The second screen in the triple screen describes the 'wave' market (market wave)
Price movements in the benchmark time frame (intermediate time frame) was not observed daily through trend following indicators such as MACD, but through the oscillator indicator. The nature of the oscillator indicator signaled buy signal when price movement market is down, and a sell signal when the market prices are rising (oversold and overbought conditions). These signals look like a 'wave' which suggests momentum for entry.
In this case the triple screen trading method seems logical because the trader only concentrate on the daily time frame trading signals with an indicator only, which is based on the direction of the trend on the weekly time frame (long term time frame). For example, when the trend on the weekly time frame up, the trader only consider a buy signal on the benchmark time frame (daily) and ignore the sell signals. Conversely, if the trend is bearish on the weekly time frame. There are four indicators oscillators are commonly used in this trading system, namely:
- Force index
- Elder-Ray Index
- Stochastic
- Williams percent range.
Force index
This indicator was made by Dr. Elder to measure the strength of bullish and bearish moving average approach. For the triple screen system is used exponential moving average (ema) with period: 2 According to Dr. Elder, ema-2 day on the force index indicator is perfect combined with the trend following indicators such as MACD. In Metatrader indicators can be obtained from the Insert-Indicators-Oscillators-Force Index. Here's an example of force index indicator on EUR / USD Daily:
If the line ema-2 day on-force index indicator is above the line 0:00, then the bullish sentiment is stronger, and vice versa when under 0:00 or negative, then the bearish sentiment is stronger. If this indicator is used in the benchmark time frame triple screen system (5-day time frame), then when the MACD histogram on the weekly time frame forming an angle (slope) upward or bullish, for the right moment to open long positions when the force index indicator pull-back (reverse direction) from bullish to bearish, or being dropped.
Long positions should be opened above the highest level on the day. In this case can be used stop orders (to buy stop). Stop loss can be determined at the lowest level that day or the previous day, whichever is lower. Level can be determined manually exit when the trend in the long term time frame (weekly) has started to reverse direction from bullish to bearish, or when there is a bearish divergence on the benchmark time frame (daily) which would imply the change of trend from bullish to bearish. The same principle can be applied to conditions of long-term time frame bearish.
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