Triple Screen Trading System (Part 4): The Third Screen for Stop Orders

In the fourth part of the Triple Screen Trading System, we will discuss the role of the Third Screen in the context of order management using Buy Stop and Sell Stop techniques. The Third Screen serves as the short-term time frame to place stop orders according to the trading signals from the First Screen (Weekly) and the Second Screen (5-Day).

The Third Screen in Triple Screen: Placing Stop Orders

1. Concept of the Third Screen in the Triple Screen System The Third Screen is the short-term time frame used to place stop orders based on the analysis from the First Screen (long-term) and the Second Screen (intermediate-term). This time frame is usually the Daily, and its purpose is to optimize entry or exit moments based on the generated trading signals.

Time Frames:

• Long-Term (First Screen): Weekly
• Intermediate-Term (Second Screen): 5-Day
• Short-Term (Third Screen): Daily

2. Buy Stop and Sell Stop Techniques

A. Trailing Buy Stop Technique

• Description: A Trailing Buy Stop is a technique where you place a Buy Stop order to enter a buy position when the price breaks out upwards.

How It Works:

1. Identify Trend:
• If the First Screen (Weekly) shows a bullish trend and the Second Screen (5-Day) shows bearish momentum, you will place a Buy Stop order.
2. Order Placement:
• Place the Buy Stop order a few pips above the previous high bar in the Daily time frame (Third Screen).
3. Stop Loss:
• Place the stop loss a few pips below the current or previous low bar, whichever is lower.
4. Exit Strategy:
• Exit Level: Can be determined when the oscillator indicator on the Second Screen shows overbought or oversold conditions, or when the trend on the First Screen starts to reverse.
• Risk/Reward Ratio: Adjust according to the predefined trading plan.

Example of Trailing Buy Stop:

Step	Detail
Analysis	First Screen: Bullish trend, Second Screen: Bearish momentum.
Order	Place Buy Stop a few pips above the previous high bar.
Stop Loss	Place below the current or previous low bar.
Exit	Adjust according to overbought/oversold conditions on the Second Screen or trend change on the First Screen.

B. Trailing Sell Stop Technique

• Description: A Trailing Sell Stop is a technique where you place a Sell Stop order to enter a sell position when the price breaks out downwards.

How It Works:

1. Identify Trend:
• If the First Screen (Weekly) shows a bearish trend and the Second Screen (5-Day) shows bullish momentum, you will place a Sell Stop order.
2. Order Placement:
• Place the Sell Stop order a few pips below the previous low bar in the Daily time frame (Third Screen).
3. Stop Loss:
• Place the stop loss a few pips above the current or previous high bar, whichever is higher.
4. Exit Strategy:
• Exit Level: Can be determined when the oscillator indicator on the Second Screen shows overbought or oversold conditions, or when the trend on the First Screen starts to reverse.
• Risk/Reward Ratio: Adjust according to the predefined trading plan.

Example of Trailing Sell Stop:

Step	Detail
Analysis	First Screen: Bearish trend, Second Screen: Bullish momentum.
Order	Place Sell Stop a few pips below the previous low bar.
Stop Loss	Place above the current or previous high bar.
Exit	Adjust according to overbought/oversold conditions on the Second Screen or trend change on the First Screen.

3. Changing Time Frames on the MetaTrader Platform

If you are using the MetaTrader platform, you can set time frames that are not available by default, such as the 5-Day time frame.

Steps:

1. Open Daily Time Frame:
• Select Daily from the time frame menu on MetaTrader.
2. Access Navigator:
• Go to Navigator > Script > Period Converter.
3. Change Parameters:
• Set the ExtPeriodMultiplier to 5 to create a 5-Day time frame.
4. Open 5-Day Time Frame:
• Go to File > Open Offline > Select D5.

Screenshot of the Process:

Step	Detail
Daily Time Frame	Select Daily on MetaTrader.
Period Converter	Access through Navigator > Script > Period Converter.
Parameter	Set ExtPeriodMultiplier to 5 for the 5-Day time frame.
Open 5-Day	Go to File > Open Offline > Select D5.

4. Tips and Best Practices for Stop Orders

1. Monitor Major Trends:
• Ensure that trend analysis on the First Screen and Second Screen is consistent before placing stop orders.
2. Evaluate Momentum:
• Use oscillator indicators on the Second Screen to determine the current market conditions.
3. Stop Loss Placement:
• Do not place stop losses too close to the current price to avoid being triggered by small market fluctuations.
4. Determine Exit Levels:
• Set exit levels based on technical analysis and your trading strategy.
5. Use Risk Management:
• Set an appropriate risk/reward ratio according to your trading plan.

The Third Screen in the Triple Screen system is the short-term time frame used to place stop orders like Buy Stop and Sell Stop. With the Trailing Buy Stop and Trailing Sell Stop techniques, traders can optimize the moment to enter the market based on signals from the First Screen and the Second Screen.

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