Today we are going to consider a very important tool of trend trading - the .
What is the Pitchfork?
The is the variant of the trend channel. The difference is that has an inner additional channel inside the big main trend channel. The median or the centraline divides these channels in to two parts. It is commonly known that the price usually tends to vary in the upper or lower half. Thus the price can often find next to resistance, support and central lines.
Support, resistance and breakouts
When the price breaks through the central line the price changes the half of the . Sooner or later there will be the massive brakeout as a result of which the price escape the . In our example the price broke through the resistance line and found the support above it. If the price has an attempt to return back to the and this attempt was rejected we can expect the massive price growth.
Let's talk about the trading opportunities into . We should observe carefully the monents when the price is next to the resistance, support or centraline. If there is a confirmation of the bounce off it the position should be executed in the direction of this bounce.
DISCLAMER: Information is provided only for the educational purposes and should not be used to take action in the markets.
Last time we considered the pitchfork definition, the support, resistance and breakout points. Today we are going to talk about how does Andrew's pitchfork constructed and how to find the situation where it is applicable.
First of all we should define the pivot point of the trend reverse. In our example the uptrend was changed by the downtrend. Let's mark this point as A.
The second step is the first downtrend swing's high (point C) and low (point B) defining. The pitchfork is constructed automatically on TradingView.
Let's consider two particular possible trades using pitchfork. We have already know that the yellow median line is a magnet for the price. If the price is next to the higher pitchfork's band there is a high probability that the price will return back to the median area. The red point is an appropriate moment for the short because the price bounces off the pitchfork's higher band and the support/resistance level.
The pitchfork's breakouts is the another opportunity for the trades execution. The green point is the nice point for long because the price clearly broke through the pitchfork and bounced of the support level which was tested twice by the price.
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