Andrews Pitchfork Trading Strategy: Incredible 73% Win Rate!
Todayโs article is about the Andrews Pitchfork trading strategy and how we can use it. The Pitchfork trading system is an old, forgotten trading technique that projects potential support and resistance lines.
Our team atย Trading Strategy Guidesย already covered the basics ofย support and resistance, and you can read it to learn about these zones if youโre not already familiar with them. The Andrews Pitchfork Forex strategy gives the S/R topic a new dynamic dimension.
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Andrews Pitchfork trading strategies PDFย can be applied to all time frames and generally to every kind of market. No matter your trading style or preferred time frame, youโre covered.
Before we dive into the Andrews Pitchfork trading system, letโs define what Andrews Pitchfork is. We will review how to profit from this fantastic technical indicator.
Table of Contents
What Is Andrews Pitchfork?
The Andrews Pitchfork trading strategy is a popular tool that uses three to five parallel lines to find sharp trading opportunities.
Moreover, the middle line is called the median line. It is followed by two consecutive resistance trendlines above the median line and two consecutive support trendlines below the median line.
The general theory behind the Pitchfork trading system is that if we get through the median trend line, about 80% of the time, it should retest the top of the Andrews Pitchfork channel. Conversely, if we break below the median trend line, we should retest the bottom of the Andrews Pitchfork channel.
When using the Andrews Pitchfork trading system, we can observe the price tends to gravitate toward the median line. This makes the median line serve as both support and resistance. In other words, it can be seen as a regression line.
Basically, the Pitchfork trading system combines three of the most powerful trading strategies into one simple method, as follows:
- Support and resistance system.
- Trend-following system.
- Reversion to the mean system.
Before we move forward, we must define what technical indicator we need for the Andrews Pitchfork trading course and how to use it.
The Andrews Pitchfork Trading Indicator
Itโs easy to identify the required indicator to draw the Pitchfork trendlines because it has the same name. Most trading platforms and charting packages (MT4, TradingView, etc.) have the Pitchfork indicator built into their indicator libraries.
The Pitchforkย trading indicatorย requires being attached to three pivots. A pivot is simply a swing high or low from where the price reacted significantly.
Effectively, we use the three pivots to draw the Pitchfork trendlines. First, you need to identify the early stage of a trend, locate the pivot points, and mark them so you can quickly draw the Pitchfork trendlines through them.
Note:ย There are multiple ways to draw the Andrews Pitchfork lines. These are just our favorite techniques.
The selected pivot points are somewhat subjective. Thatโs the reason why the Pitchfork trading system gives you the flexibility to test different trading scenarios.
Now, letโs see how you can effectively trade with this strategy and how to make some profits. Also, be sure to check out our best list of trading strategies.
The Andrews Pitchfork Trading Strategy (Andrew Pitchfork Rules)
Our team atย Trading Strategy Guidesย likes to use the Pitchfork trading system to identify a change in market behavior and make a profit from it. Understanding what Andrews Pitchfork is and what pivots to use is essential. This will give us more confidence when taking the trades based on the Pitchfork trading system.
Moving forward, we present the buy-side rules of the Andrews Pitchfork trading Indicator.
Step #1: Identify the Three Pivot Points Necessary to Draw the Pitchfork Lines.
The first thing you need to establish for the Pitchfork trading system is to identify three pivot points necessary to draw the Pitchfork lines. Check out our previous section for more insights into this topic.
Since weโre looking for buying opportunities, we need to identify a series of rising pivot points.
Now, itโs time to focus on the Pitchfork indicator. This brings us to the next step of our Andrews Pitchfork trading strategy.
Step #2: Apply the Pitchfork Indicator Starting from Pivot One and moving through Pivot Two and Pivot Three.
Use the three pivots identified and draw the Pitchfork trading system lines by connecting the pivots together. Start from Pivot One and move forward through Pivot Two and Pivot Three.
During this stage, youโll be plotting the Pitchfork trading system lines. This will map the most critical dynamic support and resistance levels.
Once youโve done this correctly, you will see a rectangle or pitchfork formed. Read more about charting withย rectangle patternsย here.
Next, weโre going to build our trades around these Pitchfork lines:
Step #3: Buy at the Market at the First Retest of the Lower Pitchfork Support Trendline.
With the Andrews Pitchfork trading strategy, the price should be contained inside the Pitchfork parallel channel. In this regard, if weโre looking for buying opportunities, assume the lower Pitchfork support trendline to hold the price for a bounce.
We recommend buying when the lower Pitchfork support trendline is tested. The next logical thing we must establish for the Andrews Pitchfork trading strategy is where to take profits.
Step #4: Take Partial Profit at Theย medianย line and Take Profit Two at the Upper Pitchfork Resistance Trendline.
The Pitchfork trading system allows you to manage your trades in many different ways. Our mantra is,ย โKeep it Simple, Stupid.โ Since the core principle of the Andrews Pitchfork trendline is that price tends to gravitate towards the median line, itโs the logical place to take some profits off the table.
We only take partial profits on the median line because we also want to maximize our profits. This will allow the market to retest the upper Pitchfork resistance trendline.
With the Andrews Pitchfork trading system, weโre trading in the direction of the trend. So, the expectation is to see the price moving higher and eventually retest the upper Pitchfork limits.
Note:ย After TP1 is reached, move your SL to BE. We accomplish two things by doing this. Firstly, we make sure that we accumulate profits, and secondly, if the markets reverse, make sure you stop at BE and donโt lose any money.
The next important thing we need to establish is where to place your protective stop loss.
Step #5: Place the Stop Loss below the Lower Pitchfork Trendline and Add a Buffer of 20-30 Pips.
The recommended place to hide our protective stop loss is adding a 20โ30 pips buffer below the lower Pitchfork trendline.
Typically, the support Pitchfork trendline should hold the price above in an uptrend. However, to protect ourselves from possible false breakouts, weโve added a buffer of around 20-30 pips to our protective stop loss.
Note:ย In a strong uptrend, itโs pretty standard for the price to break and trade above the resistance Pitchfork trendline. Inversely, in a strong downtrend, itโs quite normal for the price to break and trade below the support Pitchfork trendline.
Now, instead of focusing and limiting ourselves to one trading approach, we will explore different trading strategies using the Pitchfork trading system.
The above was an example of a BUY trade using the Andrews Pitchfork trading strategy. In the figure below, you can see an actual SELL trade example using the price failure rule.
The Bottom Line: How to Use Pitchfork Trading to Your Advantage
There are many Andrews Pitchfork trading strategies that can be built around the Pitchfork trading system lines. They can all be simply derived from the Andrew Pitchfork rules. To use this system, you need to understand what Andrews Pitchfork is.
Andrews Pitchfork is simple to understand because, according to the Pitchfork trading system principles, you only need to know these three rules:
- Price tends to gravitate towards the median line.
- When the price breaks the median line, there is a high chance it will pull back to retest the median line again.
- When the price breaks the Pitchfork channel on the opposite side of the channel direction, there is a shift in market sentiment, and the trend can reverse.
Thank you for reading!
Please leave a comment below if you have any questions about the Andrews Pitchfork trading strategy.
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I knew Dr. Alan H. Andrews as he taught me at his small home in South Miami, Florida during Christmas holidays of 1973.
That is great Dennis! Thanks for the comment
The pitchforks are to-be used on small minor trend also to breakdown or breakup going beyond the pitchforks as you show! As that happens all the time which most people use today! Also there was another major way he applied them on large trends using smaller intermediate trend itself as the median line running through the extreme closing prices that would find unusual trends and future pivot points. Using them on weekly and monthly charts is more accurate! I have since gone beyond his method as have more accurate that I use! Here is an old video of Dr. Andrews teaching his last seminar: http://www.youtube.com/watch?v=wgRkVFb3iLU
Guys! First of all I never knew that MT4 had this indicator hidden away and I really like this post of yours; Fantastic
Yes! https://uploads.disquscdn.com/images/ff8096b27bff8ce4dd57719f3afb835287b10b501ddcd8031a2ffc9d6542902b.png
For those who have trouble locating this still in MT4 you can find it here. Thanks for the comment, We wish you the best Freddie!
Hey!! Such a nice blog..The strategies you described here are so simple to understand and very useful..Thank u!!
thank you it was very useful and I could understand it easily..
Thankyou, it was quite simple and easy to understand.
Glad it was helpful to you!
Very nice.