Supplementary Information of Andrew’s Pitchfork Indicator
Forty Eighth session of Forex Training
Welcome back to Forex professional training in financial markets.
Supplementary information of Andrew’s Pitchfork indicator; Andrew’s Pitchfork failure, respond and warning lines will be studied in this session.
Failure in Andrew’s Pitchfork
In an Andrew’s Pitchfork pattern, if a price crosses the 3rd pivot line after it has touched the 1st pivot line, then any Buy signal would be invalid in a Bullish pattern.
On the other hand, if a price passes the 3rd pivot line after it has touched the 1st pivot line, then any Sell signal would be unreliable.
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In another failure condition, in a Bullish format, if a price touches the 3rd pivot line after it has met the 1st pivot line, followed by another wave over the 3rd pivot line, then crossing the 3rd pivot line does not produce any Sell signals.
In a Bearish format, if price goes near the 3rd pivot line after it has met the 1st pivot line, followed by another wave lower than the 3rd pivot line, then crossing the 3rd pivot line does not produce any Buy signals.
A Bearish example on MT4 illustrates first failure format. After a price has crossed the 3rd pivot, there would not be any Sell signal on this pattern.
In another example on an upward trend, a pattern could not create any Buy signal after the price has crossed the 3rd pivot line towards the bottom.
The 3rd failure format is formed when a price oscillates between the 3rd and the 1st pivot lines, followed by a movement towards the Trigger line.
In a Bullish trend, if a price does not cross the Trigger line and returns toward top and touches the 3rd pivot line, even if eventually price crosses the Trigger line towards the bottom, a Sell signal will not be valid or reliable.
In a Bearish format, if a price does not pass the Trigger line and returns towards the bottom and touches the 3rd pivot line, though price passes the Trigger line towards the top, a Buy signal will not be true or credible.
A Bullish example shows that the 3rd failure type did not form, thus, a Sell signal was produced after the price had crossed the Trigger line.
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The 4th failure on Andrew’s Pitchfork patterns forms whenever price crosses a Trigger line, then returns towards it.
In a Bullish trend, if a price passes Trigger line towards the bottom and it reverses its direction towards the top, after crossing Trigger line followed by a reversal trend, even if the price declines lower than the Trigger line, then a Sell signal would not be valid any more.
In a Bearish trend, if a price passes the Trigger line towards the top and it reverses its direction towards the bottom, after crossing the Trigger line followed by a reversal trend , even if the price rises higher than the Trigger line, then a Buy signal would not be reliable any more.
In the previous example, candles could be formed above the Trigger line, so a Sell signal is valid.
Small Andrew’s Pitchfork inside a main pattern
If a smaller Andrew’s Pitchfork pattern forms inside another Andrew’s Pitchfork pattern, there would be some advantages, such as:
- SL would decrease
- TP would increase
- Another confirmation on defined signal
A small Bearish pattern forms inside a main Bearish pattern, while a small Bullish pattern would be in a bigger Bullish pattern.
Small patterns can be detected in shorter timeframes.
An example shows how to find a smaller pattern. On a downward trend, a Buy signal was produced.
If a trader chooses a shorter timeframe, there would be another small Andrew’s Pitchfork pattern with a downward trend.
After the Trigger line was crossed towards the top, a Buy signal was generated and the trader could place a Buy order with SL price under the last valley.
After small fluctuations price has reached the desired TP price and it continued its uptrend towards TP price of the main pattern.
Warning Line
In an Andrew’s Pitchfork pattern, trader can measure the distance between the 3rd and the 1st pivot lines, called “R”.
In a Bullish type, 3 parallel lines can be drawn under the 3rd pivot line.
In a Bearish type, 3 parallel lines can be placed over the 3rd pivot line.
The gap between each line equals R. Each line may have considerable effect on a market price movement.
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Respond Line
If the 2nd and the 3rd pivots are connected by a line, then the direct distance between this line and the 1st pivot can be measured, known as L.
3 parallel lines with a line between the 2nd and the 3rd pivots can be placed alongside pattern with L distance from each other.
It is assumed that a market price would change its trend near these lines. In an example, a pattern was drawn on a downtrend.
In MT4 platform, a downward pattern was drawn and trader could specify Warning lines by placing the copy format of the pattern over it.
The 1st line of the copied pattern on the 3rd line of the main pattern.
As the price increased, the 2nd line of copied pattern did not have a significant effect, while the price fluctuated as it reached the 3rd line.
In another example, trader could draw a Trendline to connect the 2nd and the 3rd pivots, then a direct Trendline could be placed between this line and the 1st pivot, known as “L”.
Trader could copy and paste Trendline “L” by holding CTRL keyboard + double-clicking on the “L”.
4 duplicated “L” lines could be placed on the 1st pivot line after the connecting line between the 2nd and the 3rd pivot.
Market price trend did not show any considerable change on L1 and L3, while the price increased over the 2nd pivot line and returned on the 1st pivot line on L2.
Warning and Respond lines do not guarantee that there would be a trend movement, while traders must consider them as effective spots on a market price trend.
That concludes this session, until next time and another session take care.