Once you have learned the basics of median line study and know how to draw Andrew’s pitchfork, it’s time to apply it. Median Line Study is strongly associated with stock trading, but it can be applied to other forms of trading as well, e.g. currency trading.
Alan H. Andrew, who helped popularize median line study through his mail-order courses in the 1960s and 1970s, assumed that an overall longer-term trend will remain intact regardless of minor fluctuations up and down, until it breaks and a new trend is formed. (According to Andrew, price action will stay within the pitchfork 80% of the time.) A notable difficulty for the price to go back to the median after a fluctuation can indicate that a break is about to take place.
First, you much establish the channel on your chart, i.e. draw Andrew’s pitch-fork.
Trading within the channel means taking advantage of the fact that the price is likely to stay within the channel. You can trade without getting distracted by minor bumps up and down. You basing your buys and sells on a trend, not on minor and short-lived corrections.
When median line study became popular in the 1960s, trading within the channel was the main idea hailed by median line study proponents. However, it is definitely possible for a skilled trader to use the pitchfork to profitably trade outside the channel as well. It is a bit more tricky though, since you must develop your ability to notice when a new trend is about to be established.
To draw the pitchfork, use the same steps as for trading within the channel.
Andrews’ Pitchfork [ChartSchool]: StockCharts.com : English : Fetched 2016-03-24
Make Sharp Trades Using Andrew’s Pitchfork: Investopedia : English : Fetched 2016-02-17
Trading signals: Binaryoptions.co.uk : English : Fetched 2016-01-23
Pitchfork Primer: Pitchforkprimer.com : English : Fetched 2016-03-11