Binomo platform offers many different kinds of indicators to its users. We want to present them to you so you know how they work and you may use the signals they provide in your trading. Today, we are going to show you Andrews’ Pitchfork tool which helps you to identify support and resistance levels and potential breakout and breakdown points.
The basis of Andrews’ Pitchfork indicator
Andrews’ Pitchfork tool was invented by Alan Andrews. Its name derives from the shape it takes on the price chart. The indicator utilises a series of three trendlines that are drawn from three points at the end of the former trends. Then the points are placed at three subsequent tops and bottoms and next a straight line is traced from the first point through the midpoint between the upper and lower points. This is the median line and two trend lines are drawn afterwards below and above it in parallel.
Andrews’ Pitchfork calculations
Andrews’ Pitchfork is drawn automatically by the Binomo platform. However, we need to identify 3 points which are local price extremes. This can be a sequence bottom – peak – bottom or peak – bottom – peak. These are later 3 turning points on the chart. The platform itself will draw the lines once these points have been defined. How is this done in the background? The distance between points 2 and 3 will be the width of the channel. The central trend line will run from point 1 through the middle of the segment between points 2 and 3. From points 2 and 3 two parallels to the central line are drawn.
Trading with Andrews’ Pitchfork tool
There are a few ways of using Andrews’ Pitchfork indicator in trading. You can identify support and resistance levels with it or trade breakouts and breakdowns.
Using support and resistance levels
The central line can be used to recognise support and resistance levels, however, the upper and lower lines offer stronger indications. A general rule is to buy when the price nears the support of the central line or the lowest trendline and sell when the price is close to the resistance of the central line or the highest trendline.
Always make sure that the support and resistance levels are tested oftentimes by the price. If the median trend line is not reached repeatedly by the price, it may signify the trend is accelerating.
Trading breakouts and breakdowns
Breakout happens when the price crosses above the upper trendline. The breakdown is when the price moves below the lower trendline. You can trade on this basis, nevertheless, you should confirm the strength of the breakout or breakdown by using additional tools.
Andrews’ Pitchfork indicator can be very helpful in making decisions about opening and closing trading positions. It uses three parallel trendlines. It is crucial that the three points are selected skillfully as this is the basis for the effectiveness of the tool.
You can identify support and resistance levels with Andrews’ Pitchfork as well as trade breakouts and breakdowns.
Add some other indicators to your chart to confirm trading signals and to avoid unnecessary losses.
Remember about the demo account available on the Binomo platform. It is free of charge and offers you a wonderful possibility to practice a new tool without the risk of losing your money.
Wish you good luck!