Tag: Andrew Pitchfork | Cozy Dragon Trading Club

Pitchforking as a trading system – The basics

Andrew Pitchforks are not just a ‘channel’ type, they are a very accurate trading and market anticipation technique with no equivalent. I will focus today on the basic usage, laying out a basic pitchfork on a chart, getting a buy or short signal, getting confirmation, placing stops and estimating some target areas. Big agenda, isn’t it?

Let’s start immediately. Open a chart and select the last 4 peaks and troughs that must alternate. If you are not sure, you can use fractals or oscillators that go above and below zero, even average. Your eyes are also a good indicator :-))) Don’t worry about having the ‘right’ pivot points, each set of pivot have a story to say and Dr Andrew never put rules to select these points. We will see in other posts how to validate a pitchfork, that is more advanced discussion.

As a beginner pitchfork trader, make sure you the 4 pivots you selected form a wedge, like this:

Note the numbering. Last pivot is always called for 4.

Now we can draw our first pitchfork by selecting pivots 1, 2 and 3:

Pitchfork is made median line, 2 median lines high (MLH) parallel to median lines. Line 1-3 is called Hagopian line. Note that both median and Hagopian line are slopping down.

Buy Signal. The basic buy signal is when prices (a full candle) exit the pitchfork. Easy!

Confirmation After exiting the pitchfork, prices usually retest the MLH, which can also be a good entry point.

More secured entry An other possible entry is after breaking the Hagopian line. Note that it can be retested as well before price actually start going up.

Stop Loss – Assume pivot 4 as a good level for stop loss for now

Target Price Case 1. When price don’t reach the median line like in our case, it is expected that prices will go back to pivot 3 level with 80% confidence, and possibly much higher.

Target Prices Case 2. We draw parallel lines to median line. Like this:

Then we draw a new pitchfork by selecting pivots 2, 3 and 4.

That is the trick now! Assuming both pitchfork are valid (more in future post), the intersections of MLH, medians and warning lines are potential target prices, defined with also a timing!!! You can say price should reach this price by this time wiht pretty good accuracy.

Let’s look into the future:

As you can see, price went up though it did not reach pivot level (80% probability only!). I went beyond the median anyway. Because pivot 4 was not a the median (remember the hybrid pitchfork?), intersections are not accurate here.

That is the basic story. Hope you noted the assumptions. We have to study what to do when pivots do not form a wedge, how to validate a pitchfork, etc, etc…

In the meantime, please trade safely.

The pitchfork family – choose your tool for trading!

If you are onto trading, pretty sure you have heard about Andrew pitchforks which finance barely describes as a channel tool. As long as prices are inside a channel, the slope of the pitchfork indicates the trend and you should open positions only in direction of the trend.

That is a very limited and biased view of Andrew pitchforks, which is a complete trading system (with signals, stop, target prices…). True enough, it is hard to master and extremely difficult to automate. Moreover pitchforks are only the simplied view of action-reaction lines already mentioned in this blog. To make it more complicated, Dr Alan Andrew never revealed in written form at least all the secrets of this trading system. I think I have uncovered many of them, and these will be revealed to you in coming posts!

I assume now you know a bit about Andrew pitchforks and will introduce you to the family. For a safe start, you select 3 consecutive pivot points and draw a basic pitchfork:

You may also know the Schiff or 50% pitchfork

But do you know these ones?

Hybrid pitchfork – Hanging or virtual pivot 3 while real pivot 3 sits on a warning line

All these pitchforks can be used on any chart any time frame. Your goal is to know WHEN to use each one pending on market conditions. Which we will see in later posts.

[Beginner series] Trading with a pitchfork – Part 2

In part 1, you have learned how to identify key market turning points, which we have called Swing Point, shortened to SP. Swing points follow peaks and troughs in alternative way. Then we looked at short term and medium term SP’s. The last one are the ones we are interested in for drawing pitchforks.

Of course, the first question is why drawing pitchforks? Pitchfork is an interesting tool in the sense that is allows to identify trend in easy and blunt manner, no discussion is needed; then it gives buy and sell signal; it also measures the volatility! In short a dream tool, this is my Christmas gift to readers, but mastering will require some practice!

We are going to play with Exxon Mobil today. On the following graph, I have indicated the medium term swing points. Again take time to practice a bit here, because then it becomes (relatively) more difficult.

We are going now to number the SP’s, starting from the right of the graph, and in backward direction from 4:

Tough, isn’t it? Then your charting software should have a pitchfork tool. Select it and select the swing pints 1, 2 and 3. You should get something like that:

I am not going to explain the geometry used to draw the pitchfork, there are plenty of sites that do this. Let’s zoom instead on price action:

The green light is the median line, the red ones are the MLH (acronyms defined by doctor Andrew), are parallel to median line. After SP3, you notice that prices seem to adhere to the upper MLH, that is a sign of strength! At point 4, you can easily observe that price have not touched the median line, there is a gap between SP4 and median line, this is an other sign of strength and, according to A. Andrew, the minimum price objective for this situation is the price at SP3! The pitchfork is down trending and price have already exited the pitchfork even before SP4: this is the buy signal! We are all set up. We need to verify one last thing, the pitchfork made on SP’s 2, 3 and 4 should be trending up! Let’s draw:

Everything is perfect. We will look in future post the rules and how to find out where prices might be going, but let’s use for now the minimum price objective, so you need to place an order with stop at SP4 and objective at SP3, meeting your gain / risk sensitivity.

How did the trade go?

The min objective was reached only a few days later, then price has gone up since, landing currently a cool 33% at the time of writing!

This was your first pitchfork trade. Next time, we will look at the major rules to use pitchforks in safe and efficient manner.

Until next time, trade safely!