Andrews Pitchfork Trading Strategies Explained - Pro Trading School (2024)

If you love channel trading strategies, this is a good article for you.

Most traders know how to draw and trade the basic channel structure, but they don’t

know how to trade the advanced channel trading strategies.

In this article, I will discuss the channel trading methodology using the Andrew’s

Pitchfork in detail.

The Andrews Pitchfork is a popular trading tool that uses lines to look for sharp

trading opportunities.

The number of lines for the indicator ranges between 3 and 5.

The line running in the middle is referred to as themedian line.

The median line is followed by two consecutive resistance trendlines above it, and two

consecutive support lines below it.

Here is an example…

The above graphic shows the Andrew’s Pitchfork.

The black line in the middle is the Median Line.

Above the median line are two other lines, which form the Resistance Trendlines.

Below the median line are two other lines, which form the Support Trendlines.

The concept behind the Pitchfork trading system is that if we get through the median

trendline, it should retest the top of the Andrew’s Pitchfork channel.

If we break below the median trendline, we should retest the bottom of the Andrew’s

Pitchfork channel.

When using this trading system, the price tends to gravitate towards the median line.

Due to this, the median line can serve as both support and resistance. In other words,

you can see it as a regression line.

How to Draw the Andrews Pitchfork

Most traders find it challenging to draw this trading indicator.

However, I will make it simple for you!

In some cases, the drawing of this indicator will require a bit of trial and error until the

Pitchfork channel conforms to the price action.

If the price action starts to react to the Pitchfork levels, it acts as a confirmation of the

validity of the Pitchfork study drawn on the chart.

Choosing the 3 Pivot Points

Before you can plot the Andrews Pitchfork, you must identify an emerging or existing

trend on the chart.

The Pitchfork trading indicator should be attached to three pivots.

A pivot refers to a swing high or a swing low from which the price showed a significant

reaction.

So, we use the three pivots to draw the Pitchfork trendlines.

You should first identify the early stage of a trend, identify the pivot points and mark

them.

You can then draw the Pitchfork trendlines through them.

Consider the chart given below…

The above chart shows a bullish trend.

You should choose three reference points from the trend so as to draw the Pitchfork

indicator.

The above shows the three reference points that I have chosen.

The first point is a Low and is located at the beginning of the trend.

The second reference point of the trend is a High and it shows the emergence of the

trend.

The final reference point is a Low and it shows the retracement of the initial swing

move.

Drawing the Andrews Median Line

Now that we have identified the three reference points, it’s time to draw the median

line.

We should draw a straight line that runs between the second and the third reference

points.

In short, you connect the high and the low points with a straight line.

Next, you should identify the midpoint of the line.

This is shown below…

The blue line in the above chart is the straight line that connects point 2 and point 3.

The back line cutting across the blue shows the midpoint of the above line.

Next, you should draw the median line for the trend.

To do this, just place a ray that starts from the low at point 1, cutting through the

midpoint of the blue line between the points 2 and 3.

This should become the median line.

The following chart demonstrates this…

The blue line in the above chart is the median line for the trend.

It cuts through the midpoint of the line running from point 2 to point 3.

It also starts from the point 1.

That’s how simple it is to draw the median line of the Andrew’s Pitchfork.

After drawing the median line, it becomes easy for you to draw the other lines as you’re

going to see.

Let’s go…

Building the Pitchfork Channel

Currently, our chart only has half of the Pitchfork indicator.

It’s time for us to add the Pitchfork channel.

To do this, we will draw two rays on the chart beginning from the point 2 and the point 3.

The two rays should be parallel to the Andrews median line.

This is demonstrated in the following chart…

Congratulations!

Initially, we only had the median line.

In the above chart, we’ve added two other lines, one above and another one below the

median line.

You have added the Andrews Pitchfork indicator to your chart.

The middle line forms the Andres median line while the upper and the lower lines form

the Andrew’s Pitchfork Channel.

The line added above the median line is the resistance trendline.

The line added below the median line is the support trendline.

How to Confirm the Validity of the Andrew’s Pitchfork

Now that our chart has the Andrew’s Pitchfork Study on it, we should confirm its

authenticity.

It is after this that we will be sure of its validity and use it to trade.

The Pitchfork structure is said to be valid if the price action shows reactive movements

off the Andrew’s lines.

Consider the chart given below…

In the above chart, you can see the points at which the price action conforms to our

Pitchfork trading indicator.

The black arrows added to the chart show the instances during which the price

touches the pitchfork lines then it reacts quickly by bouncing in the opposite direction.

In short, there are many cases in which the price action finds resistance or support at

the pitchfork levels.

However, if the price action touches the support trendline, it quickly bounces in an

upward direction.

If the price action touches the resistance trendline, it quickly bounces in a downward

direction.

If your trading platform supports the Andrew’s Pitchfork trading tool, you can insert it

automatically.

You must choose your three reference points on the chart.

If it’s a bullish trend, you choose the points as Low-High-Low, in that order.

If it’s a bearish trend, you should choose the points as High-Low-High.

After that, the Andrew’s Pitchfork will be inserted into your chart.

The tool will know the type of trend you are dealing with, whether bullish or bearish,

based on the order in which you choose the reference points.

Consider the following chart…

In the above chart, I have identified an emerging bearish trend.

Since it’s a bearish trend, the reference point 1 is a High, the reference point 2 is a low

and the reference point 3 is a High.

The Andrew’s Pitchfork indicator has then been inserted into the chart.

However, it was of importance for you to know how to implement the indicator on

your own.

This will help you understand the reason behind the price movement in depth.

For a bullish trend, it should be the opposite. Consider the following chart…

In the chart, I have identified an emerging bullish trend.

The first reference point is a low, the second reference point is a high and the third

reference point is a low.

Note that the process of choosing the reference points is subjective.

This gives you an opportunity to test different reference points to know what works

best for you.

Breakout Pitchfork Trading System

The most popular Andrews Pitchfork trading strategy involves trading breakouts

outside the expected range.

This is a trend reversal strategy.

If the price action breaks the pitchfork range in a direction that is opposite to the

trend, it gives a reversal signal on the chart.

For you to trade such a price reversal, you should first familiarize yourself with the

steps for implementing this strategy.

Let’s first discuss how to trade a bearish breakout for the Andrew’s Pitchfork…

-First, you should identify the Pitchfork breakout. When you spot a trend, don’t rush to

trade it, but wait for a confirmation.

-If the price breaks the pitchfork, it is more likely to create a bottom below the

Pitchfork indicator.

-The price is more likely to return to the Pitchfork to test the resistance.

-Once the lower Pitchfork has been tested as a resistance, the price is likely to return

to the bottom that was created after the Pitchfork breakout.

If the price breaks this level, it gives you a confirmation signal and it’s time for you to

short the Forex pair.

You should place your stop loss order above the top that was created when the price

was testing the Pitchfork as a resistance.

Your take profit approach can be based fully on the price action.

You can follow basic resistance and support rules and watch out for candlestick

patterns or reversal charts.

Consider the chart given below…

The above chart shows how to confirm a trend reversal using the Andrew’s Pitchfork

indicator.

The position of the breakout has been marked asPitchfork Breakout.

That is the level at which the price action breaks through the support trendline in a

bearish direction.

The price action then formed a bottom just below the Pitchfork level that has been

broken.

The black line running horizontally touches this bottom.

The price action then returned to the already broken Pitchfork level to test it as a

resistance.

It failed to break through the resistance level, but it bounced in a bearish direction.

Note that this time, it breaks the previous bottom.

After confirming the above Pitchfork reversal, you should prepare yourself to short the

pair and place a stop loss order just above where the price action retests the Pitchfork

level.

This has been shown in the chart and marked asStop Loss.

The chart shows how useful the stop loss order is.

After breaking the bottom, the price reversed in a bullish direction, triggering your

stop loss.

The stop loss will prevent you from making a loss.

The price never manages to rise above the broken Pitchfork level!

How to Trade Inside the Andrews Pitchfork

You must have observed that the price action inside the Pitchfork routinely breaks the

median line then bounces from the lower and the upper levels.

This is what we use to confirm the validity of the Andrew’s Pitchfork indicator.

This means that the levels of a valid Pitchfork are most likely to act as the support and

resistance for the price action.

Now, let me give you essential rules you need to follow when trading inside the

Andrews Pitchfork…

-Buy the currency pair after the price bounces from the lower level of the Pitchfork.

-Sell the currency pair when the price bounces from the upper level of the Pitchfork.

-This is how you should use a stop loss order….

-If you’re buying after the price bounces from the lower level of the Pitchfork, place

the stop loss order just below the bottom created by the bounce.

-If you’re selling after the price bounces from the upper level of the Pitchfork, place

your stop loss order just above the top created by the bounce.

-This is how to hold your trades inside the Pitchfork…

-The price reaches the opposite level of the Pitchfork.

-The price breaks the Median Line in the opposite direction to the initial volume

bounce.

Consider the chart given below…

The above chart shows a bullish price action alongside the Andrew’s Pitchfork.

The numbers on the chart, 1, 2 and 3, show the Low, High and Low points used to

construct the indicator.

Let’s begin to analyze the chart from the bottom.

The price action creates a number of tops and bounces downwards.

It also creates a bottom but it bounces upwards.

Any time the price action attempts to cut through the support or resistance trendlines,

it is pushed back to the median line.

This acts as an early confirmation for our Andrew’s Pitchfork indicator.

We have used the first bounce to create the Andrews Pitchfork tool.

It represents the initial important swing low, and has been marked as 1.

I have then chosen the points 2 and 3 to help me create a Pitchfork on the chart.

After some time, the currency pair breaks the median line.

This is an indication that the bullish price move is very strong.

The price action also reached the upper level of the Pitchfork channel. As a trader, you

can use this to exit the long trade.

However, some traders will not feel comfortable to exit their profitable trades at this

time.

They may think that the price will return to test the median line as a support then

resume the bullish move.

This may be a reasonable observation, and any trader who needs to stay in his trade

further may have to perform a Median Line analysis for exiting his trade.

In that case, if the price action breaks the median line downwards, that should act as

an exit signal for the long position.

From the above chart, it’s very clear that after the price broke through the median line,

it also broke through the lower level of the Andrew’s Pitchfork.

That is the position that has been marked asPitchfork Breakoutin the chart.

The price then reversed to the downside after the bearish Pitchfork breakout.

Let’s create another example.

Consider the following chart…

In the above chart, we have added the Andrew’s Pitchfork at the point where the price

action shows a bearish trend.

That’s why our Pitchfork indicator is pointing downwards.

The three reference points on the chart have been marked as 1, 2 and 3.

Since it’s a bearish trend, we chose the reference points as High-Low-High.

There is a bearish bounce that comes immediately after the creation of the reference

point 3.

The price action forms one top and then makes a bearish bounce, which sees the price

of the currency pair drop quickly.

You can use this bearish bounce to short the currency pair.

During this bounce, the price action cuts through the Median Line of the Pitchfork,

giving a clear indication that the bearish move is very strong.

This decrease in price decreases further and finally cuts through the lower level of the

Pitchfork.

However, the price action quickly reverses the direction of this move.

The first signal to exit the trade is received once the price action touches the lower

level of the Pitchfork.

Also, you can exit the trade at a point where the price action reverses to the upwards

and cuts through the Median Line.

Once the price broke through the Median Line of the Pitchfork, it maintained a bullish

trend.

The upper level of the Pitchfork is then broken.

This point has been marked asPitchfork Breakouton the chart.

This is an indication that the bearish trend might be reversed, and also sends a signal

of a new long trade entry for the currency pair.

This is followed by a strong increase in the price as shown in the chart.

Actually, the price never goes below the Pitchfork breakout point.

If you have noticed so far, the Andrew’s Pitchfork reveals to traders the hidden

support and resistance levels on the chart.

Although such support and resistance levels are recognizable, most traders don’t

recognize them.

However, the Andrew’s Pitchfork makes it possible for traders to recognize them for

the benefit of their trades.

Knowing these support and resistance levels can help you know the range that the

price swing will maintain.

Price action traders who incorporate this type of analysis into their trading strategy

benefit by getting a deeper level of understanding of the price behavior.

Conclusion:

Here is what you’ve learned…

-The Andrew’s Pitchfork is an on-chart technical indicator that falls under the

category of Price channels.

-It is made up of lines, ranging between 3 and 5.

-These lines run parallel to each other, with the Median Line running in the middle of

the other two.

-The lines added above the median line becomes the resistance trendlines.

-The lines added below the median line becomes the support trendlines.

-To create the Andrews Pitchfork on your chart, you must identify three pivot or

reference points based on price swing.

-If you are dealing with a bullish trend, first choose a Low, then a High and lastly a Low

price swing.

-If you are dealing with a bearish trend, first choose a High, then a Low and lastly a

High price swing.

-Most trading platforms are able to tell the kind of trend you’re dealing with, whether

bullish or bearish, based on the pivot points that you choose.

-One of the ways through which you can trade profitably using the Andrew’s Pitchfork

analysis is by identifying breakouts.

-If the price breaks the lower level of the Pitchfork, you can go short.

-You can also trade with this channel indicator by catching the inside price movements

of the Pitchfork.

-If the price bounces from the lower level of the Pitchfork, buy the currency pair.

-If the price bounces from the upper level of the Pitchfork, sell the currency pair.