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
How to draw Fibonacci Retracement?
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.
How to use a Fibonacci Retracement line?
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.
Average True Range
Average True Range (ATR) helps in identifying how much a currency pair price has fluctuated. This, in turn, helps traders confirm price levels at which they can enter or exit the market and place stop-loss orders according to the market volatility.
Moving Average Crossover
The Moving Average Crossover is a valuable tool to find the middle price-point of a trend in forex trading. When currency prices crossover their current moving averages, it helps traders identify the favorable buying or selling points for the currency.
What is the Bullish Engulfing Candlestick?
Bullish Engulfing Candlesticks helps in identifying an uptrend reversal in the market. This candlestick pattern stands out because a trader does not need to wait until the entire pattern is completed to enter a trade.
How To Trade The Gartley Pattern
The Gartley pattern helps identify price breakouts and signals where the currency pairs are headed. The pattern is also widely used in the forex market to determine strong support and resistance levels.
How to Trade Forex With NFP V-Shaped Reversal
A Non Farm Payroll (NFP) V-shaped reversal refers to a sudden increase or decrease in the currency pair prices right after an NFP report is released.
Candlestick Patterns: Top Candlestick Charts Every Trader Should Know
Candlestick patterns depict the price movement of assets in a graphical manner. Candlestick patterns also enable traders to predict market behaviour.
What is the Evening Star Candlestick Pattern?
Evening Star Candlestick Patterns help traders identify ideal exit levels in the forex market by signalling a slowed upward momentum and strengthened downward momentum.
How to Use Ichimoku Cloud in Forex?
The Ichimoku Cloud provides a clear market trend direction to the traders and helps them make market decisions accordingly.
Pennants Pattern: How to trade bearish and bullish pennants
Pennant Patterns work as a continuation signal in the forex market and help identify the ideal entry and exit price points
How to Trade Forex With Renko Charts
Renko Chart is a technical indicator that provides strong market trend directions by filtering out minor price movements
What are Ascending and Descending Triangle Patterns?
The Ascending and Descending Triangle Patterns confirm continued trends in the forex market.
How to Identify Cup and Handle Pattern in Forex Trading
The Cup and Handle Pattern is a technical price chart that forms the shape of a Cup and a Handle, which indicates a bullish reversal signal.
What is the Head and Shoulders pattern?
The Head and Shoulders pattern is a trend reversal indicator that predicts bullish to bearish and bearish to bullish reversals in the forex market.
What is the Hammer Candlestick Pattern?
Hammer Candlesticks enable traders to identify potential market reversal points, determine the ideal time to enter the market and place buy or sell orders accordingly.
What is The Opening Range Breakout Strategy
The Opening Range Breakout (ORB) Strategy involves taking forex positions when the currency pair prices break below or above the previous day's high or low
Morning Star Indicator
The Morning Star Indicator helps identify strong trend reversals in the forex market and enables you to take trade position entry decisions accordingly.
Stochastic Indicator is used in Forex to identify overbought and oversold market conditions that substantially lead to market reversals.
Favourite Fib Fibonacci Retracement
Fibonacci retracement strategies help traders identify the market's support and resistance levels, trend reversal points, and entry and exit decisions.
Heikin Ashi Candlestick Pattern
The Heikin Ashi Candlestick pattern is almost the same as the traditional candlesticks, with one big difference—the former is an averaged out version of the latter.
Multiple Time Frame Analysis in Forex
By monitoring different currency pairs in different time frames, you can make your Forex trades more successful and profitable.
What are Bollinger Bands?
The Bollinger bands can help identify overbought and oversold market conditions, protecting you against placing any orders that could lead to losses.
Fibonacci retracements are one of the most popular methods for predicting currency prices in the Forex market. Predicting upward or downward market movement can help traders with accurate price analysis for exiting or entering the market.
Trading in Volatile Markets
Forex volatility is the measure of how frequently a currency's value changes. A currency either has high volatility or low volatility depending on how much its value deviates from its average value.
The ABCD pattern
One of the most classic chart patterns, the Forex ABCD pattern represents the perfect harmony between price and time.
The Bearish Gartley Pattern
The Bearish Gartley pattern was introduced in 1935, by H.M. Gartley in his book, “Profits in the Stock Market”. The pattern helps Forex traders in identifying higher probabilities of selling opportunities.
The Bullish 3 Drive pattern
The Bullish Three Drive pattern in Forex trading is a rare pattern that gives traders information about the Forex market's potential at its most Bearish point, and in turn, suggests probabilities for a market reversal.
What is the MACD Indicator?
The Moving Average Convergence Divergence (MACD) indicator helps traders quickly identify short-term trend directions and reversals in the forex markets. You can use the MACD indicator to determine a currency pair price trend's severity and measure its price's momentum and even identify the bearish and bullish movements in the currency pair prices.
Guide to Forex
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