Andrews Pitchfork is a technical analysis tool used to identify potential levels of support and resistance in the financial markets. It was developed by Dr. Alan H. Andrews, who believed that price trends move in predictable patterns that can be identified using three lines drawn on a price chart.
The three lines that make up the Andrews Pitchfork are based on three points in the price chart. The first point is called the pivot point, which is the high or low point of a trend. The second point is the reaction point, which is a point where the price retraces from the pivot point. The third point is the confirmation point, which is where the price resumes its trend after the retracement.
To draw an Andrews Pitchfork, traders start by identifying the pivot point and drawing a line through it. They then draw two parallel lines, one above and one below the pivot point, that intersect the reaction point. These lines create a channel that acts as potential support and resistance levels for the price.
The Andrews Pitchfork is a useful tool for forex traders because it can help identify potential levels of support and resistance, which can be used to make trading decisions. Traders can use the Andrews Pitchfork to identify potential entry and exit points for trades, as well as to set stop-loss orders to manage risk.
To use the Andrews Pitchfork in forex trading, traders should follow these steps:
1. Identify the pivot point: The first step is to identify the pivot point, which is the high or low point of a trend. This can be done by analyzing the price chart and looking for areas where the price has turned around.
2. Draw the lines: Once the pivot point has been identified, traders should draw a line through it. They should then draw two parallel lines, one above and one below the pivot point, that intersect the reaction point. These lines create a channel that acts as potential support and resistance levels for the price.
3. Analyze the chart: After the Andrews Pitchfork has been drawn, traders should analyze the price chart to look for potential entry and exit points. They should look for areas where the price is approaching the pitchfork lines, as these can act as potential support and resistance levels.
4. Set stop-loss orders: Traders should also set stop-loss orders to manage risk. These orders should be placed below the support level if going long or above the resistance level if going short.
5. Monitor the trade: Finally, traders should monitor the trade and adjust their stop-loss orders if necessary. They should also be prepared to exit the trade if the price breaks through the support or resistance levels.
In conclusion, the Andrews Pitchfork is a powerful tool for forex traders. It can help identify potential levels of support and resistance, which can be used to make trading decisions. Traders should follow the steps outlined above to use the Andrews Pitchfork in their trading strategy and manage risk.
