No matter the trade, every tradesmen knows that tools make the job easier. The Andrews pitchfork indicator is just that. A handy tool to help guide you in a choppy market.
Stock market trading is a battle of buyers and sellers which is one of the stock trading basics.
As a result, the market gets choppy along with forming important levels of support and resistance every seasoned trader pays close attention to.
. In some representations these will be colored much like the Ichimoku cloud. The color helps to see what quadrant the current price action is holding the pattern.
Planning your profit taking around these signals will help to take the emotion out of the trade. Setting your stops at either the major support can help manage risk.
Also waiting for the pattern to retrace to these levels can be a great time to buy so you can maximize your return on investment. Check out our service to learn more about stock trading.
When plotting out the Andrews pitchfork indicator in an up-trending fashion, it is best to remember this method Low-High-Low. Begin by finding the tool in the drawing section, on Thinkorswim by TD Ameritrade this is in the Active Tool section.
Find a historic low then the next plot is a recent high followed by the next highest low. Once completed you will see the pitchfork appear and the bar chart moving around the median line.
You can now access the properties section to adjust the numbers to be as accurate as possible. Keep in mind that the Andrews pitchfork indicator can be subjective. You want to see what the chart is saying not what you want it to say.
In the properties section you can also adjust what the lines look like to help you make a quick trade decision. Just having the indicator is not enough if you end up with what professional traders call “analysis paralysis”.
This is just a point where you have overloaded yourself with information and miss the trade due in part of to much information. We discuss these in our trade room.
Plotting the Andrews Pitchfork Indicator in a downtrend fashion is much like in an uptrend. Select the pitchfork tool from the active tool selection list. Then plot the first point on the most recent highest high.
Next to the closes high then to the in-between low. This gives a good base to start with. The top line acting as resistance and the lower line as support (it's very important to know when to use a stock loss vs stop limit order and their differences).
These lines give you a good perspective of what you can expect from the downtrend waiting to play either with in the channel or waiting for a down tread breakout. Combining this with a Bollinger band indicator can give you great indication for when to see a breakout forming.
The trigger lines on the Andrews pitchfork indicator trading strategy are the major buy or sell signals. When plotting the chart pattern in an upward fashion the trigger line will start at plot 1 and continue through plot 3.
When the chart pattern is in a downward configuration it will start a plot 1 and continue through plot 2. Think of these as the “major” support or resistance lines.
A break below the lower trigger line in the uptrend will be a solid sell signal. A break above the upper trigger line in a down tread configuration is a solid buy signal.
Using these as a rule of thumb will help you keep your risk management in check. But as always these should not be your only trading parameters as many things could affect the market.
The Andrews Pitchfork Indicator can be a very useful tool. Much like MACD and other charting patterns it has its place and time. I prefer to use it after the morning rush; but even more so in longer time frame charts such as the 4 hour and 1 day charts.
A solid point to remember is practice is key when it comes to learning new patterning styles. The pitchfork is no exception to this. When drawing the chart pattern you may have to move the points around to give you the most accurate representation.
When drawing the pattern place the points in a manner that gives you the most conformation points. Reminding yourself that this is giving you the overall resistance and support points. So having the most contact points on the pattern will help you to build your trades a more secure manner.Take our Thinkorswim course to learn more about how to use it and practice drawing the Andrews Pitchfork Indicator.