Schiff Pitchfork
Tue, Apr 15The Schiff Pitchfork is a technical analysis drawing tool that is based on the standard pitchfork, known as Andrew’s Pitchfork. It consists of three main components: a center median line (trend line) and two additional sets of lines positioned above and below this median line. These extra lines are placed a specified number of standard deviations away from the median.
What sets the Schiff Pitchfork apart is the modified location of its origin compared to the standard pitchfork. Alan Andrews, the originator of the standard pitchfork, collaborated with numerous traders to teach his pitchfork method. A New York trader named Jerome Schiff approached Andrews with a theory that, in many instances, the pitchfork appears too steep when the price is in a shallow up or down trend. To address this, Schiff developed a method to adjust the pitchfork for a more gradual prediction.
This adjusted version is known as the Schiff Pitchfork. Its origin is positioned at half the vertical distance and half the horizontal distance between the high and low points (the first two points set). To create a Schiff Pitchfork, similar to Andrew’s Pitchfork, one begins by drawing a trend line between two extreme points. A third point is then established either above or below the second point, depending on where the analyst wants the Schiff Pitchfork to be located.
It is important to note that the default setting for the Schiff Pitchfork includes the drawing of two additional sets of lines. The fundamental concept behind using a Schiff Pitchfork, as well as a standard pitchfork, is that it effectively forms a type of trend channel. A trend is deemed active as long as the price remains within the Schiff Pitchfork channel. Reversals are identified when the price breaks out of this channel.
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