Impression more like a medical diagnostic test than a financial trading method, the triple screen trading methodology was developed by Dr. Alexander Elder in 1985. Although it is an understandable mistake to make, the triple screen has nothing to do with the multitude of physical displays used. The allusion to medicine, or “screening,” is no accident: Dr. Elder worked for many years as a psychiatrist in New York ahead of becoming involved in financial trading. Since that time, he has written dozens of articles and books, including “Buying for a Living” (1993) and has spoken at several major conferences.
The Argument for Various Trading Methods
Many traders take a single screen or indicator that they apply to each and every trade. In principle, there is nothing ill-use with adopting and adhering to a single indicator for decision making. In fact, the discipline involved in maintaining a focus on a distinguish measure is related to the trader’s discipline and is, perhaps, one of the main determinants of achieving success as a trader.
What if your decided indicator is fundamentally flawed? What if conditions in the market change so that your single screen can no longer account for all of the events operating outside of its measurement? The point is, because the market is very complex, even the most advanced indicators can’t ply all of the time and under every market condition.
Choosing Indicators
For example, in a market uptrend, trend-following indicators flight and issue “buy” signals while oscillators suggest that the market is overbought and issue “sell” signals. In downtrends, trend-following needles suggest selling short, but oscillators become oversold and issue signals to buy. In a market moving strongly higher or discount, trend-following indicators are ideal, but they are prone to rapid and abrupt changes when markets trade in ranges. Within calling ranges, oscillators are the best choice, but when the markets begin to follow a trend, oscillators issue premature signals.
To discover a balance of indicator opinion, some traders have tried to average the buy and sell signals issued by various display charge withs. But there is an inherent flaw in this practice. If the calculation of the number of trend-following indicators is greater than the number of oscillators acclimatized, then the result will naturally be skewed toward a trend-following result, and vice versa.
Elder developed a plan to combat the problems of simple averaging while taking advantage of the best of both trend-following and oscillator techniques. Older’s system is meant to counteract the shortfalls of individual indicators at the same time as it serves to detect the market’s inherent complication. Like a triple screen marker in medical science, the triple screen trading system applies not one or two, but three unparalleled tests (screens) to every trading decision, which form a combination of trend-following indicators and oscillators.
The Problem of Atmospherics Time Frames
There is, however, another problem with popular trend-following indicators that must be ironed out to come they can be used. The same trend-following indicator may issue conflicting signals when applied to different time structures. For example, the same indicator may point to an uptrend in a daily chart and issue a
Time Management
Once the trader has unambiguous on the time frame to use under the triple screen system, they then label this as the intermediate time plan. The long-term time frame is one order of five longer; the short-term time frame is one order of magnitude shorter. Brokers who carry their trades for several days or weeks will use daily charts as their intermediate time carve outs. Their long-term time frames will be weekly charts; hourly charts will be their short-term eventually frame. Day traders who hold their positions for less than an hour will use a 10-minute chart as their transitional time frame, an hourly chart as their long-term time frame and a two-minute chart as a short-term time fabric.
The triple screen trading system requires that the chart for the long-term trend be examined first. This effects that the trade follows the tide of the long-term trend while allowing for entrance into trades at times when the demand moves briefly against the trend. The best buying opportunities occur when a rising market makes a temporary decline; the best shorting opportunities are indicated when a falling market rallies briefly. When the monthly drift is upward, weekly declines represent buying opportunities. Hourly rallies provide opportunities to short when the diurnal trend is downward.