Triple Screen Trading System (Part 2)

The second part of the Triple Screen Trading System developed by Dr. Alexander Elder focuses on the Second Screen, used to analyze the "Market Wave" on a smaller time frame to find trading signals. Below is an in-depth explanation of the indicators used on the Second Screen, how to use them, and examples of their application in trading.

Second Screen in Triple Screen: Depicting the "Market Wave"

1. Concept of the Second Screen: Market Wave On the Second Screen, you will analyze the intermediate time frame, which in the Triple Screen system is the Daily time frame. The main focus here is to use oscillator indicators to find trading signals based on market momentum.

Oscillator Indicators: These indicators measure the strength and weakness of the market to determine potential entry points that align with the trend direction established on the First Screen.

Oscillator Indicators Used: Here are four commonly used oscillator indicators on the Second Screen along with their explanations:

1. Force Index

• Description: The Force Index, developed by Dr. Elder, measures the strength of bullish and bearish trends using a moving average approach.
• Main Indicator: Exponential Moving Average (EMA) with a 2-day period.
• Platform: Available on MetaTrader through Insert > Indicators > Oscillators > Force Index.

How to Read:

• Bullish: If the 2-day EMA line on the Force Index is above the 0.00 line.
• Bearish: If the 2-day EMA line is below the 0.00 line.

Trading Strategy:

• Buy: When the 2-day EMA Force Index is in the negative area with upward momentum during a bullish trend on the Weekly chart.
• Sell: When the 2-day EMA Force Index is in the positive area with downward momentum during a bearish trend on the Weekly chart.

2. Elder Ray Index

• Description: The Elder Ray Index measures bullish and bearish strength using two indicators: Bulls Power and Bears Power.
• Main Indicator: Bulls Power and Bears Power with a default period of 13.
• Platform: Available on MetaTrader through Insert > Indicators > Oscillators > Bulls Power and Bears Power.

How to Read:

• Bullish: If Bears Power is in the negative area but moving upward.
• Bearish: If Bulls Power is in the positive area but weakening.

Trading Strategy:

• Buy: When Bears Power is negative and moving upward during a bullish trend on the Weekly chart.
• Sell: When Bulls Power is positive and weakening during a bearish trend on the Weekly chart.

3. Stochastic Oscillator

• Description: The Stochastic Oscillator measures overbought or oversold conditions by comparing the current closing price to the price range over a specific period.
• Main Indicator: Stochastic with a default period of 14, 3, 3.

How to Read:

• Bullish: When Stochastic shows oversold conditions (below 20) and the %K line crosses the %D line from below.
• Bearish: When Stochastic shows overbought conditions (above 80) and the %K line crosses the %D line from above.

Trading Strategy:

• Buy: If Stochastic shows oversold and gives a buy signal on the Daily chart during a bullish trend on the Weekly chart.
• Sell: If Stochastic shows overbought and gives a sell signal on the Daily chart during a bearish trend on the Weekly chart.

4. Williams Percent Range (WPR)

• Description: Williams Percent Range measures overbought and oversold conditions by calculating the current closing price level relative to the price range over a specific period.
• Main Indicator: Williams %R with a default period of 14.

How to Read:

• Bullish: When Williams %R is in the oversold area (below -80) and shows potential price reversal.
• Bearish: When Williams %R is in the overbought area (above -20) and shows potential price decline.

Trading Strategy:

• Buy: If Williams %R shows oversold and gives a buy signal on the Daily chart during a bullish trend on the Weekly chart.
• Sell: If Williams %R shows overbought and gives a sell signal on the Daily chart during a bearish trend on the Weekly chart.

2. Explanation and Application of Indicators on the Second Screen

1. Force Index

How to Use:

1. Determine Trend on Weekly: If the trend is bullish, look for buy signals on the Daily chart.
2. Analyze Force Index: Watch if the 2-day EMA is in the negative area with upward momentum.
3. Entry: Use a buy stop order above the high of that day.

2. Elder Ray Index

How to Use:

1. Determine Trend on Weekly: If the trend is bullish, look for buy signals on the Daily chart.
2. Analyze Elder Ray Index: Watch if Bears Power is in the negative area with upward momentum.
3. Entry: Use a buy stop order above the high of that day.

3. Stochastic Oscillator

How to Use:

1. Determine Trend on Weekly: If the trend is bullish, look for buy signals on the Daily chart.
2. Analyze Stochastic: Watch if Stochastic is in the oversold area and gives a buy signal.
3. Entry: Use the buy signal in the oversold area.

4. Williams Percent Range

How to Use:

1. Determine Trend on Weekly: If the trend is bullish, look for buy signals on the Daily chart.
2. Analyze Williams %R: Watch if Williams %R is in the oversold area.
3. Entry: Use the buy signal in the oversold area.

3. Example Application of the Triple Screen System

Example Case: EUR/USD

Step 1: Analyze the First Screen (Weekly)

• Indicator: EMA 13
• Result: EMA 13 shows a bullish trend.

Step 2: Analyze the Second Screen (Daily)

• Indicator: Force Index
• Result: 2-day EMA Force Index is in the negative area with upward momentum.

Step 3: Analyze the Third Screen (4H)

• Indicator: Support/Resistance Levels, Candlestick Patterns
• Result: Price forms a bullish candlestick pattern or approaches a support level.

4. Tips and Best Practices

1. Balance Between Time Frames

   • Ensure you follow the Triple Screen system rules strictly to avoid inconsistent signals between time frames.

2. Combination of Indicators

   • Use one or more oscillator indicators to increase the accuracy of trading signals.

3. Evaluate Signals

   • Check signals from the Second Screen systematically and avoid trading decisions based on emotions.

4. Risk Management

   • Clearly and consistently set stop loss and take profit levels.

By following these steps, you can effectively utilize the Triple Screen Trading System to make more informed trading decisions and increase your chances of success in forex trading.

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