Once the reversal pattern is evident, we need to confirm that the price is on the fall via an indicator – you can use stochastic, MACD etc. The formation of such a pattern will reflect waning strength in the up-move, increasing the odds for a successful reversal down. Lets assume that the market is moving down and we will be preparing for a short entry (entering in the direction of the general trend is preferred and more secure).įirst, we need the price to have broken through the median line and to be edging higher toward the upper channel line.Īs soon as it reaches and tests the resistance level, we need to identify a bearish reversal bar pattern – bearish engulfing, evening star etc. There are several steps that need to be followed. This approach takes advantage of the in-channel price fluctuations. We said that there are two types of trading Andrews pitchfork – you can enter positions as the price action is boxed within the formation and bounces between the support/resistance lines, or you can isolate breakouts, thus trading outside the lines. Here is how a bearish pitchfork looks like. Here is an example of a bullish Andrews Pitchfork. Thus, we can have a trough, followed by peak and a trough (forming a bullish pitchfork), or a peak, followed by a trough and a peak, which form a bearish pitchfork. The second point will be the result of a move opposite to the first one which ended with the pivot point, while the third one will be in the direction of the pivot point. Once that point has been selected, we need two extensions on its right side.
Let us first say a few words about how Andrews pitchfork is plotted.Īpplying the pitchfork begins with determining a pivot point, which is basically a high or low that has been formed on the chart. Also, there are two ways for the pitchfork to be traded – you can either enter positions while the price movement is contained within the lines, or trades can be initiated upon breakouts from the pitchfork formation. Our strategy will not be based solely on the pitchfork, rather we will use it in conjunction with an oscillator to filter out the best possible trades. Its inventor Dr Alan Andrews believed that the price gravitates around the medium line in 80% of the time, while isolated shifts in market sentiment would occasionally cause fluctuations that make up the remaining 20%. Trading Channels Using Andrews Pitchfork You will learn about the following conceptsĪndrews pitchfork is a widely used method to define robust support and resistance lines in a trending market, coupled with a median line that itself serves as a support/resistance area.
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