Alexander Elder Trading Strategy The Triple Screen Strategy Backtest And Example

The system was developed by Dr. Alexander Elder in 1985 and first appeared in 1986 in the Futures Magazine. Dr. Alexander was a psychiatrist but later switched to financial trading. Elder maintained that no single indicator was up to the job of correctly and consistently analysing the complexity of the financial markets. If the first screen – the tide – is pointing towards a downtrend, you can only sell. In this case, you are looking for a temporary uptrend with an idea of selling the asset. Therefore, you should ignore all buy signals, and focus on generating a sell signal, as the bullish route has been eliminated by the first screen.

  • And, for this purpose, the 200-day moving average, which is the standard measurement of bullish and bearish trends, will be our trend filter.
  • The long-term time frame is the first screen from the triple-screen system.
  • There are many ways to trade Alexander Elder’s triple screen trading strategy.
  • I also coded a separate indicator for the background color to show the Impulse System on a higher time-frame.

If the Stochastic’s value ranges from 0 to 100, the %R’s is 0 to -100. If you are looking to trade forex online, you will need an account with a forex broker. If you are looking for some inspiration, please feel free to browse my best forex brokers. IC Markets are my top choice as I find they have tight spreads, low commission fees, quick execution speeds and excellent customer support. The second step deals with the identification of the status of momentum. If during the course of the examination, if any of the indicators is not dancing on the same tune, then the entire process stands disqualified.

The third screen

This strategy uses 3 screens for monitoring the price movement, and each of them shows a different time frame. The triple screen aims to find short-term pullbacks that are about to end within an established long-term trend so as to open positions in the direction of the main trend and at the right time. The system is based on Alexander Elder’s theory that no single indicator can provide reliable signals or position plans. After a trade entry is taken, the position will hopefully then move in line with the dominant trend.

  • We’d certainly want to wait until the new direction establishes itself for entering long if the pullback is especially sharp.
  • This is the screen used to identify the dominant trend in the asset and to decide in which direction we will make the trade.
  • On the same note, oscillators work when the market is range-bound, and tend to give false signals when the market is trading.
  • At its core, the Triple Screen Trading system is a trend following system.
  • Investment value lies in the area between the fast- and slow- moving averages.

The Alexander Elder trading strategy is also known as the Triple Screen trading system combines oscillators with trend-following tools in order to refine the performance of both. This is a practical guide to the Alexander Elder trading system that will teach you how to trade for a living. Many traders adopt a single screen or indicator that they apply to each and every trade. In principle, there is nothing wrong with adopting and adhering to a single indicator for decision making. In fact, the discipline involved in maintaining a focus on a single measure is related to the trader’s discipline and is, perhaps, one of the main determinants of achieving success as a trader.

If a trader wanted to enter and exit the market, he ought to follow the middle-term waves, while the short term ripples were rarely noticed. However, the oscillator indicator shows that the price is overbought so a sell entry should be in order. For instance, if the tide is showing an uptrend, you are using the second screen to identify a weakness on a daily chart as your bullish entry position. After identifying the direction of the main trend, we look for a corrective wave in the opposite direction on our screen 2 so we can get into the market at a beneficial level. To achieve this, we apply an oscillator to the chart, which would help us know when the corrective wave is about to end (oversold or overbought). The system is based on Alexander Elder’s theory that no single technical indicator can provide reliable signals or position plans.

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It uses a mix of technical studies in different timeframes that focuses on one indicator each time, which when combined, offers an accurate trading signal. Before you start to use this trading strategy, it is recommended to test it in a demo account and then a real money account provided by one of the best Forex brokers. You can also try to add another indicator or charting figure in the third screen in order determine more precise entry points.

The Triple Screen system can be applied to different time frames depending on your trading style. A trader can use whichever trend indicator that s/he might feel is appropriate. But, the first screen identifies only the direction of the trade in which you will be trading. This means that you can only buy if there is an uptrend and sell if there is a downtrend. Most beginner traders look for a single indicator that can help them make big profits.

However, we can only improve our trading strategy only if we learn from both winning and losing trades. Check if the price is trading above the 200-day moving average to confirm the uptrend. This in return will help us spot good times to execute your trades. The Elder trading system uses oscillators to identify these price movements against the tide. By going through this process, we can filter out trades against the primary trend.

Yes, the triple trading system has proven to be a reliable trading technique. Its biggest strength is that it combines multiple technical indicators. In over three decades, this system has become a reliable trading strategy that allows traders to reduce the risk of losses and choose a trade idea that has the best chances to succeed. Elder asked – what if your chosen indicator is fundamentally flawed? Therefore, he designed a system that combines multiple technical indicators. In over three decades, this system has become a reliable trading strategy that helps traders to reduce the risk of losses.

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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. You should identify when the D line moves into overbought, over the 80 line, or oversold, under the 20 line. If the EUR/USD is trending up, we will identify buying opportunities; on the other hand, if trending down, we would seek to sell the EUR/USD. Keep reading as we explain everything you should know about the Elder price action trading strategies for forex traders, what it is, how to set up, how to trade it, etc. The Triple Screen trading system was developed by Dr. Alexander Elder, a psychiatrist, and professor at Columbia University, born in Leningrad, today Saint Petersburg.

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For the triple screen trading strategy, the parameter for the Exponential Moving Average (EMA) is set in 2-period (EMA-2). In Dr. Elder’s opinion, EMA-2 in Force Index Indicator is very suitable to be combined with trend indicators such as MACD. By using Robert Rhea’s term, if the long-term trend is on the high tide, then the weekly trend is bullish. Consequently, the moment to enter the market is when the trend wave is on the intermediate time frame (5-day) goes lower.

The order type used in this strategy is Stop Orders, with the buy stop order applied when the market is in an uptrend, while the sell stop order is relevant to a bearish market. The Williams %R shows the relation between the closing price and the price range (the highest price to the lowest price ) in some interval. The popular main feature of this indicator is the ability to predict price trend reversals. The entry signal is more accurate when there is a divergence between Bulls Power or Bears Power with the price movement. The bullish divergence happens when the Bears Power forms higher lows but the price is failed to reflect similar conditions.

The template call function does not provide access to files from the regular terminal folder. Therefore, it is necessary to create a template, then create a folder “templates” in the “Files” directory (terminal_folder\MQL4\Files\templates\). Then we the created td ameritrade: an overview template file from a regular folder (terminal_folder\templates\template name) to the newly created folder. Instead, they are meant to be used in combinations, while complementing other indicators, even in situations when they contradict each other.

On the other hand, when the long-term trend is on the low tide or bearish, it means the moment to go short is when the price in the intermediate time frame heads higher. Using trend indicators, a trader would look for the long-term trends (by dividing timeframe into five segments). Then, he would apply these indicators to the intermediate timeframe.

Alternatively, a short position would require a trailing stop-sell to be placed one tick below the previous day’s low point. You can continue trading until the weekly trend moves in the opposite direction or until the trade is activated. When both the first and second screens have been confirmed, a trailing stop will be used for the aaafx forex broker review third screen to carefully locate the entry point. A trailing buy-stop would be placed one tick above the previous day’s high point when placing a long position on a daily chart. You can also choose to use the daily chart or H4 chart, instead of the weekly chart, for screen 1 if your trading timeframe is H4 or H1 correspondingly.