If the bars have fallen below the 0 level and continue to decline, then there is a downtrend in the market. For example, you decided to choose a daily chart as the main one. This means that the first screen will display the TF (Time frame) W1 (weekly) chart. Next to it, the main daily TF will be located in the second screen. Any information provided in the articles of this site is the private opinion of its author. These articles do not constitute a guide to action or trading.
Timeframes for trading on the three Elder screens are not selected randomly. Each of them must be at least 5 times smaller than the previous one. And they should stand in order, starting from the largest and moving to the smallest. The average timeframe (the central screen) will always be considered the main one. The two extreme screens are used for filtering and searching for entry points.
The most difficult thing when working with three screens is to identify the conditions necessary for the transition to the third screen on the first two screens in time. It is even more difficult to have time to open a position and place the necessary orders in the conditions of constantly changing prices. We have just reviewed with you the principle of operation of the "Three Elder Screens" strategy, we have learned what it is. During the testing of this strategy, the results were obtained that allow us to draw a certain conclusion. On the third screen, the trader must find the last local minimum/maximum to set a "breakout" Sell/Buy Stop order.
When a candidate for such tools is found, an inexperienced trader actively uses it, sometimes even successfully, but exactly until the moment when luck turns away from him. After the first disappointment, the trader goes in search of another "wand-lifesaver" and goes through the same cycle. The sooner he realizes that the movements of the markets are too complex and unpredictable to analyze them with just one indicator, the better for him and his wallet.
The nine-day period includes 54 candles of the 4-hour timeframe. So we will put the moving average immediately on the main chart. We only need fresh data, so we will choose the EMA as the average.
We are waiting for the moment when the Stochastic Oscillator will exit the oversold zone on the second screen. Novice traders, in order not to get confused, can enter the market already on the second screen.
Here we set the higher timeframe according to one of the schemes proposed above, in our case, this is the H4 timeframe. In the working area of this screen, we will determine the overall trend trend using the MACD indicator. The 3rd screen is used to determine the entry point to the market at the best price.
Read more: Using the MACD indicator in forex trading
Settings of the "three Elder Screens" Indicator
We continue to move the order (if it did not work) until the trend on the first screen changes to bearish. Use the indicators to analyze the main trend of the chart. If the MACD histogram is in a positive zone, and the price is above the SMA, then you are facing an uptrend. If the price has fallen below the SMA, and the MACD is below 0, then you are facing a downtrend. The peculiarity of this strategy is to search for signals on three charts (screens) at once, which differ from each other by the size of the timeframe. The chart is analyzed using trend instruments and oscillators.
This approach contributes to obtaining a large profit with the least risk. The system of "three Elder screens" combines trend indicators and opposite oscillators. It is this set of tools that makes it possible to successfully filter unprofitable transactions.The signal here will be the output of the indicator curve from the overbought/oversold zone. After receiving this signal, you can go to the third screen to open a buy/sell transaction.
It is not recommended to set too long a period, because it will be difficult for you to catch a trend reversal. In addition to the above conditions for entering the market on the third screen, there is another alternative option. If the market continues to move up and the stop order fails, its position is adjusted by one or two points below the minimum of the next bar. When starting to work with the 3rd screen, the trader should already know for sure what he is going to do, buy or not.
At the same time, the MACD bars fall down, drawing a completely opposite angle of inclination. At such a moment, you should listen to the indicator, since a trend change is planned and the price will eventually go in the direction in which the MACD bars are moving. Short-term trend – we look at the third screen, a smaller period of the chart relative to the medium-term trend. All materials on the site are for informational purposes only and are not an indication to action. The data presented are only assumptions based on our experience. The published trading results are added solely for the purpose of demonstrating efficiency and are not a statement of profitability. Past results do not guarantee specific results in the future.
You should return to the third screen, place a stop order for a purchase based on the last PSAR point. If the signal is correctly determined, the parabolic points will be placed under the graph. An excellent solution in this case will be a way to enter the market with the Parabolic SAR indicator. The settings should be kept standard, equal to 0.02/0.2. Traditionally, entering the market occurs according to the tactics of shifted purchases and sales.
How do I set up the screens?
Without knowing the theory, without having enough practice, people "throw" money at the feet of the "Forex deity" and pray in front of the monitor screens for a wonderful win. And the curve of the price chart is coolly creeping in a direction known only to it alone.
The proposed examples use the most common variant, stochastic, with default settings . Professional traders rightly consider it an excellent tool for identifying overbought/oversold levels. The readings of this indicator can vary from zero to one hundred. If the main line of the oscillator is located below twenty, it means that the market is characterized by oversold.
Thanks to this set of algorithms, a trader can receive the most accurate signals and filter unfavorable entry points into the market. And vice versa – if the long-term trend is descending, and the medium-term trend is ascending, sliding stop orders will catch a sale when the price moves down. The Sell Stop order will be placed 1 point below the minimum of the previous period, during which the oscillator gave a sell signal. If the price goes up further, the order also needs to be moved after it at a distance of 1 point from the minimum.
Orders are closed when the stochastic exits the overbought or oversold zone on the second screen. The amount of profit from transactions is calculated in several ways. One of the most popular is when the distance between the opening price and the stop loss, multiplied by 3, is measured on the asset chart from its current price. Thus, the goals are three times higher than the possible losses.
We are looking for the point at which the trend direction changes from ascending to descending or vice versa. When such a signal is received from this indicator, you can go to work on the second screen. Now we will look at how to properly configure each of the three Elder screens, and make sure that there are no difficulties here. As for the Moving Average settings, they can be any. A trader can even choose a different type of moving average, but he must work strictly in the direction indicated by this indicator. The period for the Moving Average can be set to at least 28.
In trend
When the stochastic crosses the level 80 from the bottom up, it is necessary to open positions for sale. To get rid of the voiced problem, Alexander Elder proposed to put the EMA indicator on the first screen on the price chart, the period of which would be 13. It is not surprising that the Three-screen strategy becomes a clear and obvious way to make money on the stock exchange. The three Elder screens include various groups of methods, including trend tracking and countertrend methods. Unsurprisingly, the Three Elder screens allowed many beginners and already established traders to increase their well-being. If yellow columns are visible on the upper and middle timeframes, it is better not to trade. They mean an uncertain situation on the market-flat, so it is better to wait for a more appropriate moment.
Read more: The main components of a Trading Strategy
- If both stochastic moving averages have broken through the level of 80 (the border of the overbought zone) in the direction from top to bottom, then you have received a confirmation of the sell signal.
- Trading on financial markets is a high-risk type of business and can lead to the loss of all the money you have invested.
- If the trend of the senior and middle TF is descending, then set the Sell-Limit order by 3-4 points below the minimum value of the last candle.
- If the market continues to move up and the stop order fails, its position is adjusted by one or two points below the minimum of the next bar.
And so on until a sale opens or a long-term trend unfolds, canceling the signal. If the transaction is opened, the stop is placed for the maximum of the last two days. The founder of the "Three Screens" trading strategy himself compared the market to the ocean, whose waves form tides (uptrend) and ebbs (downtrend).
Although the described method is quite convenient and effective, it is not without drawbacks. When the next candle appears, it is necessary to change the size of the stop loss, which leads to difficulty in determining the position size. If the strategy is short-term, it is not always possible to set a stop order due to restrictions on the part of the broker. After a comprehensive study of the market position demonstrated by the first screen, we proceed to the analysis of the second. Consolidating what we have passed, we repeat that the direction of the market movement is determined by the situation on the 1st screen. With the upward nature of the MACD, it is advisable to make buy transactions, otherwise it is better to direct your forces to sell positions.
The long-term trend is determined on the first screen, in its direction we will look for an entry into the transaction. The chart period is from monthly and lower, depending on your trading preferences. The "three Elder screens" strategy is applicable not only as an auxiliary filter that determines the trend, but also as a separate trading concept.
The main task of a trader is to determine or predict where the price is moving. It depends on whether he will be at a profit or remain at a loss.
Read more: What is Forex and how it works