This indicator can be used as a tool for trend trading as well as indicate reversal areas. The indicator identifies the channels which the price can trade within when the price is trending in either direction. Using these lines, you can trade both corrections and complete changes in direction.
The indicator consists of three parallel line which creates a channel with support and resistance levels. The starting point for the lines is three consecutive highs and lows. During a downtrend, it consists of a high followed by a low then a high. For an uptrend, there is a low followed by a high then a low.
To create the first line, start at the first low and draw a line that splits the two other points as seen below.
The trickiest part of creating this indicator is choosing the highs and lows as this is subjective and may need a confirmation of a couple of extra candles before the last point is plotted. Once you have the structure it is fairly simple to use.
How to Use the Indicator
The basics principle is the price will tend to gravitate towards the central line and will bounce off or trade shortly outside the outside lines. When the channel is trending higher there are buying opportunities when the price hits the lower line hoping for a move back towards the central channel. If the price moves towards the top line, a selling opportunity arises.
This first line forms the center of the pitchfork. From this line, you will draw two more lines from the second and third point in parallel with a central line to create a pitchfork shape as seen below.
Creating the Andrews Pitchfork
To start with you will need to find three consecutive highs and lows of a decent size. The consecutive points will need to alternate between high and low. In the below chart you can see these highlighted.
When the indicator is trending down selling opportunities will arise when the price hits the upper level of the channel and a stringing buying opportunity when the price hits the lower level. The central line can also be used as a support and resistance areas. In this instance, the central line can be seen as support levels and vice versa.