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Invented by and named after renowned educator Dr Alan H. Andrews, the technical indicator known as Andrew's pitchfork can be used by traders to establish profitable opportunities and swing possibilities in the currency markets. On a longer-term basis, it can be used to identify and gauge overall cycles that affect the underlying spot activity. Here we explain what this indicator is and how you can apply it to your trades using two different approaches: trading within the lines and trading outside the lines. 

Defining the Pitchfork 
Available on numerous programs and charting packages, Andrew's pitchfork (sometimes referred to as "median line studies") is widely recognized by both novice and experienced traders. Comparable to the run-of-the-mill support and resistance lines, the application offers two formidable support/resistance lines with a middle line that can serve as both support/resistance or as a pseudo-regression line. Andrews believed that market price action would gravitate towards the median line 80% of the time, with wild fluctuations or changes in sentiment accounting for the remaining 20%. As a result, the overall longer-term trend will (in theory) remain intact, regardless of the smaller fluctuations. If sentiment changes and supply and demand forces shift, prices will stray, creating a new trend. It is these situations that can create significant profit opportunities in the currency markets. A trader can increase the accuracy of these trades by using Andrew's pitchfork in combination with other technical indicators, which we'll discuss below. 

Applying the Pitchfork 
In order to apply Andrew's pitchfork, the trader must first identify a high or low that has previously occurred on the chart. The first point, or pivot, will be drawn at this peak or trough and labeled as point A (as shown in Figure 1). 

Once the pivot has been chosen, the trader must identify both a peak and a trough to the right of the first pivot. This will most likely be a correction in the opposite direction of the previous move higher or lower. Turning to Figure 1, the minor correction off of the trough (point A) will serve nicely as we establish both points B and C. 

Once these points have been isolated, the application can be placed. The handle of the formation begins with the pivot point (point A) and serves as the median line. The two prongs, formed by the following peak and trough pair (points B and C), serve as the support and resistance of the trend. 

Read more: http://www.investopedia.com/articles/forex/05/AndrewsPitchfork.asp#ixzz1S5jgkWM4