After identifying three pivot points to place the pitchfork, just click on the Insert tab, look for Andrew’s Pitchfork button, select it, and then click on the chart on the three points you already selected. The result should be a pitchfork taking the shape of a big channel, with one line in the middle and two parallel lines.
The line in the middle it is being called the median line. Actually, the essence of a pitchfork resides in its median line (ML) and accompanying lines: upper median line (UML) and lower median line (LML). The median line is virtually the most important one, because without it we would have only a normal channel. It is extremely important for a trader because it has a lot of attributes. For example, the ML has the tendency to attract price. It also can be viewed sometimes as a reversal area, or as an important resistance and support area.
What traders also do is they take a Fibonacci retracement tool an try to identify 50% and 61.8% retracement of the distance between the median line (ML) and the upper median line (UML) and between the median line (ML) and the lower median line (LML). The reason for that is, depending on the time frame you are using, sometimes price travels between the UML and ML, for example without even touching the lines, and the Fibonacci retracement areas are useful in this case.
One more important application using Andrew’s Pitchfort is to draw a trendline from the beginning of the Pitchfork to the starting point of the LML (in an upward trend) or the starting point of the UML (in a downward trend) and project it into the future. This line it s being called the Shiff line, and it’s meaning is that as long as it is not broken, the trend will continue.
In the recording that goes with this sub-chapter I will show you examples of all the above and how to interpret them, and for a deeper understanding of the various ways to use a pitchfork, take my advice and read the book recommendation: Mircea Dologa, Integrated Pitchfork Analysis – Basic to Intermediate Level, Wiley Trading, 2008