Andrews’s pitchfork indicator is a handy tool to help guide traders in a choppy market. It uses three parallel trendlines to show possible levels of support and resistance. This could help to determine the breakout and breakdown levels of a stock. It’s very similar to trendlines. Alan Andrews developed this indicator.
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Andrews Pitchfork Indicator Introduction
Alan Andrews developed the Andrews Pitchfork Indicator. It is very similar to standard trend lines in that it helps to give the direction of probable support and resistance. It accomplishes this with an upper and lower line surrounding a “median” line; this configuration shows a pitchfork pattern to use as guidance. This pattern can also be configured with median lines between the main lines.
Stock market trading is a battle between buyers and sellers, one of the basics of stock trading.
As a result, the market gets choppy, forming important levels of support and resistance to which every seasoned trader pays close attention.
In some representations, these will be colored much like the Ichimoku cloud. The color helps to see what quadrant the current price action is holding the pattern.
Planning your profit around these signals will help remove the emotion from the trade. Setting your stops at either the major support can help manage risk.
Also, waiting for the pattern to retrace to these levels can be a great time to buy to maximize your return on investment. Check out our service to learn more about stock trading.
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How to Draw It in an Uptrend
When plotting out the Andrews pitchfork indicator in an up-trending fashion, it is best to remember this method Low-High-Low. Begin by finding the tool in the drawing section on Thinkorswim by TD Ameritrade. This is in the Active Tool section.
Find a historic low; the next plot is a recent high, followed by the next highest low. Once completed, the pitchfork appears, and the bar chart moves around the median line.
You can now access the properties section to adjust the numbers to be accurate. Keep in mind that the Andrews pitchfork indicator can be subjective. You want to see what the chart says, not what you want it to say.
In the properties section, you can adjust the lines to help you make a quick trade decision. Having the indicator is insufficient if you end up with what professional traders call “analysis paralysis.”
This is just a point where you have overloaded yourself with information and missed the trade due to too much information. We discuss these in our trade rooms.
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Plotting
Plotting the Andrews Pitchfork Indicator in a downtrend is much like doing so in an uptrend. Select the Pitchfork tool from the active tool selection list. Then, plot the first point on the most recent highest high.
Next, go to the closest high and then to the in-between low. This gives a good base—the top line acts as resistance, and the lower line as support.
These lines give you a good perspective of what you can expect from the downtrend waiting to play in the within or waiting for a tread. Down-recombining this with a Bollinger band indicator can indicate when to see a profit forming.
Trigger Lines
The trigger lines on the Andrews pitchfork indicator trading strategy are the major buy or sell signals. When plotting the chart pattern upward, the trigger line will start at plot one and continue through plot 3.
When the chart pattern is downward, it will start at plot one and continue through plot 2. Think of these as the “major” support or resistance lines.
Using these as a rule of thumb will help you keep your risk management in check. But as always, these should not be your only trading parameters, as many things could affect the market.
Final Thoughts: Andrews Pitchfork Indicator
The Andrews Pitchfork Indicator can be a very useful tool. Much like MACD and other charting patterns, it has its place and time. I prefer to use it after the morning rush, but even more so in longer time frame charts such as the 4-hour and 1-day charts.
A solid point to remember is that practice is key when learning new patterning styles. The pitchfork is no exception to this. You may have to move the points around when drawing the chart pattern to give you the most accurate representation.
When drawing the pattern, place the points in a manner that gives you the most conformation points—reminding yourself that this gives you the overall resistance and support points. So, having the most contact points on the pattern will help you build your trades more securely.
