Trading with Median Lines /Andrew's pitchfork

Kavima

Well-Known Member
#1
Hi

Starting this thread to share information on the method of trading with Median Lines,also called as Andrews pitchfork.It has been called as one of the leading indicators which can be used to predict high probability price targets .Combining it with trading rules / money management the method can be used as a good system.It can be used in all time frames, and gives very good entries and exits for positional trades.

The method is suitable for traders who prefer to use charts for their technical analysis for calculating their levels.It's basically a VISUAL method with price patterns against systems which use Numbers / ratios for finetuning levels.

Median Lines can be used in combination with Fibonacci ratios very effectively for trade setups.

I have learnt about this interesting system over the years with information on the internet and trading with the concepts and setups which I have evolved from the knowledge.The system performs well as in any other system only when we trade with rules , stoploss mechanism and money management.
Let me move on to the basic concepts..
 

Kavima

Well-Known Member
#2
Median line studies utilizes the concepts of support, resistance, and retracements .

Median Line method also called as Andrew's Pitchfork was developed by Alan H.Andrews.
Andrews' Pitchfork is a trend channel tool consisting of three lines.
The lines formed can help predict channels of support and resistance in a trending market.There is a median trendline in the center with two parallel equidistant trendlines on either side. These lines are drawn by selecting three points, usually based on reaction highs or lows moving from left to right on the chart. As with normal trendlines and channels, the outside trendlines mark potential support and resistance areas. A trend remains in place as long as the Pitchfork channel holds. Reversals occur when prices break out of a Pitchfork channel.




How to draw Median Lines

1.Identify a significant ( high or Low) reversal point- this becomes Point A.
2. Draw a line from this point to the next significant reversal point at Point B.
3.Then plot a line from a significant point early in the trend ( Point C) bisecting the first line halfway between A & B.This is the Median Line.
4.Now draw two lines parallel to the Median line, one starting from Pt A and other from Pt B.
5.These form the Median line set / channels or Andrews Pitchfork.

How to draw the charts

1.There are many stock charting programs which have Andrews pitchfork tool.
2.Web based charts programs like Icharts.in have line tools where the APF line can be drawn and saved.
2.Copy charts and paste them in Paint program and draw the lines.( But this is a time consuming process for short term trades.However can be used for longterm trades /positional trades.
 

Kavima

Well-Known Member
#3
Resources to learn Median Line trading

Resources for learning more about Median Line trading..

1.Best Trendline methods of Andrews by Mikula forecasting

This book will give an insight of how Median lines can be used for trading, finding entries and targets .Right from the basic concepts to the trade setups the book is a good reference to build a system.

2.Timothy Morge is a professional trader of 39 years experience and has been actively using and sharing his knowledge about median line trading .He has some wonderful websites ,
www.medianline.com and www.marketgeometry.com which can be accessed for loads of information, charts and articles which with patient study throws up gems to use ourselves.

My blog also has information about the above.
 
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Kavima

Well-Known Member
#4
Example of charting and understanding trend


Here I've attached a nifty daily chart with the Median line drawn with Upper median line parallel and Lower median Line parallel.

How do we interpret and form an opinion of the trend and where the prices are heading?


We start the median line from an important pivot point and draw the line through 50 % of the next major retracement / swing.Parallel Lines are drawn equidistant from the Median Line through the extreme pivots of the retracement swing.The Median line set can be drawn as soon as the price crosses 38.2% R of the retracement swing.
Now , the Lines are ascending and we call this an Ascending Pitchfork and the trend is moving up as long as the price is contained within these parallel channels.
The Price will not move up in a straight line and will alternate between rallies, retracements and consolidation periods .
The basic concept for the trade Decisions are
1.Lower Median Line parallel is a support Line.Testing and retesting of this line gives a good entry Point for Buy.
2.When Price climbs up and meets Median line,
2a.It will meet with Resistance and retrace the upswing recently completed.
The retracement can reach the Lower Median line parallel again or after a minor swing down can breakout of the previousminor swing pivot.So the breakout can be another Buy Entry point.
2b.The price consolidates for a longer period within a range.The breakout of this range Gives a good BUY Entry point.
2c.The price zooms through the median Line.It indicates a strong trend and price has a probability of reaching the Upper median line parallel.So adding to positions can be done.
3.Upper Median Line Parallel is the resistance for the upmove.When Price meets the UMLH , one can book profits on Long positions.
3a.On meeting the UMLH, a red candle indicates the trend reversal.One should wait for a retest of the high, formation of a lower high, or breakdown of a minor swing retracement and go short.The first target will again be the price bar meeting the Median Line.
The Price need not meet the UMLH.The formations of swings at the upper channel and the breakdown into the Lower channel will give the indication the trend is reversing.
So the next step is to look out for formations where we can short the stock / index.


At the beginning of any trend , we cannot assess the strength straightaway, so we need to enter trades with always the stoploss in mind.Price patterns, Breakouts ,volumes give hints about the trend direction.
In Median Line System, we look out for patterns Like 123 pattern, Breakouts of Minor Swings highs,minor swing lows to enter a trade with a minimum stoploss.
In the attached example chart, there is a minor retracement at 50 % level of Retracement and breakout of the swing high gave a good Buy entry point with the swing low as the Stoploss.
When it reaches the Median Line, there will be a resistance and this point is the place to book part profits.The price patterns at the Median Line which have to be watched out for
1.Reversal
2.Consolidation
3.Breakout

At the median Line the trade decision will have to be taken based on the above.

Again coming back to the example chart, the price retraced from the Median line and reversed again.The breakout of the Swing High at the Median Line gave a second entry for Buy position.
The price goes through a consolidation mode and after touching the Lower Median Line parallel climbs up again.Now the breakout of the previous sminor swing high gives another Buy Entry point.The meeting point of Price Bar at the Median Line will be the part profit booking target.

Some simple tips to follow would be :
Ascending Pitchfork: Up Trend , Look out for BUY trades ( trend trades)
Descending PitchFork:Down Trend , Look out for Sell trades
 

EagleOne

Well-Known Member
#5
Thanks, Kavima, for this thread!
You won't believe, I figured this method independently a few weeks back as a side-effect of the complex methodology I am developing. Firstly, I was elated thinking it's kinda discovery. Later, when I researched through the Net, I found some Andrew guy had already done that!
Well, the only comfort I have now is, great minds think alike. :p :)

Please continue with more what you know about Andrew Pitchfork. And save me from muttering ever so often: God!...Why do all the interesting trading concepts not get discussed at length on TJ? One or two pages, then fissss....gone! Leaving me with all those ancient stuff, boring as a dead horse, that gets beaten to death on a regular basis on almost every other thread.

Thanks again. And again I say, please continue.
 

4xpipcounter

Well-Known Member
#7
Kavima, I am also looking forward to your posts. Keep posting, as I am sure this is going to be a very helpful thread, and we can tell you do have some experience.

BTW, tell me if you agree. The nice thing about pitchforks is they are a trendline, regression channel, and a facsimile of a standard deviation measure. It is a very useful tool because of that.
 

Kavima

Well-Known Member
#8
Example of Median Lines in an Uptrend
Attached below is a daily chart of State Bank of India to illustrate the median line concepts to use in taking a decision to enter and exit positions.



There is a double bottom and a series of higher pivots and lower pivots formed, so the view is that the stock is in an uptrend.
When the swing AB is formed and the price starts moving up 38.2% retracement of AB, we draw the Median Line set.The price bar which crosses 38.2% R is the signal bar.
The price action after this point is watched out for either a retest of the Lower Median line parallel or breakout of the signal Bar high.
In this case the price touched the LMLH in the next day and a Buy position with Stoploss of the point B could be entered.
(or) a Buy could be taken at the breakout of signal bar with Stoploss as Low of the Signal Bar.

The discipline to enter positions with a smaller stoploss point is important, as in trading markets, nobody can predict the price moves.

The targets will be when the price bars meet the Median Line.In this case ,after meeting the Median Line there was a consolidation and the breakout of a price bar which met the ML was a good entry point for adding positions or a new Buy.
Point 1 and 2 are the points to book profits.
 

Kavima

Well-Known Member
#9
Entering Short term Trades
State Bank of India Chart example
Let me run through a recent 60 min chart with entry and exit points for trades using Median lines and the concept of Warning Lines.

I have drawn an ascending Pitchfork from a low in August through the mid point of a retracement swing after the price bar crossed 38.2 % R.Buy position entered when price crosses signal bar high.Target reached very close to median line.
Afterwards, the price has moved in a range, a ledge like formation.two probabilites at this point- Breakout above range, continuation of Long trade / New buy position.
Taken a long at the breakout price above the range which happened within the channel, booked the position with the stoploss .
Breakdown of range- Entering Short position.
In this case, price moving out of the Ascending pitchfork and breaking down confirms a good entry point for the Short.

The next Pitchfork , now Descending is drawn.Price hits the Median line and moves further down towards the Lower Median Line Parallel.Part profit booked for Short.


Here I'd like to introduce another concept of median line followed.This is called as warning lines for the extensions of the swings beyond the parallel Lines.This is drawn with distance equal to the distance between the Lower median line parallel and the median line and Upper median Line parallel.
These are also support or resistance lines similar to the LMLH and UMLH and are drawn when price moves out / breaks out of the channel.
In this instance, the price moved down to the first warning line for the profit .


A blue Pitchfork is drawn with Pivot C from the low point of the previous larger swing.( as clear minor swing pivots were not formed in the chart.)
Now,Price has climbed up upto the Blue median line where resistance is expected.
The next few price bars close will determine the next trade decision.The probability exists that it can climb upto the red UMLH where again it meets up with resistance.
So in both cases , short trade entries is being looked out for.
 

4xpipcounter

Well-Known Member
#10
Kavima, what is LMLH and UMLH?


Entering Short term Trades
State Bank of India Chart example
Let me run through a recent 60 min chart with entry and exit points for trades using Median lines and the concept of Warning Lines.

I have drawn an ascending Pitchfork from a low in August through the mid point of a retracement swing after the price bar crossed 38.2 % R.Buy position entered when price crosses signal bar high.Target reached very close to median line.
Afterwards, the price has moved in a range, a ledge like formation.two probabilites at this point- Breakout above range, continuation of Long trade / New buy position.
Taken a long at the breakout price above the range which happened within the channel, booked the position with the stoploss .
Breakdown of range- Entering Short position.
In this case, price moving out of the Ascending pitchfork and breaking down confirms a good entry point for the Short.

The next Pitchfork , now Descending is drawn.Price hits the Median line and moves further down towards the Lower Median Line Parallel.Part profit booked for Short.


Here I'd like to introduce another concept of median line followed.This is called as warning lines for the extensions of the swings beyond the parallel Lines.This is drawn with distance equal to the distance between the Lower median line parallel and the median line and Upper median Line parallel.
These are also support or resistance lines similar to the LMLH and UMLH and are drawn when price moves out / breaks out of the channel.
In this instance, the price moved down to the first warning line for the profit .


A blue Pitchfork is drawn with Pivot C from the low point of the previous larger swing.( as clear minor swing pivots were not formed in the chart.)
Now,Price has climbed up upto the Blue median line where resistance is expected.
The next few price bars close will determine the next trade decision.The probability exists that it can climb upto the red UMLH where again it meets up with resistance.
So in both cases , short trade entries is being looked out for.
 

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