Trading With Pitchforks

The Andrews Pitchfork trading strategy is a popular trading tool that encompasses three parallel lines. Or a maximum of five parallel lines that can be utilized to find sharp trading opportunities.

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 to serve as both support and resistance. In other words, it can be seen as a regression line.

In short, the pitchfork is a handy tool because it encompasses:

• Support and Resistance
• Trading Channels
• Trend Following System
• Reversion to the mean

The Andrew’s Pitchfork Indicator

First, in order to find your pitchfork tool, open your Tradingview account and follow the instructions below. Leave the default settings as is, as there is no need to change anything, regardless of the market you are trading in unlike other tools (ie – ichimoku).

How to Use it to trade

A pitchfork is created by first drawing a trend line between two extreme points. A third point is then set either above or below the second point depending on the analyst’s desired pitchfork location.

Keep in mind that the default pitchfork setting calls for two additional sets of lines to be drawn and Tradingview allows for up to 9 sets of lines to be added.

Ensuring the right pivots points are used is critical to the accuracy of the pitchfork tool

A pivot is simply a swing high or swing low from where the price had a significant reaction and you need to first identify the early stage of a trend development, locate the pivot points and mark them so you can easily draw the Pitchfork trendlines through them.

Typically, you would look to enter (or long) when the price falls near the support of either the center trendline or the lowest trendline. Oppositely you’d look to sell (or short) when price approaches the resistance of either the center line or the highest trendline.

Even though the center line can be used to identify areas where price may find support or resistance, it is generally not as strong as the two outside lines. In practice, the levels identified by this indicator are very useful for identifying strategic positions for stop-loss orders.

Setting up the trade

Step 1: Identify Your pivot points

As we mentioned above, this is the most critical part of ensuring your pitchforks give you the right areas of support and resistance. In the case above, we were looking for long entires, so we had to identify a series of rising pivots.

The opposite can be said when you are looking for short opportunities, or where to potentially exit a losing position. 

Step 2: Using your pitchfork tool, connect pivot points 2 & 3, starting at pivot point 1 as shown above. In these cases, you are looking for swing high and swing low areas, however as you play around with the pitchfork tool, you will find there are some occassions where you will need to play around with the exact location of your pivot points to ensure the best result.

Step 3: When looking for potential entry signals, look for the firs re-test of the original support line that was drawn from pivot 3. Keeping in mind that price needs to be contained within the pitchfork channel, you may wait to buy the proceeding candle if it gives you a more solid confirmation when/if it closes within the paralell channel. 

Step 4: Take partial profits when price hits the center line and take profit 2 when price hits the upper channel line (resistance). Similar to that of the bollinger bands and keltner channels, price tends to gravitate towards that center line, which can also act as a level of support when above and resistance when below. 

The reason why only partial profits are taken at the center line is the because you also want to maximize profits, however you’ll always want to ensure you’re using the pitchfork tool in conjunction with other forms of TA and indicators such as MACD and RSI to give you a true understanding of the direction of the current trend. 

Note: When TP1 is reached, move your SL at BE.

1. It makes sure you’re accumulating profit
2. If the market reverses, make sure you stopped at BE and don’t lose any profits. 

BONUS TIPS

• Price tends to gravitate towards the median line.
• When price breaks the median line there is a high chance it will pull back to retest again the median line.
• When 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.

Final Thoughts

• 0 – 19m – Intro/News
• 19:00 – 25:00 – Intro to the pitchfork tool
• 25:00 – 35:00 – Using Pitchforks in a Downtrend
• 36:00 – 42:00 – Using Pitchforks in an Uptrend.