Forex Investment and Currency Trading

The pitchfork is created by drawing a line A from the start and finish of the first significant counter-trend price move (retracement) and then drawing a rend line B from the mid-point of the line back to the start of the original price move. Next, extend this line B to the right and draw two parallel lines starting from the end points of line the first line A (to the right).

Trend lines have been applied to all markets in all time frames. A rising market bounces up off its supporting trend line and a falling market bounces down off its resisting trend line. In the former case, the trend line provides a buying point at each bounce. If this market is still trending higher, (i.e. – does not break its trend line), there is no signal given as to when to sell to lock in profits. By drawing a parallel line to the trend line, a channel can be created which contains all short-term rallies and declines within the general trend.

The bottom trend line can be used to buy into the rally and the top trend line can be used to take short-term profits. After selling, the trader would then wait for the market to hit the bottom trend line to buy again. It is common for a market to trade in the lower channel, jump to the upper and then back to the lower. During all of this activity, the general trend is still intact. When prices move outside of the larger channel, the overall market trend may have changed.