Triple screen trading system or 3 screens was developed by Dr.Alexander Elder, a trader who is also a psychiatrist. A detailed description of this trading system outlined in his best-selling book "Trading for a Living '. This trading system uses 3 screens to monitor the movement of price with time scale (time frame) are different. This method was developed to obtain a more accurate Trading signals
Most traders use a single screen or single screen to monitor some indicators that are used every time you open a position. In principle, by using only one screen is enough to make a decision, but what if there is a conflict between these indicators? This often happens between trend following indicators (eg Moving Averages, ADX) with oscillator indicator (eg stochastic, RSI).
For example if we use two indicators, trend following and oscillators. In a market that is an uptrend, trend following indicator signaled buy signal, but the oscillator indicator shows overbought state which means cue to sell. In contrast to the market is a downtrend, sell hinted trend following indicator but the indicator shows oversold oscillators. Such conflicts often occur, giving rise to one interpretation of the decision to open the position.
Circumstances such as the above could happen because the market situation is very complex and can not be predicted exactly. If the market is trending strongly trend following indicator will be accurate, but if you suddenly turned sideways market conditions (ranging), the trend following indicators could be wrong and would be more accurate oscillator indicator. However, it is difficult to know for sure when the state of the market will change. Many traders are adding indicators as confirmation, but it also does not guarantee the accuracy of some combination of these Indicators.
To overcome these shortcomings, Dr.Elder develop Develop a method that can be used to cope with the accuracy of a combination of trend following indicators and oscillators.
Time frame triple screen trading system
Trend following indicator can show the opposite sign if used on different time frames. As an example of a trend following indicator that suggests the uptrend on the daily time frame can show or sell signal on the weekly chart downtrend. The lower time frame trading, the buy and sell signals will increasingly fluctuate implied.
To overcome the above problems, Dr.Elder divide the time frame by a factor of 5 to 6 monthly time frame to 4.5 weekly (weekly), weekly time frame to 5 day (1 week active market 5 days), the daily time frame to be 5 to 6 hour . For traders daily, hourly time frame into a 10-minute (divisor factor = 6), and the time frame for 10-minute to 2-minute (divisor factor = 5).
The decision to open or close a position based on the time frame of at least 2 state. If you want to take a decision on the weekly time frame (in this case 4.5 week time frame), you should look to the monthly time frame, and if you use a 10-minute time frame, you must look also to the hourly time frame.
In the triple screen system, the main time frame that you are using is called the intermediate time frame, the higher the time frame referred to the long-term time frame, and the lower called the short term time frame. Trend determined from long-term time frame, and cues for market entry occurs when the intermediate time frame trend opposite to the long-term time frame. For example, if the weekly trend bullish, buy signals occur when the price movement on the 5 day time frame down, as well as sell signals occur when the price of the 5-hour time frame up but the trend on the daily time frame is bearish.
