Pitchfork Strategy is a technical method that helps traders to read price trends easier and determine reversal points, either for entry or exit points.
Pitchfork Strategy is a technical analysis method developed by Dr. Alan Andrews on the concept that prices often revert to its origin. The lines made on this strategy seems like a pitchfork, where the first point is the handle and the second and third make up the prongs. After you understand where to place the first point, you could start to draw the pattern and find trend's area. This strategy made it possible for traders to tighten their risks and targets moderate profit.
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The argument for this strategy is that 80% of time in the market is shaping trend. So, traders will find prices by drawing line according to market condition, be it up-trend or down-trend. The first point starts the first line that will be the median line, and extreme sways are at the second and third point. Median line is the foundation of Andrew's Pitchfork Strategy.
There are many tools to help you find the first, second, and third point, like Zig Zag indicator, and daily and weekly fractal patterns. Zig Zag indicator could be used to determine reversal price changes, and at once draw a pitchfork from those points. Fractal shows price reversals which signals turn over at the market.
The end result is to frame price action with Pitcfork Strategy on the time frame you like best. That way, you could choose your entry and exit point.
The key of using this technical analysis is choosing the most suitable strategy for you. No matter what you choose, make sure to limit your risks by placing stop loss outside the line and trading in coherence with your ability.
3 Comments
Joe Adams
Dec 17 2013
I've often seen people use this strategy, but I have to pass it because I don't know its function. But after reading this explanation. Maybe after this, I will try to apply it to the platform maybe it suits me
Stanley Hill
Dec 26 2013
Is this the same function as a trend channel? I see the difference is only in the setting method. If the channel connects high and low points, this pitchfork determines the ABC level, but it looks almost similar to the channel. Indeed, will this indication be more accurate from the channel or what? I see how come these two indicators actually function to recognize trends.
Brenden Romero
Jan 3 2014
In my opinion, it's better to use Bollinger bands. The line can be more flexible and doesn't need to be pulled first to correct the position of the indicator. There is still a chance that the indicator in the position in the pocket is misplaced and the reading is less clear. It's different from the indicators that just have to install, just set the period like a Bollinger band. It is much easier and the position is more reliable.