Andrews' Pitchfork Trading Indicator
Andrews' pitchfork, originally named Median Line Studies, is a well known trend indicator which primarily shows support and resistance levels of an existing trend. The indicator was developed by Dr. Alan H. Andrews and with its median and side lines it resembles the farmers' pitchfork. Andrews' pitchfork is a simple indicator which can be used to enter buy and sell signals as well as to evaluate overall market cycles and trend changes.
Andrews' pitchfork consists of three lines, a median or middle line, an upper resistance line and a lower support line. The lines are plotted to the future from an identified trend. The middle line originates from a peak or trough and passes through the midpoint of the distance between another peak and trough, from which the upper and lower lines start respectively and run parallel to the median line. Most price movements occur within the channel created by the indicator.
Andrews' pitchfork can be used to trade within the lines and outside the lines. When trading within the lines, the upper line should be taken as the resistance and lower line as the support. Sell signals can be entered when the price pulls back from the upper resistance line and buy signals entered when the price reverses from lower support levels. The price movements outside the lines are considered short-lived and trading can be done accordingly.
According to Andrews, most of the price movements (up to 80%) occur towards the median line and this constitutes the long-term trend. But if price fails to show a trend towards the median line (from either side), it indicates a change of trend in a new direction; if the price is now above median line, it is a new bullish trend and if the price is below median line, it is a new bearish trend. Many traders also use Andrews' pitchfork to forecast the size of the next trend, based on the size of the previous trend.
Note: The indicator offers better results when it is confirmed by other price and volume indicators.
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Andrews' pitchfork consists of three lines, a median or middle line, an upper resistance line and a lower support line. The lines are plotted to the future from an identified trend. The middle line originates from a peak or trough and passes through the midpoint of the distance between another peak and trough, from which the upper and lower lines start respectively and run parallel to the median line. Most price movements occur within the channel created by the indicator.
Andrews' pitchfork can be used to trade within the lines and outside the lines. When trading within the lines, the upper line should be taken as the resistance and lower line as the support. Sell signals can be entered when the price pulls back from the upper resistance line and buy signals entered when the price reverses from lower support levels. The price movements outside the lines are considered short-lived and trading can be done accordingly.
According to Andrews, most of the price movements (up to 80%) occur towards the median line and this constitutes the long-term trend. But if price fails to show a trend towards the median line (from either side), it indicates a change of trend in a new direction; if the price is now above median line, it is a new bullish trend and if the price is below median line, it is a new bearish trend. Many traders also use Andrews' pitchfork to forecast the size of the next trend, based on the size of the previous trend.
Note: The indicator offers better results when it is confirmed by other price and volume indicators.
NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage
posted by Daniel Pipitone at
5:08 AM
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