What is an Andrew’s Pitchfork?
Andrew’s pitchfork is a technical analysis concept developed by renowned educator Dr Alan Andrews. It’s basically a trend channel tool consisting of three lines that helps traders & investors to determine the support & resistance.
How does it work?
Andrews Pitchfork is based on reaction Highs & reaction Lows of the stock also known as pivot points. First step to draw Andrew’s Pitchfork is selecting three points for drawing.
- A beginning point that represents the start of a trend.
- A reaction high coming after the beginning point.
- Areaction low coming after the beginning point.
The two most common strategies based on Andrew’s Pitchforks are:
Buying the Bounce: Traders may buy when prices hit the bottom of a channel and sell when prices hit the top of the channel to profit from the difference
Buying the Break: Traders may buy when prices breakout from the top of a channel or sell when prices breakdown from the bottom of the channel.
Key points to remember:
- The trader must first identify a high or low that has previously occurred on the chart. The first point, or pivot, will be drawn at this peak or trough.
- Traders can plot multiple Andrews’ Pitchforks on the same chart to provide an indication of where support or resistance may be strongest.
- Traders may also look at different time-frames to determine long-term and short-term support and resistance levels for a given security.
- Selecting the initial three points is a very subjective activity, which means that the trading indicator’s success hinges on experiencing in finding the optimal points.