There are several different tools and strategies that traders use when trading on the forex markets. One such tool is a pitchfork indicator. So, what is a pitchfork indicator and how can it be applied to forex trading? We’ve looked and compiled some tips to help you if you want to give pitchfork indicators a try.
What is a pitchfork indicator?
Also known as “Andrew’s Pitchfork”, pitchfork indicators are named after their creator, Dr. Alan Andrews. He developed a trading strategy using pitchfork-shaped graphs to predict future prices.
Although most commonly used in equities and futures trading, pitchfork indicators can also be very useful in forex trading to identify medium- and longer-term opportunities.
Andrew’s Pitchfork is a trend chart that comprises three lines – one on the median price, the second on the upper price range, and the third on the lower price range. The upper and lower lines are equally spaced from the median. Extrapolating the lines can show possible upper, median, and lower price predictions.
Where do you start?
This is the key to using pitchfork trading successfully. Where you put the three starting points dictates the angle of the pitchfork and therefore all the information you will be using to base your trading decisions on. This means that where you start is crucial.
The bad news is that there is no specific rule that tells you where these three points should be placed. The pivot points are chosen based on your judgment and experience, which is the main reason why this strategy is best used by intermediate or advanced traders.
This seems too advanced for you? Then check out this basic guide on forex trading!
Basic concept
All pitchforks have three lines starting from three pivot points: the upper line (UL), lower line (LL), and median line (ML). The angle of the pitchfork is dictated by the three starting pivot points and is used to predict future price movements.
Using the pitchfork strategy, traders will buy currency when the price is at or near the ML or the LL. When the price reaches either the ML or UL traders will recognize this as the signal to sell.
While prices are on an uptrend, they should touch the ML regularly. Failure to do so could be a sign that a reversal is coming.
Main points of pitchfork indicators
Pitchfork indicators are graphs using equidistant lines - upper, median, and lower - starting from three pivot points to indicate future price predictions.
Keeping an eye on price performance versus prediction will indicate when to buy or sell and when to expect a trend reversal.
Picking the right initial pivot points from which to draw your pitchfork indicator graph is crucial. There is no real guidance for this, which is why understanding the market and experience in trading is essential.
Get involved
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