Triple Screen Strategy: 3 Steps to Make Profit

The Triple Screen Trading Strategy is a multi-timeframe approach, designed to filter out noise and confirm trends across different timeframes. Developed by Alexander Elder, it builds on the concept that the market moves in three trends — long-term, medium-term, and short-term — often compared to the tide, waves, and ripples phenomenon. 

The strategy aims to trade with the tide (long-term trend), using the waves (medium-term) for entry and ignoring the ripples (short-term noise). By combining three “screens” (or layers of analysis), each with different indicators, this approach enhances accuracy and reduces false signals.

What can you trade with it?

This strategy is highly versatile and can be applied to various markets including Forex, stocks, commodities, and indices. 

The key to success is identifying a clear long-term trend and then aligning medium- and short-term price movements for precise entries and exits. The Triple Screen Strategy can be applied to both trending phases of the markets (uptrends or downtrends) and is suitable for both swing and intraday traders.

On what timeframes?

The timeframes used in the Triple Screen Strategy depend on the trader’s goals. For long-term traders – the weekly (W1), the daily (D1), and the 4-hour (H4) charts are used. For intraday traders – the daily, the hourly (H1), and the 5-minute (M5) charts are employed. 

The method is flexible, and the trader decides the timeframe based on their trading style, whether long-term or intraday. The larger timeframe (first screen) identifies the overall trend, the medium timeframe (second screen) finds pullbacks for potential entry, and the smaller timeframe (third screen) fine-tunes the trade execution.

Here’s a quick guide on which timeframes work together the best:

First screen	Second screen	Third screen
W1	D1	H4
D1	H1/H4	M15
H1	M15	M5

How to use it?

First screen (trend identification)

The first screen focuses on the long-term trend using a trend-following indicator like the MACD (Moving Average Convergence Divergence). The MACD needs to be set with the parameters 3, 15, 1.

For this screen, the slope of the last two bars of the MACD is analyzed:

• If the slope is rising, it indicates a bullish trend.
• If the slope is falling, it indicates a bearish trend.

The goal of this screen is to ensure that you trade in the direction of the larger market trend, like swimming with the tide.

Second screen (entry signal)

The second screen switches to a medium timeframe (e.g., we will use the 1-hour chart for intraday traders). Here, an oscillator like the Elder’s Force Index (FI – Force Index on MetaTrader) is used to measure the strength behind price movements using price and volume. The FI is set with a parameter of 2:

• In a bullish daily trend, wait for the EFI to reach an oversold level on the 1-hour chart, indicating a potential buying opportunity.
• In a bearish daily trend, wait for the EFI to reach an overbought level on the 1-hour chart, indicating a potential selling opportunity.

This screen identifies price reversals and corrections for possible trade entries.

Third screen (trade execution)

The third screen moves to the shortest timeframe (e.g., we will use the 15-minute chart for intraday traders). This screen doesn’t use an indicator but rather applies a moving stop technique:

• ‘Buy’ setup (uptrend). If the MACD on the daily chart shows an uptrend and the EFI on the hourly chart is oversold, use a ‘moving buy stop’ order. Place a ‘buy stop’ above the previous high. If the price continues to rise, the buy order will be triggered.
• ‘Sell’ setup (downtrend). If the MACD on the daily chart shows a downtrend and the EFI on the hourly chart is overbought, use a ‘moving sell stop’ order. Place a ‘sell stop’ below the previous low. If the price continues to fall, the sell order will be executed.

Set your Stop-Loss at the most recent high (for short trades) or low (for long trades), and use support/resistance levels for your Take-Profit.

This layered approach allows traders to operate in harmony with the larger trend while using oscillators to time their entries and short-term price action to fine-tune executions. It’s designed to filter out noise and maximize the probability of success.

Real example

Let’s take a look at a real example of this strategy on GBPUSD, with a D1, H1, M15 combination.

First screen (trend identification)

On the daily chart, we take a look at the three green rising candles, included in the green  box. The green box will appear also on the H1 and M15 charts, in order to better understand where we are looking at price.

We take a quick look at the MACD – the slope is trending upwards, and the histogram is rising. This means, we have a confirmed bullish uptrend and we can move to the next, lower timeframe.

Second screen (entry signal)

On the hourly chart, we look at the beginning of the area in the Daily green box and at the Force Index in the meanwhile. During the whole green box period, the FI lowered below the 50 level only thrice showing the market at that point was oversold.

When we have confirmed an oversold signal, we can move on to the last lower timeframe.

Third screen (trade execution)

The zones where we saw an oversold signal are marked with green circles. It is here that we place our ‘buy’ stop orders, and wait for the market to reverse back into the bigger main trend and fill them. The SL is placed at the last lower low, while the TP is set to cover the key price resistance levels.

As we can see, every time our position closes into profit. Use the Triple Screen strategy now on Headway with 0% commission on deposits and withdrawals.

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