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Andrews's Pitchfork: Thinking Approach
By the Tradecision Development Team
Trading approaches are much like people: some aren't worth a dime but have a lot going for them: their genius creator's legendary bios, intricate, if bizarre, theories behind them, commercial websites, full of promotional puffery, and hordes of steadfast followers, who keep the former afloat. Others are rather modest but talented and really able to help trade profitably. No doubt, one of such talentedly developed methods was invented by Dr. Alan Andrews in the beginning of the 1960-s to become one of the simplest, most efficient and reliable technical analysis techniques. So what makes Andrew's Pitchfork a valuable analysis technical tool and what are the benefits and risks one should be aware of while applying this method?
As we have already mentioned, the method is quite simple. It shows the areas of resistance and support using three lines: a median, starting from the most recent contract's low or high, and two more lines, being the "tines" of the pitchfork. The upper "tine" originates from the peak of the first upward move. The lower "tine" originates from the low of the downward move that follows the first upward move. The pattern looks like a triangle. The idea is to buy at lows and sell at highs. Simple, isn't it?
You may ask: "And what's the big deal? Does this give a better guarantee than the other commonly used methods?" The answer is "No". Andrews's Pitchfork is about as precise as most other methods (our estimate would be around 60%). But the precision level, ensured by Andrews's Pitchfork, is, actually, not the reason for which the method is valued so highly or should be used. What makes the method a great trading tool is the inestimable possibility of being able to analyze one part of the pattern using the other parts. In other words, you can analyze the different trends that make up the pattern as parts of the same figure, for example, you can most effectively and very easily forecast the size of the second bullish trend based on the length of the first bullish trend.
We will agree with those who will say that Andrew's Pitchfork should not probably be used as the bulk, determining method of your trading combination. However, its importance as that of an extremely valuable "tactical" method should not be overlooked.