This is just a visual aid and using other indicators along with it might help. This seventy-minute webinar comprehensively focuses on helping the viewer understand all the multiple aspects of a portfolio strategy that targets investing through live trading. For example, if your preferred time frame is the daily chart, you first start by looking at higher time frames like the weekly chart. This is the chart where you’re going to apply the trend-following indicators to establish your bias. The crux of this factor-of-five concept is that trading decisions should be analyzed in the context of at least two-time frames.

In this review, we will discuss a trading strategy called Triple Screen, designed by a popular trader and author Alexander Elder. This is one of the most famous strategies suitable for all financial markets. For example, if the long-term trend is the 4h time frame, the medium-term trend should be the 1h time frame while the short-term trend should be the 15 minutes TF.

This means that the period of each chart reduces by a factor of 3, 4 or 5 from the longest duration chart to the shortest duration chart. If the long range chart is the weekly, we divide by 5 to get the tactical chart, then by 5 again to for the executional chart. If the exact period chart doesn’t exist on applying this rule, the closest one is used.

How to Use the Alexander Elder Trading Strategy?

You can get the earned money via the same payment system that you used for depositing. In case you funded the account via various methods, withdraw your profit via the same methods in the ratio according to saxo bank forex broker the deposited sums. Our history, ambition and DNA comes from the world of creativity, software development & the empowerment of investors. No problem, check out the demo version and have a poke around.

• Our curriculum provides students opportunities to demonstrate excellence in and out of the classroom.
• Both are normally interpreted as signs of the oversold state in the market and a signal to buy.
• However, before taking a deeper dive I would take a step back and load the symbol into the triple screen.
• The Elder trading system came in response to a well-known problem that certain technical indicators only work in a certain market environment.

In principle, there is nothing wrong with adopting and adhering to a single indicator for decision making. When the weekly trend is up, the daily Elder/Ray gives a buy signal, when the Bear Power declines below zero and then up-ticks fortfs review back up toward the centerline. When the weekly trend is down, daily Elder/Ray signals to short when Bull Power rallies above zero and then ticks back down. I have really be struggling with finding a strategy for swing trading.

Chart 1: Weekly

As we know, the markets are highly unpredictable, and no single indicator can be used consistently. Therefore, it is common to see indicators that give contradictory results. The screener runs multiple tests and produces a buy/sell signal based on whether all the tests are passed. Alexander Elder’s Triple Screen trading strategy has become widely popular because it is universal and suitable for different financial markets.

For timing the market with great results, we’re going to use the Know Sure Thing Indicator. For this example, we’re going to use as the first screen the daily chart. This is the method used by Dr. Alexander Elder to select his time frames. The way to go about it is to first select your larger time frame and then downgrade the charts lower by a factor of 4, 5, or 6. The Elder’s technique involves using a factor of four to six to classify his time frames.

They use bigger timeframes to identify dominant trends, and shorter windows to select entry points. After identifying the dominant trend in the first screen, and getting a signal from the second screen, we move to the third screen. This signal will appear when the stochastic leaves the overbought or oversold areas and returns to more median values in the center of its range.

Dr Elder’s Triple Screen Trading System

The RSI is a good tool, giving a fairly precise indication of the market strength and the moments where it is safe to open a position. As we are planning to buy on a correction rising trend, we will try to catch the moment to open a long position. On the H1 chart of Platinum, we see that it crossed the oversold level. Thus, we understand that the bullish push of the market is pretty strong.

Therefore, we proceed to the third screen to pick the level to open longs. Stock and currency prices in the most random price movements will follow a trend despite fx trader magazine the time, day, or date. It is based on common sense, and the most ignorant of investors is not going to pay $1000 for an $800 stock, and vice versa.

Similarly, the moving average convergence divergence reflects the power of bulls and bears. If the first screen used the daily chart, the next in line time frame is the 4-hour chart. Now, to find your execution screen aka the third screen, we have to downgrade our time frames lower one more time. If we used a factor of 4, the next down in line time frame is the 1-hour chart.

Step 1 – Choosing a Chart Setup

Mauricio is a financial journalist and trader with over ten years of experience in stocks, forex, commodities, and cryptocurrencies. He has a B.A and M.A in Journalism and studies in Economics from the Autonomous University of Barcelona. He is the inventor of the FXStreet Currency Forecast Poll Sentiment tool. The Triple screen trading system is an investment strategy developed by Dr. Alexander Elder in 1986. It works by identifying the dominant trend over the long term and then using reversals to identify entry areas.

On the other hand, you would buy the asset when the indicator is returning from an oversold area. The Elder-Ray Index, developed by Dr. Alexander Elder, uses indicators to measure the amount of buying and selling pressure in a market. The Relative Strength Index is a momentum indicator that measures the magnitude of recent price changes to analyze overbought or oversold conditions. Gordon Scott has been an active investor and technical analyst of securities, futures, forex, and penny stocks for 20+ years. He is a member of the Investopedia Financial Review Board and the co-author of Investing to Win.

As an example, let us take a popular oscillator Stochastic . IF the mid-term trend is going down, we can expect the Stochastic to give a signal to buy, when the indicator lines %K and %D will cross in the oversold area (0% to 20%). And vice versa, if the mid-term trend is moving upwards, we wait for a signal from the Stochastic to sell, when %K and %D cross in the overbought area (80% to 100%). After we have defined the direction of the trend on the first screen, we switch to the second one. On this screen, we will have a chart with a smaller timeframe, on which we will search for a trend counter the long-term one, and wait for its reversal.

When the monthly trend is upward, weekly declines represent buying opportunities. Hourly rallies provide opportunities to short when the daily trend is downward. In order to combat this problem, it is helpful to divide time frames into units of five. In dividing monthly charts into weekly charts, there are 4.5 weeks to a month. Moving from weekly charts to daily charts, there are exactly five trading days per week. Progressing one level further, from daily to hourly charts, there are between five to six hours on a trading day.

Elder compared the mid-term trend with a wave rolling against the main stream. We define the trend by the methods of classical tech analysis and additional signals of trend indicators. Elder recommends EMA with period 13 of the standard MACD for defining the direction of the trend. A movement up- or downwards of the MACD histogram shows the direction of the current trend.

What’s going on with Meta Platforms stock?

As you can probably tell, the Alex Elder trading rules involve the use of multi-timeframe analysis. The third Screen is used for timing your entries using short-term breakouts in the direction of your trading bias. As the name of the Elder trading system suggests there are three “screens” that we apply to every trade. Let’s get started with an introduction to the Alexander Elder trading strategy. Finally, keep in mind that the markets evolve every day, and situations and the environment can change any second. Keep an eye on fundamental data and pay attention to market sentiment, too.

With each buy signal triple screen creates, we accumulate the entire position up to a pre-defined risk limit. To identify the entries Elder’s original system used a combination of MACD and the Force Index, which are types of momentum oscillators. In practice though there are a variety of other indicators that will do the same job, and work equally well or better. Here we’ll look at a simplified triple screen strategy with some examples. We explained how to combine signals from three indicators, study the intricacies of the procedure, and understand the rules for opening and closing positions.

On the other hand, if we are looking for a selling entry point, we will use a trailing sell stop one point below the previous day’s low. Keep reading as we explain everything you should know about the Elder Triple screen trading system, what it is, how to set up, how to trade it, etc. “Buck the trend” is a colloquialism that refers to when a security’s price moves in the opposite direction to the broad market.