Triple Screen trading system (Alexander Elder)

Why it works

Every timeframe tells a different story. The first screen (a timeframe five times longer than the one you trade) gives the tide. The second screen finds a wave against the tide, which is a cheap entry. The third screen is a precise trigger so you only enter when the market starts moving your way again.

Trading only in the direction of the higher timeframe removes about half of the bad trades a beginner takes.

The rules

Setup

• Screen 1 (e.g. weekly or 4H): the slope of the 13-period EMA or of the MACD histogram gives the direction. Only longs if it rises, only shorts if it falls.
• Screen 2 (e.g. daily or 1H): wait for an oscillator (Stochastic, RSI or Elder's Force Index) to show a pullback against that direction: oversold in an uptrend, overbought in a downtrend.

Entry

• Screen 3: place a buy stop one tick above the previous candle high (long) or a sell stop below the previous low (short).
• Move the order each candle until it triggers or the setup on screen 2 is cancelled.

Stop loss

• Below the low of the trigger candle or of the previous candle, whichever is lower.
• Elder's money rules: risk no more than 2% of the account per trade and stop trading for the month if the account falls 6%.

Exit and management

• Take profit at the opposite band of a price channel or at the previous swing.
• Or trail the stop under each new swing as long as screen 1 stays in your favour.

Filters that improve it

• If screen 1 is flat, there is no trade: Triple Screen needs a tide.

Worked example

Illustrative example: the 4H MACD histogram on GBP/USD is rising (screen 1, longs only). On 1H the Stochastic falls below 20 during a dip (screen 2). A buy stop is placed above the last 1H candle high at 1.2745; it triggers, the stop goes below the dip low at 1.2718 and the target is the previous 1H high at 1.2800, about 2R.

Illustrative numbers, not a recommendation.

Common mistakes

• Taking oscillator signals against screen 1: an oversold reading in a downtrend can get much more oversold.
• Using timeframes too close together (15m and 5m): Elder suggests a factor of about five.
• Ignoring the 2% and 6% rules, which are half of the system.

How to practise it

In Candlemind, read on 4H first and note the MACD slope. Switch to 1H, add the RSI or Stochastic and wait for the pullback reading. Then use a pending stop order above the last candle.

The "trend" part of your score shows immediately whether screen 1 was respected.

Pre-trade checklist

1. Screen 1: higher-timeframe trend clear (EMA/MACD slope)
2. Screen 2: oscillator shows a pullback against it
3. Screen 3: stop order beyond the previous candle
4. Risk ≤ 2% · monthly loss limit 6%

Frequently asked questions