Today’s video is part 1 of “Andrews Pitchfork Trading: A Great Tool to Make Money in the Stock Market.” Technical analysis is the art and science of reading the charts of stocks rather than looking at a company’s “fundamentals” (earnings, sales, price/earnings ratios, etc.).
If you’re not comfortable only trading a stock based on it’s technical analysis, you can combine technical analysis with fundamental analysis as many traders do.
This first, in a 2-part series, will focus on a technical analysis tool that fits into the category of “market geometry:” Andrews Pitchfork Trading. See Part 2 further below in this same blog post.
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VIDEO TEXT:
Welcome to this video on Stock Market Trading Tips regarding Andrews Pitchfork Trading. I’m Doctor Barry Burns with Top Dog Trading.
This is part 1 and you can watch any of these in any order. We’re going to show you how to do this with Andrews Pitchforks. So let’s take a look at what that is. It’s a geometry pattern that we use. Go up here, click on Andrews Pitchfork. Obviously your software maybe a little different. This is Ninja Trader.
THE BASICS OF ANDREWS PITCHFORK TRADING
Andrews Pitchfork is a 3 point drawing tool. We go 1, 2 and 3. Now the point of this is we are going from a high, significant high to a lower low and then to the next high.
We’re looking to draw this in the energy of a new trend. A new move. Now it’s going to show us the relative strength of the price action as it continues in that trend. If you can use your imagination a little bit, you can see this is called the handle here. And that’s the handle of the fork. Just think of it is the fork. And the fork is angling down. And then from here you have the sides going out like that and that and then the tines, they are called tines, the fork are going this way.
The primary times we’re looking at are, first of all the middle one is most significant. I got that in black. I’ve got these drawn in different colors. The middle one is black, and then the outer two from that are in a darker blue. As you can see a little thicker.
Ultimately what we would like to see is the market to stay within the boundaries of this line or tine if you will. And this one here. Because what that’s showing is that the market is maintaining the same relative strength as this initial impulse move from there to there and then down again.
WHAT IT’S ALL ABOUT
Remember Andrews Pitchfork Trading is all about the energy of the market. How is this energy continuing? So again our initial 3 point were those 3. That sets up a particular type of energy for the market to go down. And we want it to stay below this line and basically above this line.
Because if it goes below this line, that means the market is probably having a exhaustion pattern.So we get a wave 1 here, stays within that area. Wave 2, stays below that tine. Great. Wave 3 comes right down to the bottom one.
Wave 4 actually comes in here, now here we start to show a little bit of weakness. See that. It comes back up and we are still okay, because it doesn’t go above this one, doesn’t get above that one. This is your final hurrah. Up here is showing a little bit of weakness. And then when it come down, it gets back to the little one, but look it does not come down to that one. So this is the key that we’re watching.
5 wave pattern is what is normal. We are looking for a trend to have 5 waves. And they don’t always have 5 waves. Sometimes they got only 3, other times it will go 7, or 9, or 11. So what we’re doing is we are counting our waves. Let’s say if it will go average of 5 or if it will be an exception to the rule.
PRACTICAL TRADING TIPS
Now we do that by simply looking at the relative strength of the market, relative to the initial impulse move. Here we are good, here oops we broke out above that line, so that’s our first little signal, that oh there is weakness, the strength of this trend is starting to get weaker. Does it get back to this line? Nope, it only goes to that one.
When we’re putting in a wave 5 there, then probably we are going to just go ahead and get out. I would. That’s what I would do when using this Andrews Pitchfork Trading technique. Because right at wave 5, which is average, as far as the length of the trend goes, 5 waves. And it’s getting weaker. It didn’t get down to this line down here, it only got to the middle one. And then it comes back out.
Now if you want to be a little more free flowing with your money management, and you think oh can go further, it can go further down, just gets weaker, doesn’t mean it won’t go down any further. You might want to place your step outside of this line. And definitely outside of that line for sure.
But look how much money you are giving back when you do that. So you’re giving back a lot of potential profits here. You know about $10 in this particular case. And once it breaks out of that, well then we are done. Then this initial energy down has completely changed.
HOW TO START OVER AFTER THE TRADE ENDS
What are we going to do then? Then we’re going to do the exact opposite of what we did before. We are going to take this pitchfork off and we’ll put a new pitchfork up.
Oops got the wrong button there, so we are going to go now, measure it up from there to there and to there. It now measures the movement up.
Look at that, it didn’t go very far, did it? It knows how the market did respond to those zones if you will. And it kind of goes little, climbs up this one but it’s already on the outside, kind of breaks to the outside of it immediately meaning that do not expect a big move to the upside right here. At least not on the same energy. And it just goes outside the zone right away and starts outside the time.
So once that happens, then what I would do is see how the energy just goes sideways then. This was not a strong, this is a strong move. Up here, 1, 2, 3. But that same type of energy doesn’t continue up.
ADVANCED APPLICATION
You can actually, if you want to get real creative with it, get a little more advanced for you. You can actually then go to like that, low over there and say okay, well this is the energy that it established, and it did. And now here is our 3 primary tines. And it goes up, it stays in there for a wave 3 and then it fails. Comes all the way down and it’s outside.
What happens when it goes outside? Totally chaos. So does not continue in that same direction. Okay so that’s the idea.
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Andrews Pitchfork Trading to Make Money in the Stock Market, Part 2
This second, in a 2-part series, will focus on a technical analysis tool that fits into the category of “market geometry:” Andrews Pitchfork Trading.
Enjoy the video and please leave your comments below.
PLEASE “PAY IT FORWARD” BY SHARING THIS VIDEO & ARTICLE ON FACEBOOK OR TWITTER by clicking one of the social media share buttons above, or at the very bottom of this article.
VIDEO TEXT:
Welcome to part 2 of this series on how to make money with stocks.
In the last video I showed you how to use Andrew’s Pitchfork and we got a lot of good emails from that. So I decided to do it again and take it a little more advanced today. So lets jump right into it.
Today I’m going to be using an Intraday chart. This is actually a 3 minute chart of Apple. The last video I showed you it on daily chart. And we just go up here to the Andrew’s Pitchfork. As I want to show you a couple of different things. Little more advanced than the last time.
So first of all, we can span from one day to the next. That’s the first thing I want to share with you. so here is one day, then here is the next. This, on the left of this vertical line is I August 15th, and then to the right of the vertical line is August 16th. But, yeah so you can do this across from one day to the next.
TRADING ANDREWS PITCHFORK WORKS ON MULTIPLE TIME FRAMES
So we’ve got our low, and then our higher high and a higher low. That’s the first place we use to draw our lines. And then we have our 3 tines. Here is the handle, and there is our main tine. And then our 2 tines on the opposite side of that.
Now remember as long as it stays within these tines, we are considering that it is going to be in a relatively strong position from this initial impulse move relative to that. Once it breaks outside of this area here, it goes down here then that’s where we want to be out. Specially here that would be our ultimate stop if we wanted to try to hang in there for riding through some noise.
Alright you can say it did pretty well. Right now if you got out here, you did pretty good. In fact the 50 MA trend’s over, that’s what that line is. There, and we actually get a short trade there. but here is what’s different to what I talked about in part 1.
WHAT’S DIFFERENT IN PART 2 OF THIS ARTICLE
In part 1 we are looking for an uptrend, and I talked about using this for staying in long trends and getting out of short trends. So basically we’re using the Andrew’s Pitchfork, and when to get out when it breaks out of the trend to the bottom side. However look what we have here, here is the upper tine, and that’s an uptrend, and it goes way above the upper tine. So here is a new rule for you. This is an exhaustion move.
When it gets outside of this, in a bullish territory where you would expect it to stay within these tines. And instead of just using it as a stock going against the trend, what if it goes dramatically in the direction of the trend. Well I would get out there. why? Because that’s an exhaustion move. It’s way beyond the normal energy of the market.
THE DEVIL’S IN THE DETAILS
We could have stayed there longer and we get out over here but the problem is, look here we get out of this at this price, here we get out at that price. Now these are optimal prices. Obviously. But you get your 5 wave move which is an average trend 3 and 5. And we just get out there.
We may do that because based on the geometry of the pitchfork, we have an exhaustion move there, so this price is normally going to be much better than if I wait for the trailing stop using the Andrew’s Pitchfork. Now let’s take this same chaty and look at it in the opposite direction going down.
AND NOW FOR THE ADVANCED STUFF
Here’s a couple more advanced tips here. I give a lot of basic stuff in these videos but once a while I like to do something little more advanced for the advanced traders of Andrews Pitchfork Trading as well.
Our normal wave drawing in Andrew’s pitchfork of course would be from a high that stands out to the low, to the next low or high. If we do that off of here, remember this is where, I showed you we would optimally get out at a wave 5 after that explosive move to the upside and the exhaustion move of the Andrews pitchfork.
But here’s the problem, if you do it on an exhaustion move in the opposite direction, the Andrew’s pitchfork isn’t going to work very well. And there’is a very logical reason for that. It’s simply that this is not a normal sine wave type of pattern.
It’s an exhaustion pattern. It’s an extreme pattern so if you draw it from there to there to there, you are not measuring the normal type of energy in the market. In other words, the normal cycles of the market. It’s off of an extreme move. So that’s one exception where we don’t want to do that. Therefore we want to go ahead and measure it of off a more normal cycle pattern, a more symmetrical pattern that is typical for the markets.
THE LINE IN THE SAND BETWEEN BULL MARKET AND BEAR MARKETS
In this situation the main thing here is that this is a 50 period SMA. 50 period Simple moving average. That’s what I use for my line in the stand in the sand between the bull and bear market. This is really the significant point here. You’ll also notice that one doesn’t have a number or letter because it’s not really a, it is a cycle, even though it is not a cycle high or a cycle low. And it’s definitely not a wave high or low.
We’re going to use these points. You can use this point as well. Actually that might be the better one. They are equal, no actually this one’s a little lower. So lets use that one. Okay we come up here, go to our Andrew’s Pitchfork. Bang, bata boom, and get our high there.
You’ll notice we got the same type of action, price action relative to the initial strength set up by these first 3 points. That we did going up, in other words what I mean by that is we are going down and rather than having to worry about getting stopped out over here, we get in exhaustion move or a very strong dramatic move to the downside that breaks through all of the tines in the direction of the trade.
REPEAT, I SAY REPEAT.
Again we say, oh okay, so we are not going to wait to get out over here. We are going to go ahead and count our 5 wave pattern, and then just get out. Because that’s a very very strong move, stronger than normal. Now this one actually did the next day go dramatically down. But you know hindsight’s 20/20. And notice what it did. It came all the way back. It’s just amazing how well this works. The geometry of this.
WHEN WILL IT ALL END?
So it comes back, where does it finds resistance? Right here. Where does it find support? Right there. where does it find resistance? well all along this tine. So really worked well. Now we get another exhaustion move. Another very dramatic move down. And again that’s an unusual pattern.
You will see things like this happen. And the common mental response is to say ‘OH Dang! I got out here at the high probability exit but I should have stayed in because I could have made more money.’
Right obviously that’s more money than that. And you will regret it and then you will try to reverse engineer it and say how could I have known that this would go down. Now notice the danger. The danger is if you stayed in this, you are having to stay in for a long retrace above this high, above this high. Right?
And you potentially would have given away all this profit. And we just got in here. So it’s, you’ve almost given away all your profit. So you cant do that for me risk management or money management point of view. Trade after trade over a large sample of data. This is your high probability entry point.
PLAY THE ODDS
You’ll always find a reason that you can that you could have caught one particular trade. but that has nothing to do with what most trades will do. In other words we have to trade the rule, not the exception. We have to find whats high probability, not what happens this time or that time, or any other single instance in the market’s movement. Huge problem that lot of traders run into.
You’re never going to get the perfect exit every single time. So don’t even try. Impossible. No one has ever done it, nobody will do it, you are not going to be the first.
So a couple of great lessons there. one on market geometry with Andrew’s Pitchfork Trading, people wanted some more extra stuff on that. So there you go, little more advanced stuff, some extra things on getting out before the trailing stop. That actually gets you out bigger profits. And then also a great psychological tip of the day.
PLEASE PAY IT FORWARD BY SHARING THIS VIDEO & ARTICLE ON FACEBOOK OR TWITTER by clicking one of the social media share buttons below.
Leave a comment below telling me what other information you’d like about Andrews Pitchfork Trading that you’d like me to teach in the future.
Also I am giving away one of my favorite trend trading strategies that work today. Just fill out the yellow form at the top of the sidebar on the right. Once you do that, I’ll personally send you an email with first video.
For another excellent trading video including stock market trading tips, simply click here:
http://www.topdogtrading.com/stock-market-trading-strategies/
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