(binned per thread starter’s request) Powerful is the Fork

M5 GBPUSD

Bought

atb vvm

USDCHF 5min chart.
Price gapping down. When price returns to a gap this can be a trading opportunity.

Here price solidly engages a gap and confirms possible continued downward progression as bullish PA is taken out by bearish PA to the downside (a pivot).

3:1 target achieved

EURGBP 60 minute chart:

Price trending down overall. Note LLs and LHs.
Last swing in the trend denoted with blue ML drawn L-H-L. Previous swing denoted with pink H-L-H ML.

Given the blue ML price projects to the ML and has not reached it yet.

Given the pink ML the sliding parallel suggests price might turn to the downside with projection being the pink A-B

Applying median lines or Andrew's Pitchforks to trade can seem daunting. Do a search and you'll find many possible ways to apply median lines. Using the basic elements of a trend can be helpful. First what are the basic elements of a trend?

HH/HL/LL/LH definition: Higher Highs and Higher Lows in an uptrend and Lower Lows and Lower Highs in a down trend.

Impulse leg and corrective leg: An impulse leg is the leg that either makes a HH in an uptrend or a LL in a downtrend. A corrective leg is the leg that either makes a HL in and uptrend or a LH in a downtrend.

We can use these concepts to apply median lines logically rather than applying them randomly or in a way that "looks good".

We'll use the chart below to help move forward the discussion in the next post. Study it for now.

This chart shows a median line drawn using the impulse leg A to B and the corrective leg B to C.

Of course this is drawn in hindsight but let's learn.

First this median line can only be drawn when pivot C shows itself. One will often be wrong when having confidence that pivot C is in place.

Why is pivot C so important?

Because it represents the end of the corrective leg of this part of the trend and the beginning of a new impulse leg that is expected to make a new low.

So why bother with a median line? This is a valid question and the answer is you don't have to use them. But let's move on and provide another answer.

The real answer to the question goes to the heart of the purpose of a median line which is to project either the next impulse leg or the next corrective leg.

In this case it is projecting the next impulse leg. The projection is depicted with the red trend line. The end cannot be seen on this chart. This projection takes advantage of the fact that median lines accurately project to the median line (center line) about 80% of the time. This statement has been verified by Alan Andrewa and Dr. Timothy Morge.

When trading using this kind of median line we want to enter a trade as close to pivot C as possible with the target being the projection previously stated.

Using a median line with A to B being an impulse leg will provide the maximum potential profit target.

We're going back to the previous swing to show the value of the median line that projects a corrective leg.

Here the red median line is drawn using a corrective leg as A to B. Pivot C is the end of the impulse leg and the beginning of the next corrective wave.

This median line is projecting the corrective leg C to D.

In this type of median line trading from pivot C is less desirable because it is counter-trend.

The advantage of this median line is the idea that once the projection is satisfied then the next impulse leg can be anticipated.

Median lines will not always line up as they did in the previous posts.

Often the projections fail and price turns. However even this occurrence can be use to advantage.

What happens at the center line of a median line often provides clues to price direction. Note I said it provides clues not absolutes.

Notice in the previous few posts that I've spoken of projections as the major theme of the median line. This is important because there is a school of thought that uses median lines as diagonal support and resistance. While I don't fully dismiss this school of thought I do not endorse it as the primary concern of median lines. Using median lines primarily as diagonal support and resistance results in a search for a median line that "lines up" with multiple pivots. Once this has been accomplished the trader will have a nice median line that historically shows diagonal support and resistance but is left with the question of what to do with it. Often once the trader has found such a nice median line is about the time that subsequent price decides to disrespect the diagonal s/r.

Here's an example of a couple of median lines where it seems price is respecting diagonal support and resistance. Notice the amount of data this chart contains but this is typical of what some will post. It will be said that a median line is valid because price is respecting the diagonals. In fact what they've done is managed to draw a median line that respects what price has already done and they expect price will continue to do the same. Unfortunately this is usually not the case.

Closed this trade earlier today but thought I'd reflect a bit for anyone interested in the value of median lines.

The 60 minute EURUSD is currently in a steep down trend. Using median lines in the context of trends gives median lines more meaning.

A correction began about June 21 after a steep impulse. Trends are made up of impulse legs that lead to LLs in a downtrend. Corrective legs lead to LHs in a downtrend. Trading at or near the termination of the corrective leg in a down trend is desirable.

During the corrective leg price trends up with HHs and HLs until it doesn't. In this case a new low is made when price breaks below the blue horizontal shown and signals the possible termination of the corrective leg. We can see this without any median lines.

In this chart the pink median line takes advantage of the new low previously mentioned. Note the purple arrow points to a gap bar which gets filled after the new low. This is an entry area given the overall scenario and if one believes price will go on to make an overall lower low in the bigger downtrend. The grey rectangle merely highlights sellers and is a logical area to consider selling.

So what does the pink median line do? Understand first that a median line projects price. In this case A to B is anticipated to project C to D. Price doesn't reach D which only confirms that price is likely to descend from this area. Take note that the median line is not the reason to sell in that area but rather the appearance of sellers as previously noted is. The median line here shows that price does not reach D (the center line of the median line). When this happens it suggests price will go further in the opposite direction and Andrews rules state.

I haven't gone over targets but enough for now.



The orange ML is used to guide target as shown


It needs to be said again that the ML projects price. The MLs here were not used as diagonal support and resistance as so many attempt to do.

EURUSD 60 min
A median line can be drawn considering the last swing's corrective leg and impulse leg. I'll describe it in detail and then how it is relevant to any potential trades.
Pivot A to Pivot B of the ML represents the last corrective leg of the current downtrend.
Pivot B to Pivot C of the ML represents the last impulse leg that led to a new LL.
Pivot A to Pivot B projects the next potential corrective leg of which we can see price beginning to head in that direction.

Although the corrective leg projection can be anticipated it cannot be assured. Some may consider trading this projection given the fact that price may reach the ML (center line of the ML). However one must consider that this would be counter trend and as such it decreases somewhat the chance that price will reach the ML (center line of the ML).

Zooming in a bit and looking at the pink ML an argument to trade long towards the ML (center line of the ML) can be made.
The pink ML was drawn using the last smaller swing corrective, impulse and current ongoing correction.
Notice that price "zoomed" the pink line ML and did so with a large gap candle. This gives a bit more confidence that price may have a bit more upside before turning back down as would be expected given the overall downtrend.

To maximize R:R a buy upon a retest of lower PA is not without merit. However it still remains in fact a counter trade.

Finally we can also consider the following scenario given the overall downtrend.

The pink ML in this configuration uses the last impulse and the current corrective attempt. It assumes that price may already be turning down but more confirmation of this is needed. Selling in this area offers a decent R:R. In addition it is with the overall down trend.

EURUSD 60 min chart.
The 60 minute time frame shows a rather relentless down trend that began in May 2021. Currently it is in a correction and given the trend it seems reasonable to expect further downside.

The chart below shows the current median line drawn as a corrective ML. With the current corrective leg price has satisfied the projection so any traders who bought up to this point were rewarded. While further upside can't be ruled out I'll be looking for price action to the downside suggesting the beginning of a new impulse leg.