So far we have presented almost all known classic indicators and have given at least one strategy and far-reaching tips for each indicator. So whoever is interested in trading with the help of technical analysis and indicators will definitely find what they are looking for in our articles.
But the end of the story has not yet been reached, although it must be said that the level of awareness of the last indicators presented is high already leaves something to be desired. In this article we present an indicator from the pattern recognition category. Similar to the Fibonacci retracements, such indicators are about pointing to relevant price zones and less about evaluating the price behavior itself.
The first of this series is the Andrews Pitchfork, in English Andrews pitchfork. This may sound a bit unspectacular, but is only intended to clarify the meaning behind it. Basically, the indicator is about projecting a trend into the future, i.e. making a kind of forecast.
Brent analysis with Andrews Pitchfork
The upper chart shows the first European Brent oil price with day candles. The rough trend channel points down. The three lines, which look like a pitchfork, represent the indicator. Without knowing how the indicator works, it is very surprising at first glance that the last low was exactly supported on the upper fork. The functioning of the indicator explains how this comes about.
How does the pitchfork work?
First of all, you should know that the function is based on the formation of a median line based. If you go further back, the basis is Newton's third law, according to which there is a reaction to every action.
To achieve the projection of the fork, we need three relevant course zones:
- A high
- A low
- A recovery high
The whole according to the example above in a downward trend, in the upper chart as the points 1,2 and 3 shown. If we analyze an upward trend, the opposite applies. Then we need a low, a high and a recovery low. As you can see, the pitchfork in the present example could have provided us with a good basis for the technical forecast.
The second example shows an analysis of the S&P 500 chart with hour candles. If we follow the same method, we can immediately see that the upward trend is weakening, because the upper fork is not being driven at all, and there is even more breakthrough under the lower fork. Item 4 represents the retest of the lower fork. As in the case of the Brent analysis, it almost looks as if the downward probability outweighs at least on a short-term basis. Only that it is the probability upwards with Brent.
So we hold firm: Regardless of where the classic trend lines run, the Andrews forks offer good indications of resistance and support zones. We can use this knowledge to develop our strategy with Andrews Pitchfork. This can be used, for example, to determine whether a trend tends towards strength - depending on which of the forks is driven or broken. Furthermore, we will optimize as always to achieve the best results by looking at whether it makes sense to also set rules for identifying the three points.
Profit from movements in currency
Conclusion - Little known, but effective and simple
We have to admit that we had known the indicator itself for a long time, but we paid little attention to it. After an in-depth analysis and multiple use, we were amazed to find that it can be very effective but is easy to use.
A trader needs to see the relevant things. It is of no use to him if the chart is overloaded with an enormous number of indicators, but almost all of them say the same thing. Therefore, due to its category, Andrews Pitchfork is a good choice to complement other indicators that measure price behavior because it identifies patterns and zones.
With the broker Binary.com, beginners can try the indicator. In the coming week we will be presenting a detailed strategy with Andrews Pitchfork.