend is in place, the entry order is executed, and the price again moves towards the median line. This would lead to the trader making successful profits through Andrew's Pitchfork Forex trading within the lines strategy.
Here’s a step-by-step guide in trading within the lines:
- Identify the currency pair price action that occurs through the median trendline, approaching the upper part of the trendline.
- Test the resistance point towards the uppermost end of the trend line and identify a candlestick pattern.
- Confirm the price decline in the chart through the candlestick pattern.
- Place your market entry point just below the closing point of the final trendline/candlestick pattern.
- Apply the stop loss position at least 50 pips above your entry-level (or more, if need be).
Trading outside the lines
The second way to trade with Andrew's Pitchfork strategy is to trade outside the lines. Even though trading outside the trend lines does not happen as frequently as trading within the lines, it is also a way to earn significant profits in the Forex market. The trader assumes the currency pair prices to go back to the median trend line. However, there is a possibility of the market shifting in its direction. Hence, to avoid any potential losses, the traders capture the market retracements, filter the adverse movements and close the positions a little before time. This leads to the traders mitigating their Forex risk and protecting themselves against hefty losses.
Here’s a step-by-step guide in trading outside the lines:
- Identify the currency pair price that moves towards the median trendline.
- Confirm the falling prices that hold the potential to break back to the upper trendline.
- Identify the support or resistance point in the chart.
- Place your entry order at least 30 pips below the support level to protect your profits.
- Confirm the position with a price oscillator.
- Execute the order.
Use Andrew's Pitchfork to improve trading positions
Andrew's Pitchfork trading strategy is definitely one of the most widely used and helpful strategies that help you identify support and resistance levels in the market, which results in providing you with the correct entry and exit points. You can start trading with Andrew's Pitchfork trading strategy by signing up on Blueberry Markets that has all the charting tools and techniques necessary you need in Forex trading.
Sign up for a live trading account or open a risk-free demo account to start Forex trading today with Blueberry Markets.
Frequently Asked Questions
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You can place the Fibonacci retracement in the market grid from the low price to high price in an uptrend and from high price to low price in a downtrend.
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The horizontal Fibonacci lines are used to determine the support and resistance prices in the Forex market.
How to use Fibonacci Retracement technical analysis?
The Fibonacci retracement is analysed by taking two extreme price points on a Forex market price chart.
What time frame is best for Fibonacci retracement?
The 30-60 minute candlestick chart is best suited to analyse the Fibonacci retracements to watch the daily market swings closely.
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