Archive for July, 2009:
A Primer on Andrew’s Pitchfork Application on Forex Trades
Andrew’s Pitchfork is invented by the well-known and celebrated market master, Dr. Alan Hall Andrews. This is a technical indicator that can be used by forex traders as well as those that are involved in the other markets. It can help a trader identify and measure the general cycles that have an effect on the fundamental market activities. There are two different applications in which you can make use of the indicator on your trading technique. These are the approaches in which you can trade within and outside the lines.
By Definition
Before we tackle the two approaches, it is vital that you know first what Andrew’s Pitchfork is. Basically, this is called the median line studies and is similar to the support and resistance indicator. The inventor of this believed that the price of the currency in the forex market would descend to the median line almost eighty percent of the time. The remaining 20% is for the change or the fluctuations in the outlook accounting. Thus, the theory states that whether there are changes in the market trend, the overall market performance will remain unaffected. To know that the current trend will be replaced by a new one, the supply and demand elements will shift and the prices of the currencies will drift. These situations are the key to finding the trading opportunities for beginner and experienced forex traders. If you want to increase your chances of getting accurate trades, the Andrew’s Pitchfork indicator will help you win your game.
The Application
Before you use this technical indicator, you are required to classify the highs and lows that appeared on the chart. Now, draw the pivot at the peak and label it. After the pivot, you will need to make out the trough and the peak, which are both at the right side of the pivot. You have now isolated the high and low with the pivot point. This time, you can place the application. It all begins at the first pivot point, which is also the median line. The peak and the trough will be the support and resistance for the trend of the market.
The Two Approaches
As previously stated, there are two approaches which can be applied for the Andrew’s Pitchfork technical indicator. The first one is to trade within the lines. To profit from this strategy, you will need to understand how exactly it works. For instance, your currency pair is USD/GBP and in the indicator, it shows that it has moved away from the median line towards the pitchfork’s top resistance. Considering these indications, a trader will only benefit from it if he places an entry at the uppermost part of the signal line. Of course, rigorous money management will always help along with a correct stop loss strategy. Even as the price of the currency moves toward the median line once again, the momentum will remain downward. This means that there is a great chance of getting close to a profitable position of 1000 pips during the trading process.
On the other hand, to trade outside the lines is yet another approach that you can apply using the technical indicator. Although this is less recurrently used, they are most considered for long term trends. This is a little bit more complicated than the other approach. You have to understand that the theory here states that the price action will descend to the median line but it can also be assumed that the market has decided that there will be a new trend coming. This can lead to losses on the trader’s part. To avoid this, you can add parameters to secure the retracements and close your position early.
Useful Divergence Metatrader indicators
Before you make use of a Metatrader indicator particularly the divergence indicator, you should first understand what it means when someone speaks of the Metatrader indicator. Basically, this is a series of data points, which can be used by traders who wish to enhance their knowledge in predicting and examining the movements of the forex market especially the currency pairs. Because of the advancement of the technologies today, one can effectively create his own technical indicator. This is important so that a trader will be able to develop his or her own strategies in the forex market.
The divergence indicator is among the most popular indicators for the traders in the forex market. Divergence here pertains to the signal that a reduction is dropping steam. The divergence indicator is currently considered as the strongest most especially if a trader decides to make use of the said indicator with the stochastic divergence ones. Most of the time, the buyers of the currency pairs will purchase the currencies and then they will push the prices into a specific direction even though a lot of traders have already stopped dealing with transactions for the day.
There are a great number of divergence indicators that are present today and among the most widely used are the MACD or the Moving Average Convergence Divergence and the stochastic oscillator. Stochastic is often used to point out whether the currency you are looking at us oversold or even overbought. Often, this is presented in such as way that it is placed on the zero scale up to one hundred percent. You can calculate this with the use of the two lines that can be found on the chart itself. These lines are a representation as to whether a currency is excessively bought or sold. This is believed to be one of the most powerful signals that can be used in trading in the forex market.
Meanwhile, the MACD divergence indicator involves the two lines related to the momentum or the movement of the currency value at a certain period of time. The single line that can be observed from the chart is actually the difference between the 2 exponentials known as the moving averages. You can also see that there is another line that is called the trigger or more commonly known as the signal line. This is the outcome of the exponential of the averages that is taken from the single line difference. Here is an example of a result produced by the MACD divergence indicator:
You can definitely combine the two divergence indicators and this will help you understand more about the dealings in the forex market. With the stochastic indicator telling you if it is time that you buy the currency pair you are looking out for, the MACD will confirm if you will really have to make a purchase. If it is in a high fractal formation, you should certainly buy the pair. If you want, you can also make use of the stochastic indicator with the Relative Strength Index or the RSI.
Divergence Metatrader Indicators
Before you get to know more about divergence indicators, you should first understand the meaning of a forex Metatrader indicator. This is a sequence of data points that are used by every knowledgeable trader to predict and even examine the movements of the currencies in the forex market. There are now a lot of popular technical indicators today and they grow in number each day because a trader is allowed to develop his own indicator.
With the divergence indicator, this is believed to be the most well known indicator that is being used by the traders today. When we speak of divergence, we are pertaining to the signal that a contraction or a rally is dropping steam. These indicators are even considered as the strongest signals especially when they are used together with stochastic divergence indicators. What happens here is that there are buyers during the last periods of the trades who are pushing the prices of the currencies into a certain direction while a greater number of traders have stopped transacting. This is because they are cautious of the retraction or the correction.
There are certain types of divergence indicators that are extremely popular today. Two of them are the stochastic oscillator and the Moving Average Convergence Divergence or MACD. The former is used to indicate whether the currency is being oversold or overbought and is presented on a scale of zero to one hundred per cent. This is based upon the observations that the indicator has obtained during a specific amount of time particularly on the closing prices. Stochastic is calculated once there are two lines that appear on the chart. They represent if a certain currency value is overbought or reversed. Divergence between the lines of the outcome of the stochastic oscillator as well as the action of the prices is actually a very powerful signal in forex trading.
On the other hand, MACD is an indicator that involves the setting of two lines that are related to the momentum of the currency value. The single line from the MACD chart is the difference between the two exponentials which are moving averages. Another line called the trigger or the signal line is the result of the exponential of the moving average from the difference of the first single line. Whenever the MACD and the lines that are known as the trigger cross each other, a trader can predict that there is a change in trend that will come in the not too distant future.
MACD divergence and stochastic divergence can be combined and this is actually a powerful method that a trader should try. It will also be much more effective if you try different custom indicator combinations using the stochastic and the RSI or the Relative Strength Index. Since stochastic is often used to determine whether it is time for a trader to buy a currency pair, having the MACD on check may lead to potential gains. What you will do here is to examine whether the value of MACD has a high fractal formation. If this turns out to be the case, you should definitely make the purchase as soon as possible. It is inevitable that traders like you will find other ways on how they can make their job easier and with the Metatrader indicators, you will surely discover them one way or the other.
Whatever divergence indicators that you choose to work on simultaneously, you should have a great understanding about their main elements. Since these types of indicators are really powerful, your trading opportunities will increase and in line with this, your gains will mount higher.
