Andrew's Pitchfork

Tracking market trends can often be complex due to numerous fluctuations within a broader movement.
Andrew's pitchfork is a valuable tool that enables traders to identify and visualize deviations from the primary trend. This indicator creates a channel with levels of support, resistance, and a central line, providing critical insights into market direction.

1. What is Andrew's Pitchfork?
2. How to create Andrew's Pitchfork?
3. Practical applications of Andrew's Pitchfork
4. Examples of using Andrew's Pitchfork in the market
5. Extending Andrew's Pitchfork
6. Overview of Andrew's Pitchfork

What is Andrew's Pitchfork?

Andrew's pitchfork is an analytical tool available in Y4Trade.com's trading charts. It consists of three parallel lines: a central line and two outer lines equidistant from it. It is used to identify potential levels of support and resistance, possible market breakouts, and other key points.

Andrew's pitchfork was developed by Alan Andrews in the 1960s as a way to predict how a market might deviate upward or downward from the primary trend. This tool helps traders better understand market dynamics and effectively plan their trading strategies.

How to create Andrew's Pitchfork

To draw Andrew's pitchfork, select three key points on the chart of a trending market:

• Point A: The start of the trend, serving as the tool's origin point.

• Point B: The highest reaction point, where the market reaches a peak before forming a countertrend.

• Point C: The lowest reaction point, marking the end of the countertrend as the market reverses back toward the primary trend.

Once these three points are selected, the tool automatically generates three parallel lines:

• Central line: Represents the main direction of the trend.

• Upper and lower lines: Indicate potential areas of support and resistance.

These lines resemble the shape of a pitchfork, explaining the name of this tool.

TIP: You don’t always need to select the points in the order A, B, C. If the lowest reaction (Point C) occurs before the highest reaction (Point B) on the chart, selecting the points in reverse order (C before B) will work just as reliably.

Practical use of Andrew's Pitchfork

Once you've properly drawn Andrew's pitchfork, the central line (median) should reflect the general direction of the primary trend. The upper and lower lines then serve as key levels of support and resistance, which can push the price back toward the central line.

Key Points:

• Central line:
  It follows the main trend and often serves as a reference for market movements. Sometimes, it can also act as a level of support or resistance, even without interaction with the outer lines.
  
  

• Upper and lower lines:
  They act as barriers, reflecting price movements back toward the median.
  When the price hits one of these lines and fails to break through, you can expect a return to the center of the channel.
  
  

• Break of outer lines:
  If the price breaks through the upper or lower line, it could signal a break in the trend.
  This often suggests that the market may be approaching the end of the prevailing trend and could start a new trend movement.
  
  

By using Andrew's pitchfork, you can effectively identify not only the current trend but also potential reversal points on the market, making it a valuable tool for technical analysis.

Examples of Using Andrew's Pitchfork in the Market

1. Break above the upper trend line – Bullish fork

Example of bullish pattern on EUR/USD

In this example, the market moved as follows:

1. Initial trend (Point A): The market started its upward trend at point A.

2. Reactionary low (Point B): The price then reached a reactionary low at point B.

3. Recovery and new high (Point C): From point B, the market recovered and reached a new high at point C, forming the three key points required to create the Andrew's Pitchfork.

The lower trendline, which originates from point B, successfully predicted levels where the market bounced back several times, moving upward. However, when the price eventually broke through the upper resistance line originating from point C, a breakout occurred, and the market accelerated, pushing beyond the original trend boundaries.

This example demonstrates how Andrew's Pitchfork can help identify critical support and resistance levels while signaling potential changes in the market trend. The breakout above the resistance line indicates that the market might be entering a new phase, which can be crucial for traders looking to capitalize on trend continuation.

Breakdowns Below the Lower Trendline – Bearish Fork

Example of bearish fork on USD/CAD

Andrew's Pitchfork can be applied to both upward and downward trends. In this example, a bearish fork is illustrated on a market with a downward trend.

Identification of points:

1. The market first reached a significant low at Point B.
2. Then, it reached a local peak at Point C, identifying the points needed to draw the pitchfork.

Use of the median line:

• The median line of the pitchfork initially acted as support, which the price reacted to several times.

Trendline Break:

• After the breakdown of the median line, the lower trendline, originating from Point B, could become a new support level, which traders could focus on.

The chart illustrates how the price reacts to the key pitchfork lines, with the median line providing support until it was broken. The price then shifted its focus to the lower trendline, reinforcing the idea of support and indicating a potential reversal in the trend.

This chart illustrates the Bearish Fork on USD/CAD. The median line of the pitchfork initially acted as support, but after it was broken, the lower trendline became the new support level. Such an approach helps traders identify potential entry or exit points in the market.​

Extension of Andrew's Pitchfork

If the prevailing trend exceeds one of the outer lines (called "teeth") on the Andrew's pitchfork, it may indicate an acceleration of the trend. In such cases, it is appropriate to extend the channel with another parallel line that follows the new direction of the market.

Procedure for Extending the Pitchfork:

1. Identify which of the outer lines has been broken – the upper or the lower.

2. Draw a parallel line to the centerline that follows the direction of the broken trend.

3. Place this line at a distance equal to the space between the centerline and the corresponding outer line.

This extension helps capture the new boundaries of the market's movement and updates the framework for trading.

Andrew´s Pitchfork overview