HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%
XM information and reviews
XM
82%

Elder's three screens strategy


As a rule, it is very difficult to analyze the market using just one indicator. However, there are many facts when different indicators used simultaneously give conflicting signals to start trading.

The “Elder’s three screens” strategy is applicable not only as an auxiliary filter that determines the trend, but also as a separate trading concept. This method is relevant in all markets and trading sessions. Elder’s trading strategy is a comprehensive approach to applying the three charts of the asset selected for trading with different time frames.

Method Features


The method is based on filtering trading operations by the largest time interval and identifying the correct entries by the smaller. This approach helps a trader to achieve a large profit with the least risk. The “three screens of Elder” system combines trend indicators and opposite oscillators. It is this set of tools that makes it possible to successfully filter disadvantageous transactions.

The founder of the Three Screen trading strategy compared the forex market with the ocean, which waves form the tides (uptrend) and low tides (downtrend). The period of prevalence of the uptrend in the market is the time of purchase of the asset. When the downtrend dominates, this is the time of sales. A peculiar market “calm” is a flat price movement. In such a period, it is better to refrain from trading.

The first screen should display all of the above market conditions. The second screen serves to determine the initial wave motion in the current trend. In other words, this is the determination of the moment when the correction ends and the next trend movement begins.

The third screen is used by the trader to accurately enter the transaction with setting the minimum safety stop loss.

Timeframe Selection


What is the optimal time period to choose for trading? The Three Screens trading strategy is universal - the timeframe should be determined depending on the trading style. The main thing is that the time interval of each subsequent chart should be five times less than the previous one.

The graph in the center is the main one. For long-term trading it is D1. It will display the price movement in this time interval. On the screen on the left there is the price movement with the time frame W1, on the right - H4. The monthly number of open transactions is no more than 3. However, the profit received is to be expected very significant.

Traders who prefer medium-term trading should analyze the screens displaying the asset’s price on H4, H1, M15 screens. In this case, the number of transactions will be much larger, which can increase profits several times. But this also increases the number of false signals to enter the market.

Scalping enthusiasts should choose M30, M5, M1 timeframes for this strategy. The above set of intervals is advisory. If desired, using personal trading experience, each trader can choose other timeframes for himself.

The essence of the strategy of Alexander Elder’s "Three screens"


This trading method provides for the initial determination of the direction of price movement on the first screen with the highest timeframe. The indicators set here serve as a filter, giving initial signals for transactions. As an indicator, MACD with average settings is used. The decline in its columns determines the downward trend, especially when the MACD crosses the zero mark from top to bottom. Rising bars indicate the presence of an uptrend, in particular, when the histogram crosses the zero mark from bottom to top.

The strength of the trend is determined by the angle of the histogram to the zero mark - the larger it is, the faster the trend is growing (decreasing), and the greater the profit margin. From time to time, MACD may give false signals to enter the market. To minimize them, an additional filter is effectively applied - EMA 13:

It happens that conflicting signals come from MACD and EMA 13. Then moving average signals are considered more priority. However, it is better to wait until the signals of these indicators coincide.

The second screen in the Alexander Elder’s trading system serves to monitor the end of the trend correction on a smaller timeframe. This occurs after the identification of the main trend movement in an older time interval. Therefore, using the second screen, a trader who has decided on purchases (sales) is looking for a moment for optimal entry into the transaction by setting a safety stop loss at a minimum. It is for this timeframe that a stochastic oscillator is installed.

If you are looking for a favorable moment for purchases, you should wait until the "stochastic" leaves the oversold zone.

When selling, you should wait for the oscillator to exit the overbought zone. Beginner traders can very well use two screens for transactions. The third screen usually suits experienced traders. On it, traders determine an even more accurate moment of opening orders. Indicators are not required here. In this case, the shifted purchase or sale method is rational.

Its essence can be considered with a specific example. After analyzing the market situation on the higher timeframes, the trader concludes that there is an increasing trend, and the "stochastic" has already left the oversold zone. Then on the third screen you should set the pending Buy Stop slightly higher than the maximum of the previous candle.

If it does not work, you need to move it to the next maximum of the newly closed candle. This procedure can be repeated until the order is triggered. As soon as this happens, set your stop loss just below the low of the last two bars.

In the case of sales, everything happens exactly the opposite. A Sell Stop order is similarly moved until it becomes active, after which a safety stop loss is immediately set.

The amount of profit from transactions is calculated in several ways. One of the most popular is when the distance between the open price and stop loss multiplied by 3 is measured on the chart of the asset from its current price. Thus, goals are three times higher than possible losses. After about half the price traveled to the target, the safety order is transferred to breakeven. Some traders use a trailing stop for this.

Among others, there is another option for fixing profit using the Stochastic Oscillator. Orders are closed at the moment the “stochastic” leaves the overbought or oversold zone on the second screen.

A number of traders who prefer long-term trading close profitable transactions, focusing on the first screen. This happens immediately after the opposite signal has formed. Although the number of successful trading operations is reduced, the profit is a pleasant surprise for traders.

Conclusion


The trading strategy “Three screens of Elder” has a minimum risk level with a rather high profitability. For many years, this trading method has retained its popularity. It is tested by time, because it complies with the main rule of the foreign exchange market - following the trend.

Author: Kate Solano for Forex-Ratings.com

RELATED

Top 11 Forex Trading Strategies in 2023

Trade popular currency pairs at low cost with Vantage. Vantage is a leading regulated forex broker offering access to the world’s most popular currency pairs...

Three of the most popular trading strategies

In this article we discuss three of the most popular trading strategies used by global traders...

Deep Dive into Scalping Trading Strategies and Their Efficacy in Short-term Profit Generation

In the thrilling world of forex trading, there's a tactic favored by those who love the adrenaline rush of rapid-fire decision-making: scalping. This method is akin to the quick footwork of a dancer...

Trading Strategies for Volatile Markets

In this article we explore different types of trading strategies for volatile markets like forex...

Free Forex trading system that works

Financial markets shouldn't be traded without a sound tried and tested trading system, and the Forex market is no exception. Making the right...

Mastering the Art of Nighttime Rest: Essential Sleep Strategies for Traders

In the fast-paced world of trading, the hustle and bustle extend well beyond the closing bell. The rituals and habits you adopt at the end of the day can be pivotal determinants of your trading prowess come morning...

Short-Term vs. Long-Term. What is Your Strategy?

People always want to find the best type of trade to invest in. This particularly holds for short-term and long-term trading. This decision, however, varies from person to person...

Dogecoin vs. Shiba Inu: Which one is the Better Investment?

Dogecoin and Shiba Inu have captured many crypto headlines over the last few years, as some have become millionaires overnight. However, deciding on buying Shiba Inu vs. Dogecoin...

Top 5 Successful AMarkets RAMM Strategies in July

Today we’ll review the 5 best performing RAMM strategies of the past month. The Copy Trade Archer strategy proved to be the best performing strategy in July...

How To Strategically and Effectively Diversify A Currency Trading Portfolio

In the multifaceted arena of currency trading, a trader’s success pivots not solely on precise market analysis and judicious decision-making but significantly on the astute construction of the trading portfolio...

Mastering Euro Forex Trading: Top Tips and Strategies

Whether you're a seasoned Forex trader or just starting your journey in the world of currency exchange, this article is packed with valuable insights...

Top 10 forex trading strategies for beginners

If you’re a forex beginner, learning how to better manage trading in the forex market is key to achieving success. This is because the forex market is an incredibly volatile financial market...

The Ins and Outs of Forex Scalping

In the investment world, scalping is a term used to denote the "skimming" of small profits on a regular basis, by going in and out of positions several times per day...

Price Action Trading: The how-to guide

Price action trading is a popular strategy used by traders to analyze the movement of an asset's price over time. This is done by identifying patterns on candlestick...

Should I invest aggressively?

Wondering what market execution style you need to follow to get the profit you want? Continue reading today's article to learn more!

The Intricacies of Short-Term Trading: A Comprehensive Exploration

In the intricate tapestry of financial markets, short-term trading emerges as a dynamic segment, renowned for its rapid pace and the transient opportunities it presents...

Profitable Forex Trading Strategies Nobody Tells You About

One of the key aspects to be successful in trading is to maintain a high level of discipline. One keyway to enforce discipline on the FX market is to have a robust...

Range Trading: A Simple Forex Strategy Explained

It is natural for all traders to seek the best possible technique for achieving their trading goals. As range trading becomes increasingly popular, more and more people are looking...

Why are 98% of Forex strategies ineffective?

This question is probably asked by every novice trader. Almost every information resource on the subject of financial markets provides a separate section...

Exploring the Efficacy of Forex Hedging Strategies

The world of forex trading is marked by its dynamic nature, offering substantial opportunities along with inherent risks. In an effort to mitigate these risks and protect their investments

FP Markets information and reviews
FP Markets
81%
RoboForex information and reviews
RoboForex
77%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.