Developed by renowned educator Alan Andrews, the technical indicator known as 澳洲幸运5开奖号码历史查询:Andrews' Pitchfork can be used by traders to establish profitable opportunities and swing possibilities in the 澳洲幸运5开奖号码历史查询:forex market and other📖 markets. On a long-term basis, Andrews' Pitchfork can be used to identify and gauge overall cycle🥃s that impact underlying spot activity.

Below, we'll explain two approaches to using this indicator: trading within the lines and trading outside the lines.

Defining Andrew's Pitchfork

Andrews' Pitchfork (sometimes referred to as "median line studies") is available on numerous programs and charting packages and widely recognized by novice and experienced traders. Comparable to run-of-the-mill support and 澳洲幸运5开奖号码历史查询:resistance lines, the application offers two formidable support/resistance lines with a middle line that can serve as support/resistance or as a pseudo-regress꧑ion line.

Andrews believed that market 澳洲幸运5开奖号码历史查询:price action would gravitate toward the median line 80% of the time, with wild fluctuations or changes in sentiment accounting for the remaining 20%. ꦕAs a result, the overall longer-term trend will (i꧟n theory) remain intact, regardless of the smaller fluctuations.

If sentiment changes and 澳洲幸运5开奖号码历史查询:supply and demand forces shift, prices will stray, creating a new trend. It is these situations that can create significant profit opportunities in the currency markets. A trader can increase the accuracy of these trades by using Andrews' Pitchfork in c🐲ombin🐠ation with other technical indicators.

Applying Andrews' Pitchfork

In order to apply Andrews' Pitchfork, the trader must first identify a high or low that has previously occurred on the chart. The first point, or pivot, will be drawn at this peak or trough and labeled as point A (as shown in Figure 1).

Once the pivot has been chosen, the trader must identify both a peak and a trough to the right of the first pivot. This will most likely be a correction in the opp𒐪osite direc🌳tion of the previous move higher or lower. In Figure 1, the minor correction off of the trough (point A) will serve us well as we establish both points B and C.

Once these points have been isolated, the application can be placed. The handle of the formation begins with the 澳洲幸运5开奖号码历史查询:pivot point (point A) and serves as the median line. The two prongs, formed by the following peak and trough pair (points B and C), serve as the 澳洲幸运5开奖号码历史查询:support and resistance of the trend.

Application of Andrews' Pitchfork to a chart showing the price action of the EUR/USD. The pivot point (A) has been drawn at a previously occurring trough, and points B and C have been established to the right of the pivot. The line drawn from point A is the median line, while the two "prongs" serve as support and r🏅esistance.

When the pitchfork is applied, the trader can either trade within the channel or isolate 澳洲幸运5开奖号码历史查询:breakouts to the upside or downside of the channel. In Figure 2, you can see that the price action works well serving as support and resistance where traders can enter off of bottoms (point E) and sell from tops (point D) as the price will gravitate towards the median. As always, the accuracy of the trade improves when confirmation is sought. A basic price 澳洲幸运5开奖号码历史查询:oscillator will be jᩚᩚᩚᩚᩚᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ⁤⁤⁤⁤ᩚ𒀱ᩚᩚᩚust enough to add to the overall trade.

Application of the pitchfork o🃏n an uptrending GBP/USD. Notice the multiple opportunities offered to the ꦦtrader inside and outside the boundaries.

Additionally, the trader can initiate positions on breaks of the support and resistance. Two examples are presented at points F and G. Here, the 澳洲幸运5开奖号码历史查询:market sentiment shifted, creating price action that strayed from the median line and broke through the channel trendlines. As the price action attempts to fall back into the median area, the trader can capture the windfall. However, as with any trade, sound 澳洲幸运5开奖号码历史查询:money management and 澳洲幸运5开奖号码历史查询:confirmation must play important roles in execution.

Trading Within Andrews' Pitchfork Lines

Let's take a look at how a trader might profit from trading within the lines. Figure 3 is a good example, as it shows us that the price action in the EUR/CAD 澳洲幸运5开奖号码历史查询:currency pair has bounced off of the median line and has risen to the top resistance of the pitchfork (point A1). Zooming in a little closer in Figure 4, we see a textbook 澳洲幸运5开奖号码历史查询:evening star formation. Here, the once-rising buying momentum has started to disappear, forming the doji, or cross-like, formation right below the upper prong. When we apply a 澳洲幸运5开奖号码历史查询:stochastic oscillator, we see a cross below the 澳洲幸运5开奖号码历史查询:signal line, which confirms downside momentum.

The trader would do well to place the entry at point X (Figure 4), slightly below the close of the third candle when taking these indications into consideration. The entry would be executed on the downward momentum as the price action once again gravitates t🐷owards the median line, in🐈 practice with sound money management (and including an appropriate stop loss). Even better, the trader could make close to 1000 pips over the life of the trade.

Another great setup in the EUR/CAD cross currency. Here we see a prime example of an "inside the line" profit opportunity as price action approaches the 1.5000 figure.

A closer look at the opportunity reveals textbook technical formations that aid the entry. Here, the trader can confirm the trade with the downward 澳洲幸运5开奖号码历史查询:crossover in the stochastic and the evening🦂 star formation.

Trading Outside Andrews' Pitchfork Lines

Although trading outside the lines occurs less frequently than within, they can lead to extended runs of profit. However, they can be trickier to attempt. The assumption here is that the price action will gravitate back towards the median, similar to wayward price action within the lines. However, it is possible that the market has decided to shift its direction. Therefore, the break outside may be a new trend forming. To avoid a catastrophic loss, simple parameters are added and placed in order to capture the 澳洲幸运5开奖号码历史查询:retracements into the channel and, at the same time, filter out adverse movem☂ents that ultimately result in traders closing th꧋eir positions too early.

Looking at Figure 5, we see that the price action at point A offers such an opportunity. 🎐The chart shows that the EUR/USD price action has broken through support in the first week of April. Once the break has𝓀 been identified, we isolate and zoom in to obtain a better perspective.

Notice how the price action gravitates once again towards the median. 🧜This is a great opportunity, but money management and ꦿstrategy remain important in capturing the run-up.

In Figure 6, the trader is offered multiple opportunities to trade back into the overall trend as the underlying spot 澳洲幸运5开奖号码历史查询:consolidates in ranging conditions. However, the real opportunity lies in the break that occurs in October. The trader can see that the price action ranges or conso🌠lidates prior to the break, es꧂tablishing the $1.1958 support level (shown as the blue line).

Using a 澳洲幸运5开奖号码历史查询:moving 👍average convergence divergenc💮e (MACD) price oscillator, the individual sees that a bullish convergence signal is forming, as there is a large peak and a subsequently smaller secondary peak in the 澳洲幸运5开奖号码历史查询:histogram. The entry is key here. The trader will see a potential breakout opportuni𒅌ty as the price rises to test the upper resistanc🔯e at $1.2446.

The convergence in the M♐ACD, combined with the decline in the underlying spot price, suggests a near-term upward break

In order to place the entry in this example, first you need to make sure that the upper resistꦑance is tested. If the resistance is not tested, it may mean that a downward trend is in the works, and you will have saved yourself the trouble of๊ entering into a non-profitable trade. You can see in Figure 6 that the price action breaks back into the prongs in early October, hitting a high of $1.2446.

If the price action can break above this resistance, it will confirm a further rise in the price action, as fresh buying momentum will have entered the market. As a result, you should place your entry 30 pips above the target (shown as the red line), with your subsequent stop applied upon entry. Once your ⛦order is executed, the stop should be applied five pips below the previous session low. The assumption is that the low will not be tested because the price action will cont𒀰inue to rise and not spike downward due to the buying momentum.

Breaking Andrews' Pitchfork Down Step-by-Step

Although the two methods discussed here (trading within the lines and trading outside the lines) may seem complex, they are easily applied when you break them down step by step. Traders will find that the 澳洲幸运5开奖号码历史查询:pitchfork method yields far better results when applied to 澳洲幸运5开奖号码历史查询:major currency pairs such as the EUR/USD and GBP/USD because of their nature to trend rather than range. 澳洲幸运5开奖号码历史查询:Cross currencies, although🐠 they do exh🔯ibit trending patterns, tend to be choppier and yield less satisfying results.

Identifying two great opportunities in the NZD/USD currency pair.

Now, let's break the process down. The NZD/USD currency pair, seen in Figures 7, 8 and 9, presents a perfect example of both "within the lines" and "outside the lines" opportunities. First we'll take the in-line approach, choosing example A in Figure 7:

1. Identify price action that has broken through the median line and that is approaching the upper resistance prong.
2. Testing the upper resistance prong, recognize a textbook evening star or another bearish candlestick pattern. For example, in Figure 8, we see a textbook evening star formation at point X. This will serve as the first signal.
3. Confirm the decline through a price oscillator. In Figure 8, a downward cross occurs in the stochastic oscillator, confirming the following 澳洲幸运5开奖号码历史查询:downtrend in the currency. Also, notice how the cross occurs before the formation is complete, giving traders a heads up.
4. Place the entry slightly below the close of the third and final candle of the formation. As little as five pips below the low will usually suffice in these situations.
5. Apply a stop to the position that is approximately 50 pips above the entry. If the price action rises after the evening star, traders will want to exit as soon as possible to minimize losses, but still maintain a healthy risk measure. In this example, the entry would ideally be placed at 0.6595, with a stop at 0.6645 and a target of 0.6454 – an almost 3:1 澳洲幸运5开奖号码历史查询:risk/reward ratio.

An evening star formation at point X suggests an impending sell-off t♓hat is confirmed by the downward crossover in the stochastic oscillator.

For breaks outside the trendlines, we take a look at the next example, point B in Figure 7. Here, the price action has broken above the upper 澳洲幸运5开奖号码历史查询:trendline, ♕but looks set to retrace back to the median or middle line. Let🦋's take another approach, using the same NZD/USD currency pair:

1. Identify the price action moving toward the median or middle line. Traders want to confirm that the price is indeed falling and will break back through the upper trendline. In Figure 9, the currency spot falls through the trendline, confirming selling pressure.
2. Identify the significant support/resistance line. Here, traders will want a confirmed break of a significant support level in order to isolate sufficient momentum and increase the probability of a successful trade.
3. Place the entry order 30 pips below the support level. In our example (see Figure 9), the support level is at the 0.7200 figure, meaning that the entry would be placed at 0.7180. The following stop would be applied slightly above the 0.7300 figure – the previous session's high – and give us an almost 2:1 risk/reward ratio when we take profits at the 0.7000 price.
4. Receive confirmation through a price oscillator. The downward cross that occurs when the stochastic oscillator is used gives traders ample confirmation of the break of support in the price.

Figure 9: Taking a closer look,ಞ we can see a great opportunity asไ the price action moves towards the median line.

The Bottom Line

Andrews' Pitchfork can provide currency traders with profitable opportunities in the longer- or intermediate-term, capitalizing on preferably longer market swings, although it's worth noting that it is more often applied in the futures and equities forums than in the currency markets.

When the pitchfork is applied accurately and is used in combination with strict money management and textbook 澳洲幸运5开奖号码历史查询:technical analysis, a trader is able to isolate great setups while weeding out the choppier price action in the 澳洲幸运5开奖号码历史查询:forex markets. The trade will be able to ride its way to profitability compared to its shorter-term peers, given that traders apply all of th🌄e criteria we outlined above.