Andrew’s Pitchfork Indicator
Forty Sixth session of Forex Training
Welcome back to Forex professional training in financial markets.
In this session Andrew’s Pitchfork indicator will be studied in details.
Andrew’s Pitchfork is a widespread indicator in a financial market that indicates support, resistance, reversal and continuation levels.
Peaks and valleys are pivots of the waves that can specify support or resistance levels.
The future trend of the market can be predicted by using the most recent pivots alongside Andrew’s Pitchfork indicator available in the MT4 platform.
These three pivots are called Entry point, High pivot and Low pivot.
1st principle of this strategy defines that in 85% of cases, market price will return to the second line and touch it.
In addition to this strategy, AO can be exploited to detect trend’s direction and RSI or Stochastic can be used to specify the saturation regions.
Some examples on MT4 would be beneficial. The pivot points can be marked by trader to simplify drawing Andrew’s Pitchfork.
Andrew’s Pitchfork pattern can be inserted from a toolbar button.
If a trader cannot find it on the toolbar, then he/she can right-click on the toolbar, Andrew’s Pitchfork button can be attached from a customize window.
For instance, on an uptrend, a trader can detect 3 pivots that can be used to draw an Andrew’s Pitchfork pattern.
After pressing the inserted button, trader must select 3 points on the chart to determine the pivots.
Three parallel lines are drawn on 3 pivots. The 1st and the 3rd points are on an upward trend, while the 2nd pivot is on the downtrend.
To clarify the 1st principle, another example can be drawn.
On a downward trend with a sharp gradient, an Andrew’s Pitchfork pattern can be drawn.
After the price has returned from the 3rd pivot, it could not touch the 2nd line due to the steep slope.
Equivalent points of the 2nd and the 3rd Andrew’s Pitchfork points on indicator chart has different phases.
The highest peak and the lowest valley are called High and Low, respectively.
The previous example explained the different phase of the 2nd and the 3rd pivots on indicator chart.
Trader can draw a vertical Trendline to find High and Low on trends.
Thus, selecting 3 pivots on the sections can be eased by using vertical Trendlines. The pivots are selected correctly in this example.
If a price touches the second line, trend direction will change on or after the cross point in more than 65% of all cases.
On MT4 example, price has changed it direction before touching the 2nd line.
The 1st and the 3rd pivot points have the same phase on indicator chart, while the 2nd pivot has an opposite phase.
In MT4 example, the 1st and the 3rd pivots are under level 0, while the 2nd is over this line in the indicator.
If a trader connects the 1st and the 3rd pivots with a Trendline, Trigger line can be formed which has a support or resistance effect on the market price.
On MT4 platform, Trigger line can be drawn by a Trendline that will be discussed later.
It is recommended to modify Andrew’s Pitchfork points in a shorter timeframe for more precise result.
In MT4 example, timeframe was on D1 that can be set on H4.
After setting a new timeframe, trader can select precise pivots of Andrew’s pattern.
The ideal condition of this pattern is when the 1st pivot is out of the 2nd and the 3rd pivot horizontal channel, however, if it is in this region then the power of Andrew’s Pitchfork will decrease.
The MT4 example shows that the 1st pivot is out of region between the 2nd and the 3rd pivots.
Another example can be drawn to check the situation in which the 1st pivot is in the region between the 2nd and the 3rd pivot points.
Despite of less strength, this pattern had a valid prediction.
Trader can relocate the 1st pivot to another peak which is outside of the 2nd and the 3rd channel.
Trader can draw a Fibonacci pattern on the 2nd and the 3rd pivots to check if the 3rd pivot point is detected correctly.
If price returns before level 38.2% then the 3rd pivot point is determined accurately.
On MT4, an Andrew’s Pitchfork pattern can be placed. A Fibonacci pattern can be drawn from the 2nd to the 3rd pivots.
Price has returned to level 38.2%, thus the 3rd pivot is acceptable.
On a Bullish trend, a lower line is used to generate an order signal, while a higher line is used for generating order signal in a Bearish trend.
In the recent example, signal can be generated by a lower line from the 3rd pivot.
In another example, the highest line is used in a Bearish trend to produce signals and predictions.
That concludes this session, until next time and another session take care.