The triple screen trading system in forex was developed in 1985 by Dr. Alexander Elder. The developer created this system to combat the issues of simple averaging, while taking into account the dual advantages of trend following and oscillator techniques. The system can help in counteracting the shortfall of individual indicators simultaneously when it serves in detecting the inherent complexity of the market. This applies three unique screens to every trading decision, thus leading to a blend of oscillators and trend-following indicators.
The problem with time frames
When using the same trend following indicator for different timeframes it can cause conflicting signals, and this gets more increased with intraday charts. During the short term charts, the trend following indicators can fluctuate amid buy and sell signals on an hourly or even more recurrent basis. The timeframe is thus divided in units of five, which can help in resolving the issue. When using the monthly charts they should be divided into weeks. The weekly charts into daily charts, which are exactly five in number. Moving one more level, from daily to hours, the five to six hours in a trading day can be divided likewise. Similarly the hourly charts can be reduced to 10-minute charts and the 10 minute charts into 5 two minute charts.
The importance of this factor of five is that the trading decision should be based on comparison of two timeframes. If a trader prefers a weekly chart, then they should also employ monthly charts. The timeframe which has been decided for the triple screen system is referred as intermediate timeframe. Traders carrying trade for weeks or days can use the daily charts as intermediates. Here the long term time frames are the weekly charts, while hourly charts are the short-term ones. For traders who wish to hold their position for less than one hour, the 10 minute chart acts as the intermediate timeframe, and hourly is the long term and two minute chart as the short term timeframe respectively.
As per this system, the long term trend should be first examined. Traders can enjoy best decisions when the rising market seems a small fall and the best shorting is experienced, when a falling market sees a brief rallying.
The problem with time frames
When using the same trend following indicator for different timeframes it can cause conflicting signals, and this gets more increased with intraday charts. During the short term charts, the trend following indicators can fluctuate amid buy and sell signals on an hourly or even more recurrent basis. The timeframe is thus divided in units of five, which can help in resolving the issue. When using the monthly charts they should be divided into weeks. The weekly charts into daily charts, which are exactly five in number. Moving one more level, from daily to hours, the five to six hours in a trading day can be divided likewise. Similarly the hourly charts can be reduced to 10-minute charts and the 10 minute charts into 5 two minute charts.
The importance of this factor of five is that the trading decision should be based on comparison of two timeframes. If a trader prefers a weekly chart, then they should also employ monthly charts. The timeframe which has been decided for the triple screen system is referred as intermediate timeframe. Traders carrying trade for weeks or days can use the daily charts as intermediates. Here the long term time frames are the weekly charts, while hourly charts are the short-term ones. For traders who wish to hold their position for less than one hour, the 10 minute chart acts as the intermediate timeframe, and hourly is the long term and two minute chart as the short term timeframe respectively.
As per this system, the long term trend should be first examined. Traders can enjoy best decisions when the rising market seems a small fall and the best shorting is experienced, when a falling market sees a brief rallying.
