At the end of the article we make a backtest of a triple screen trading strategy. In conclusion, the Triple Screen Trading System is an effective and versatile approach to trading that can assist traders in making informed decisions by offering a detailed view of the market. It has become immensely popular due to its applicability in various financial markets and its ability to provide reliable signals. The triple screen trading system helps identify the prevailing trend across multiple timeframes in forex.

The idea behind it is that every trading decision should be based on three tests. Day traders are investing professionals who engage in frequent and ongoing buy and sell trades each day. Their strategy is based on predicting and seizing on intraday price changes.

• The buy position must be opened higher than that day’s highest level.
• The triple screen trading system was developed by Dr. Alexander Elder, an American professional trader and trading coach who has written many trading books.
• New versions typically add other indicators but using the naked eye to spot price action here is a completely acceptable method.
• The Buy Stop order is set one point above the previous period’s high where we received the buy signal from the oscillator.

Select three timeframes

There are indicator options and advanced functions that make this system possible. Before diving straight into this method, back-test your strategy on a demo account on MetaTrader4 by looking into the past performance. We can speak about a long-term upward trend if the MACD histogram has flipped and is going upwards from the region below 0. If the MACD histogram has flipped and is going downhill from the region above zero, the market is in a long-term decline.

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There are many ways to trade Alexander Elder’s triple screen trading strategy. The backtest we did in this article is just one example of how you can do it. With data driven strategies you can twist the trading rules to whatever you prefer. So, we attach an oscillator of choice (stochastic, for example) to the chart and wait for it to show the oversold signal. Any sell signals in this case would be ignored because the uptrend from the first screen has already filtered those out. A sell signal is a red flag alert indicating to a trader that they should sell a particular security.

Trading Strategies

On the M15 chart of platinum, we see in detail the wave that was indicated as an entry area on the previous chart. We just want to reconfirm now that there will be no sudden downward reversal to invalidate our market correction assumption. We wait for the price to rise above the indicated level along with the 50-period Moving Average. We may open a long position right after the first candlestick closes above the resistance line, locating the stop-loss at the bottom of the previous candlestick down.

Market Timing Strategies (Setups, Regime Filters & Backtest)

You can also choose to use the daily chart or H4 chart, instead of the weekly chart, for screen 1 if your trading timeframe is H4 or H1 correspondingly. But it is important to know that a trend really depends on which timeframe you are looking at. For instance, the trend may be up on the daily chart, but when you look at a four-hour chart, it may be down.

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That is the reason that all three indicators must behave in the same manner and when all the three gives a positive signal, then we will move to the second step. The triple screen trading system requires the first two stages of the study on a weekend. It means that one can start examining this process only after the weekly closing is over.

New versions typically add other indicators but using the naked eye to spot price action here is a completely acceptable method. After identifying the direction of the main trend, we look for a corrective wave in the opposite direction on our screen 2 so we can get into the market at a beneficial level. To achieve this, we apply an oscillator to the chart, which would help us know when the corrective wave is about to end (oversold or overbought). Please read here for a briefing on what happens when stock markets are oversold. After a trade entry is taken, the market is expected to move in line with the dominant trend for the trade to make profits. This timeframe offers an opportunity to time trades more accurately.

This triple screen trading system was developed by Dr Alexander Elder. By adopting this multi-faceted approach, traders can significantly boost their chances of achieving consistent profits. Traders can also refine the approach based on lessons learned for future trades. Thus it will create a higher top and higher bottom which also confirms that the downtrend or the correction is over and the price has started creating the higher top and higher bottom.

Once the direction of the long-term trend has been determined, you will have your trading direction for the intermediate chart, either to buy in the uptrend or sell in the downtrend. The triple screen trading system was developed in 1986 by Dr. Alexander Elder. Despite its name, the system has nothing to do with the number of physical monitors used –  it was designed to eliminate false indicators and signals by combining multiple technical indicators. If the first screen has an uptrend and the second has a downtrend, the Trailing Stop will capture a buy at an upward reversal. The Buy Stop order is set one point above the previous period’s high where we received the buy signal from the oscillator. If the price continues to fall, the order likewise falls, briefly above the high, until a buy opens or the primary trend reverses – at which time the trade is canceled.

Setting Up The Triple Screen Trading System

Therefore, you should ignore all buy signals, and focus on generating a sell signal, as the bullish route has been eliminated by the first screen. The direction of trade is actually identified by the first screen. When it identifies the direction of the tide, this is the only direction you are expected to follow in the second chart. Therefore, if your trend indicator signals that the price action is trading in an uptrend, you can only open a long position.

• The capacity to identify price trend reversals is the most well-known aspect of this indicator.
• We wait for the price to rise above the indicated level along with the 50-period Moving Average.
• It is important to note that between 74-89% of retail investors lose money when trading CFDs.
• By integrating long-term analysis, intermediate trends, and timely execution, traders can enhance their ability to maximize profits while minimizing risks.

After that, for the first screen, you can choose a weekly timeframe, and for the third, an hourly or 4-hour timeframe will suffice. Intraday traders can perform the same thing with shorter timeframes. For instance, if the intermediate trend is H1 or H4, the long-term trend is D1, and the short-term trend is M15 or M5. The first screen aims to identify the long-term direction of the market, triple screen trading system providing traders with insights regarding market trends. This is typically accomplished through the use of daily or weekly charts.

Dr. Alexander Elder developed the indicator based on the market’s bullish and bearish power. The bullish power evaluates the market’s capacity to drive the price above the current average range, while the bearish power evaluates its capacity to push the price below the current average range. After identifying the direction of the trend on the first screen, the role of the second screen comes into play. On this screen, we’ll see a chart with a smaller time frame, on which we’ll look for a trend that runs in the opposite direction to the long-term tide and wait for it to reverse. Each will be reflected in one of the three screens, as the table below shows. So even if the weekly chart allows a positive trend, the stochastic in daily chart might say the other way round.

It is important to note that between 74-89% of retail investors lose money when trading CFDs. These products may not be suitable for everyone, and it is crucial that you fully comprehend the risks involved. Prior to making any decisions, carefully assess your financial situation and determine whether you can afford the potential risk of losing your money. Dr. Alexander Elder created the indicator to measure the bullish and bearish power of the Moving Average. The Exponential Moving Average (EMA) parameter for the Triple Screen Strategy is set to 2-period. According to Elder, the 2-period EMA in the Force Index is well suited for use in conjunction with trend indicators like MACD.

ROC Indicator – How to trade with Rate of change Indicator ?

If the order was executed, the stop loss is set to the two-day low. In that case, you can decide to open a buy trade when the Force Index Indicator is in a negative region with an upward pullback momentum. However, as the number of traders in the world has grown, the market has gotten increasingly complex. Many traders nowadays follow the intermediate and short-term using various time frames. Elder’s Triple Screen system involves finding and choosing trades according to three criteria i.e. three screens of the approach.