Education post 21/100 – How to trade using Andrew's Pitchfork?
USE ANDREW’S PITCHFORK IN FOREX
Andrew’s Pitchfork comes from the name of one Dr Andrew, who used a pitchfork to forecast future prices, and developed a trading system many find very interesting. The system became so popular over time that the Andrew’s Pitchfork trading tool has been integrated into all trading platforms. The idea behind trading with Andrew’s Pitchfork is to find three points, called pivots; and from those three pivots, the pitchfork should be drawn. Any pitchfork has three lines, and each line starts from the three pivots mentioned above. The lines are called the upper line (UL), the lower line (LL) and the median line (ML). Out of these three lines, the most important one is the ML, the reason being that it has an important characteristic: It attracts price. There are many ways to use the Andrew’s Pitchfork, and this is because it is a matter of controversy as to how to set the three pivot points. This is the most important decision when trading with a pitchfork, as different pivot points will result in different angles for the overall pitchfork, which will then lead to different results when interpreting the market.
TRADING WITH THE PITCHFORK
To overcome this inconvenience, traders use the Andrew’s Pitchfork tool in conjunction with the Elliott Waves theory. The reason for this is that the Elliott Waves theory allows for knowing exactly where a specific wave ends, and these endings are the places for the pivots to be set on the pitchfork.
USING THE PITCHFORK IN CONJUNCTION WITH ELLIOTT WAVES THEORY
Because the Elliott Waves theory is based on both impulsive and corrective waves, there are two separate ways to use the pitchfork, both of which reflect the same thing: the fact that the price was attracted by the ML. A pitchfork comes in handy for finding the ends of specific waves under the Elliott Waves theory as well. This is very important for traders who count waves, as if the extension in an impulsive wave is respected, by the time the ML is reached, most likely the third wave in an impulsive move is completed as well.
Pitchfork with Impulsive Waves
The way to use the pitchfork tool with impulsive waves is to try to find the end of the third wave, as this is the most likely wave to extend. The three pivot points should therefore be placed as follows:
The first pivot should be placed at the start of the impulsive wave. This would be the equivalent of the first click on the screen after selecting the Andrew’s Pitchfork tool.
The second one should be the end of the first wave.
The last one should be the end of the third wave.
The resulting pitchfork will resemble a rising channel in a bullish impulsive move, or a falling one in a bearish move. The distance between the ML and the other two lines in the pitchfork is always the same, as the ML stays at 50% distance. It means that the channel is basically split into two equal parts. In an impulsive wave, no matter whether a bullish or a bearish one, it is very difficult for the price to go much further than the ML. This is because in a bullish pitchfork, the price will rarely reach the UL, but will settle for the ML. By the time the ML is reached, look for the third wave in the impulsive wave to be completed, providing the extension rules are respected.
Pitchfork with Corrective Waves
The same thing is valid when it comes to corrective waves under the Elliott Waves theory, with the difference that the three pivot points that make up the Andrew’s Pitchfork are placed as follows:
The first one at the start of the correction;
The second one at the end of the a-wave;
The third one at the end of the b-wave.
MORE ON OUR WEBSITE, LINK ON PROFILE.
Andrew’s Pitchfork comes from the name of one Dr Andrew, who used a pitchfork to forecast future prices, and developed a trading system many find very interesting. The system became so popular over time that the Andrew’s Pitchfork trading tool has been integrated into all trading platforms. The idea behind trading with Andrew’s Pitchfork is to find three points, called pivots; and from those three pivots, the pitchfork should be drawn. Any pitchfork has three lines, and each line starts from the three pivots mentioned above. The lines are called the upper line (UL), the lower line (LL) and the median line (ML). Out of these three lines, the most important one is the ML, the reason being that it has an important characteristic: It attracts price. There are many ways to use the Andrew’s Pitchfork, and this is because it is a matter of controversy as to how to set the three pivot points. This is the most important decision when trading with a pitchfork, as different pivot points will result in different angles for the overall pitchfork, which will then lead to different results when interpreting the market.
TRADING WITH THE PITCHFORK
To overcome this inconvenience, traders use the Andrew’s Pitchfork tool in conjunction with the Elliott Waves theory. The reason for this is that the Elliott Waves theory allows for knowing exactly where a specific wave ends, and these endings are the places for the pivots to be set on the pitchfork.
USING THE PITCHFORK IN CONJUNCTION WITH ELLIOTT WAVES THEORY
Because the Elliott Waves theory is based on both impulsive and corrective waves, there are two separate ways to use the pitchfork, both of which reflect the same thing: the fact that the price was attracted by the ML. A pitchfork comes in handy for finding the ends of specific waves under the Elliott Waves theory as well. This is very important for traders who count waves, as if the extension in an impulsive wave is respected, by the time the ML is reached, most likely the third wave in an impulsive move is completed as well.
Pitchfork with Impulsive Waves
The way to use the pitchfork tool with impulsive waves is to try to find the end of the third wave, as this is the most likely wave to extend. The three pivot points should therefore be placed as follows:
The first pivot should be placed at the start of the impulsive wave. This would be the equivalent of the first click on the screen after selecting the Andrew’s Pitchfork tool.
The second one should be the end of the first wave.
The last one should be the end of the third wave.
The resulting pitchfork will resemble a rising channel in a bullish impulsive move, or a falling one in a bearish move. The distance between the ML and the other two lines in the pitchfork is always the same, as the ML stays at 50% distance. It means that the channel is basically split into two equal parts. In an impulsive wave, no matter whether a bullish or a bearish one, it is very difficult for the price to go much further than the ML. This is because in a bullish pitchfork, the price will rarely reach the UL, but will settle for the ML. By the time the ML is reached, look for the third wave in the impulsive wave to be completed, providing the extension rules are respected.
Pitchfork with Corrective Waves
The same thing is valid when it comes to corrective waves under the Elliott Waves theory, with the difference that the three pivot points that make up the Andrew’s Pitchfork are placed as follows:
The first one at the start of the correction;
The second one at the end of the a-wave;
The third one at the end of the b-wave.
MORE ON OUR WEBSITE, LINK ON PROFILE.
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