Technical analysis is a method of analysis that is commonly used in forex trading. Benefits provided in whom it is possible for a trader to "track" the movement of the market and make decisions based on the ongoing trend. Not just a trend that could be the benchmark, but also many "tools" such as the introduction of price movement patterns, as well as technical indicators. One of the many "tools" in the technical analysis is "Andrews 'Pitchfork', which we will discuss in this article.
From the name, you might have guessed that Andrews' Pitchfork named after its creator. You are right, because its creator was Dr. Alan H. Andrews. He is a physicist who was born from a family that is close to the financial world. His father was an investment consultant so that almost every day he is familiar with the talks about the financial markets. With wit - and his awareness of the importance of education - he graduated from Harvard and MIT, two very prestigious universities in the United States because of its quality.
But Andrews is not alone, he got help from Roger W. Babson and George Marechal.
The first introduction with Andrews' Pitchfork
Andrew's Pitchfork is not an indicator, but are included in the family "Line Studies". Studies Included in the family line is the trendline, channels, Fibonacci Retracement and others. However, for easy reference, let us consider only Andrew's Pitchfork is a technical indicator.
OK, so what and how exactly this indicator?
Basically, it is an indicator that can be used to identify support and resistance with the help of three parallel trendline. Three trendline was formed from the placement of three reference points after determining that a clear trend.
You could say this indicator is similar to the channel, it's just that he has three lines, while the channel is generally only has two lines (top and bottom). Third line on Andrews' Pitchfork obtained by using three reference points which are points of significant peaks and valleys.
Here is the appearance Andrews Pitchfork with three reference points that are significant peaks and valleys.
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| Figure : Andrews' Pitchfork with 3 points of reference, drawn on the chart XAU / USD. |
Line in the middle of the channel which formed the so-called "median line". That is why this kind of analysis method is also often referred to as "median line studies". In Andrews' Pitchfork, the median line was called "helve" (stalk), while the two channel lines that are above and below the so-called "teeth" (tooth). Pitchfork own means pitchfork in Indonesian, so the naming of "stalk" and "teeth" that refers to the shape of a pitchfork who have stalks and teeth. Both "teeth" that is actually a channel, where the line is above yag into resistance while below into support.
There is a 80% chance the price will again move towards helve if it has been at the top or bottom, but do not forget that there is also the possibility the price will break up or down the line when pressure is very strong bullish or bearish, can even change the direction of the trend.
Application
To draw Andrews' Pitchfork, before you have to see the trend. Remember, the trend has a rule: the uptrend is a series of peaks and valleys are higher, while the downtrend is a series A peak and the lower valley. Look here to refresh your memory about the trend.
In the picture above shows that the XAU / USD started to move down from the peak point 1. Prior to point 2, you can also see there is a higher valley, this means that Point 2 is a valley which is lower than the previous valley. Then from point 1 to point 3 you also can see the peaks are formed also lower. Thus, the movement from point 1 to point 3 is a short-term downtrend.
After pitchfork well defined, the next step is to try to look for opportunities to sell or buy. To make trades, you can use the area in between along the channel, or you can wait until one of the channel line (teeth / tooth) translucent to implement the trading breakout.
The method is also often used is the bounce trading by utilizing the channel as well as the support and resistane helve (median line) as a pivot.
There are some basic rules that apply to trading based on Andrews' Pitchfork this:
Sell area when the price is channel above, helve first target is, while the target is the furthest down the channel.
Buy when the price is below the channel area, the first target is the helve, while the farthest target is the top channel.
At the time of the downtrend, buy if the channel on translucent.
At the time of the uptrend, sell if the channel under translucent.
In the next article will discuss examples of the application of trading by using Andrews' Pitchfork.
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