Andrews Pitchfork is an indicator use if Forex reading, the technical indicators are used by the technical analysts in the Forex Trading to determine the entry and exit points for any currency. One of the popular technical indicators is Andrews Pitchfork. Andrew’s Pitchfork was invented by Dr Alan H. Andrews. This is an excellent method that can be used by the traders and the investors to find swing possibilities and profitable opportunities for any currency in the Forex Market. Andrew’s Pitchfork is not only recognized by the experienced traders and investors but novices can also use it. It is sometimes also named as Median Line Studies.
How to apply Andrews Pitchfork in Forex trading
To apply Andrews Pitchfork, the traders must find high or low in the chart and must draw pivot at this peak (high) or trough (low) and label it as A. Pivot point is the first point in the figure. After drawing the pivot point, find next peak and trough occurring to the right of pivot point. Name the higher point as B and lower point as C. Draw lines through point A, B and C. Line going through the point A is acting as a median line, line through B is the resistance and line going through C is the support line as shown in the figure below.
After the Andrews Pitchfork is drawn, the traders and the investors can trade either with in the channel or outside the channel. Forex Traders trading outside the channel are trading in the breakouts.
Trading with in the channel
Traders can open new positions as long as the price line is below the median line but after the price line rises above the median line and touches the resistance line at any point, the buying momentum will be least at this point. Traders should minimize their buying activity when the price line reaches to the resistance line. Now two things may be possible at this moment. Either the price line will cross the resistance line and form a new resistance line or will return to the channel after a short breakout. In case the price line again comes in the channel, if the price line gets close to the median line then there is a buying opportunity for the traders and the investors. At this point, traders should open new position because after a short fall the price line will again shift towards the resistance line earning profit for the traders and the investors. It is shown in the figure below that trading anywhere between lines B and C such as at point D and E will be profitable.
Trading outside the channel
It is risky to trade outside the channels, trading outside the channel means trading at the breakouts. At the channel breakouts there are two possibilities, either the price line will shift towards the median line as mostly happen or it may also be possible that market may change its direction. If the market changes its direction and the price line goes above the resistance line or below the support line the buying or selling opportunities are generated for the traders. In such cases traders can trade outside the channel to make maximum profit and there will be new support and resistance lines in the chart. For example, see in the figure below that trading at point F is trading at downwards breakout. you can learn more about other currency trading indicators in our Forex education category
So applying Andrews Pitchfork method with other technical indicators, success rate of the trades increase and both the experienced traders or investors and the beginners can earn money.