Instead, traders must use judgment and experience when drawing channels.Īs with most aspects of technical analysis, it’s important to build your forex skill and understanding by experimenting. Mastering pitchfork indicatorsĪs mentioned above, there are no hard rules for point placement. The steepness of the channel depends on where the three drawing points are placed, particularly point one, which is the start of the median line.Įven though point one usually starts with a reaction high or low, it’s sometimes necessary to adjust point one to ensure a realistic price channel that is in line with actual market behaviour. Should the currency then break above the resistance of the centre line, the forex trader’s target would then change to the top line, with the centreline becoming the new support. This would make placing a stop loss just below this level a logical choice. Stop loss placementĬonsider an example whereby a currency has found support near the bottom trendline twice over the past quarter. Failure to reach this line shows underlying weakness that could mean a trend reversal will soon happen. Prices should reach the median line on a regular basis during an uptrend. While the centre line can be used to identify areas where a currency may find support or resistance, this is not as strong a guide as the two outside lines. However, the most important thing to remember when trading with a pitchfork is that different pivot points will result in different angles for the overall pitchfork, which will then lead to different results when interpreting the market. The pitchfork is intended as a quick and easy way for traders to identify possible levels of support and resistance for an asset price or currency. The lines are called the upper line (UL), the lower line (LL) and the median line (ML). All pitchforks have three lines, and each line starts from one of the pivot points. The pitchfork shape itself is created by drawing a line from the first point that runs through the midpoint of the other two points.
Hence, the pitchfork is most suited for intermediate and advanced traders. It’s a matter of judgment that can only come from experience. Ultimately, there are no set rules about how to place your points and draw the channels. These points are based on highs or lows (also called pivot points) and are placed at the end of previous trends. The first step to creating the pitchfork is selecting three points for drawing the trend lines.
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