The Logic Behind the Pitchfork

Thanks. Your post is informative. I think according to cycle theory, pitchforks are tools to measure the most probable path of future waves.

Crucial Point,

Thanks for the great videos (the 10D story): very informative.

Now, I think I can understand your approach of 6D: although I can not use it and I am looking for my own approach, but your bits of ideas and suggestions are truly useful.

If you shape possible outcomes into their own dimensions, then you are entitled to talk of multiple dimensions: so basically you already take into account all the possible scenarios into your coordinates systems, if you want.

About a 4D hypercube, I think you can imagine a way simpler version, just adding colours to your setup: I like that video less, I do not like unnecessary difficult. Take a 3D cube, actually paint any point with a given colour: you have a 4D cube, without all that mess. My opinion

Trading-wise: the set of possible configurations of a given cube will provide you with enough substance for another dimension (price has some constraints and limitations, to be precise; on converse we can easily remove the positiveness, if you just count from our buy/sell price: the price at which we got in is my zero, to me and I always refer to it; so negative prices are possible).

About breakout and bouncing back: my way of proceeding (if it can be of any help to others) is exactly the opposite. Suppose I claim that from configuration A then B is likely to occur. Then look for all examples where this assumption fails. What happens if it fails?

I truly believe the research of an edge lies in the research of failures, not of successes. Well, they are actually the same, but you have to quantify all possible scenarios (your extra dimension, CP, if you prefer).

Well, back to work I have many outcomes to analyze to do my homework.

An extra thought: automatic trading may be very helpful at least in the researching part. Even if you are going to trade manually, I think to be able to skim through years of events is definitely worth the extra burden.

Just my two cents.

Thanks to anyone who took part into this and to Crucial Point for interesting insight.

Thank you actarus. A very informative post!

Mahdiquant,

Thanks; glad you found it useful.

Another thought which I would like to add; I do not actually propose anything new, if you wish, just some suggestions to test ideas; not to be off-topic I will refer to Pitchforks.

I am not familiar with pitchforks, at all and to be frank I am not interested in them. but I really enjoyed the conversation so far.

Do they work? How likely they will work? I do not have an answer, but what I can add to previous plots is that I think to study a phenomenon (or to make hypotheses on cause-effect relations) one must first define the phenomenon in an operative way.

There is another interesting thread about MA crossing: does it work or not? I will not go into that, but the question itself does not make sense to me, for the way I think. A better question to me would be: does it work this set of prefixed rules?

Be caution: prefixed set does not mean prefixed behaviour.

Following the reasoning of CrucialPoint, you have to deal with extra 'dimensions' (to name them according to him). No matter how you name them or figure them, you have to deal with multiple scenarios, this is a fact. That is why I do not trust in pre-heated trading systems based on if A occurs then B, because the whole sentence should be a decision-tree
if A occurs then B if otherwise C then, provided C had occurred D if otherwise E or F. This makes more sense to me.

Getting back to Pitchforks: you can find any logic and can make any system invulnerable if you just DO NOT define it.

If I say MA crossing works in trending regime, I can define the best system of the world. Caution: what is a 'crossing' (between what and what), how do I react, how do I manage opened positions and what is a trend. You have to define this in an operative way, otherwise we get back to base one: any bounce has a breakout. Now: how do you react to it? Is it a one-to-one correspondence (under what conditions)? If it were one-to-one we would have a very easy edge: if bounce occurs, put anything on breakout and vice-versa. Not exactly what happens, but the point is: trying to find something tangible and completely defined under all possible scenarios, give an estimate of risk (adverse scenarios) and choose: would you enter the trade? Once you are in, how would you manage it?

Do pitchforks work? Maybe. First of all: what are pitchforks in a quantitative way! Even breakout should be defined in an operative way, otherwise how can you see whether something is a false breakout or not? Under what conditions pitchforks work?
With which likelihood to FAIL? Once you are in and are in loss, how long should you hold on? Once you are in and in profit? But please first define precisely (not necessarily mathematically, although it would certainly help) what you mean and how you measure it; otherwise everything works (or does not). The burden is not in assessing the capability of creating an edge with that methodology, but in plastically redefine the methodology from time to time. If you do it a priori: it is fair, you have a fantastic method; unfortunately people do it a posteriori.

Just my two extra (hopefully reasonable) two pips.

I'm glad you understood , let me borrow your term "decision tree".

Example of my trading decision tree (that is somewhat pre-heated, but unlike your typical trading system you find all over the internet):

First Pullback or ABC/123 formation
1. Is the pullback with the trend or against?
...with trend > continue to analyze setup
...against trend >discard setup

2. Is the setup at the beginning phase, middle phase or ending phase of a trend?
...beginning phase > good opportunity
...middle phase > neither good or bad
...ending phase > be very cautious (Further decisions tree are set for this type of trades)

2. Does the setup have enough quantitative force behind it (no matter what phase) ?
...Yes > enter
...No > discard

3. Stop loss at 10 pips (This is due to me being a selective scalper trader. I've researched my trading system's fulcrum regarding quantitative measures, 10 pips is not a random number for my trading system. Any other scalper should not take a 10 pip stop loss without understanding their position.)

4. What is the balance of price after entry, did price hit 5 pips or -5pips?
...5pips > proceed
...-5pips > decision tree >
was it a sharp move or a slow gradual move to -5pips?
...sharp move > Exit trade at -5pips
...gradual move > move stop loss at 7.5pips

5. Has price hit 10pips?
...Yes > move SL to 1pip
...No > proceed

6. Has price hit 50pips in under 7minutes (7min is not any random number for my trading system)
...Yes > Exit
...No > proceed

My cross-roads decision tree is implemented at this stage

Exit is determined either which parameter occurs first
* price retracement at a certain level
* quantitative force has depleted to a certain level

7. Has Price retraced to a certain % or is the quantitative force at a depleted level?
...Yes > Exit
...No > Proceed

8. Has price hit 200pips in under 1.5hrs?
...Yes > Exit
...No > calculate where is price according to my 4th dimension

9. Is price within/outside range of my 4th dimension?
...Within > Continue to implement Cross-roads decision tree
... Outside > Move stop loss to the 4th dimension level
Continue to trail price while outside the 4th dimension level until it goes within and then refer back to the Cross-roads.

10. The joker dimension will show up at any unforeseeable time.
...Continue with decision tree as long as price is outside the 4th dimension
...Exit when the second Joker occur, even if price is outside the 4th dimension

11. Is my trade going to run through a news release?
(Further decision tree are set for this scenarios)

12. End of trading session?
...Yes > Exit
...No > continue to trade

===========================
Well there you go ladies and gents, now you get a glimpse of a real professional trading system: the main crucial point is the quantitative force, a dynamic entry and the second crucial point is the dynamic exit. Notice that I have at least 12 dynamic exit strategy set in place apply it to your pitchforks

Wonderful explanation, Crucial Point. Thanks.

I still do not have a trading system, but the only thing I am pretty sure is that it has to adapt and adjusts on different scenarios. Your posts have always been very informative and this one is truly explanatory. I am glad it seems I was on the right track.

Well, I have enough meat to grill my laptop, now. That is for sure

I’ve been using/studying the fork for nearly 3 years now, it’s my primary/only indicator, next to market structure. The science behind them others can better explain than me. However, I can say that when one knows how to wield them, they can be deadly accurate in terms of low risk entries and high probability TPs. But not an easy tool to get a grip on in the beginning, nevertheless well worth the effort I’d say.

The attachment shows the probability price will reach the next ML as extracted from grain markets.
http://le-blog-de-reklats.over-blog....-30572730.html
.

CrucialPoint and PeterE! Thanks for your posts!
Very insightful!

Has anyone ever looked into the brain wave patterns or related studies of successful traders? Does such testing or emotional profiling even exist? ...Auxesis also mentioned something about traders..."not having the mental resources to hang in there...". Can it...the trader's "mindset/temperament"... be developed by anyone?

RE: Pitchforks. Agree with Beeb...my number one trading tool!

FX4

I find that when price breaks a pitchfork line and finds support/resistance shortly thereafter, it's usually the result of any of the following: sliding parallel, secondary pitchfork, trendline, previous support/resistance. This can account for any support/resistance found in any multi-dimensional pitchfork-related structure.

In the image below, I used an alternate P0 (pivot A) for the blue pitchfork.

By the way, don't expect the one-bounce-reversal to occur when price reaches a line. The lines serve the purpose of giving the area where price has a "probability" to run out of directional energy (i.e. lose momentum) upon reaching them. If there is ever a time to pay attention to how price will react, it is when it reaches one of these lines.

Starting with a pitchfork and a warning line, you can create a 3D-pitchfork by adding a few more lines.

HOURLY USD/CHF

Another perspective:

Result:

Hey Kapital,

Like what you did with the rectangle on the fork. Nice .

FX4

Hi All,

This is just my two cents. I didn't look through every thread so if someone mentioned this point, I apologize for the redundancy. Although everything said may be valid, it might be easier to think of the pitchfork in terms of simple economics and statistics. A properly drawn fork essentially takes two extreme values (a swing high and a swing low). It's anchored with a swing point in between those, which serves as the point of central tendency. The trendlines extend the extreme high and low values and the median line serves as a central tendency. When prices near a top trendline, it might be considered overbought, a statistically extreme value (sell signal) and vice versa for the lower line. The middle line might serve as "fair value." If you play with forks a lot, you will see that price does often abide by the fork for some time and it seems to gravitate around the median line, no matter the time frame. Why does it work? Not sure, but I believe it has to do with the fork being a good illustration of the supply and demand forces at work in the market or maybe it is all psychological? But wait, when you get down to it, that's what supply and demand is...right?
It seems to me a reasonable explanation for the general function of the fork, however, I cannot explain why the occurrence of switchbacks , quartiles, fibo numbers and other phenomena that occur...perhaps could be explained by Newton, other psychological factors, natural law, or a bit of everything or completely random
Anyways, just my two cents, hope this might help someone who likes pitchforks, but can't rationalize them. That was me some time ago, I always had a fascination for the fork, but needed my own rationalization to use it...

https://www.mql5.com/en/charts/88474...group-holdings

Thank you very much for your chart; same expectation here! I am also waiting for bearish moves here. Let’s see, what market offers us.

Gravity is still an unproven theory. Objects (most likely) fall simply due to their density, i.e. they find their balance in a system according to other objects and their densities.