Dr Elders tripple screen

Discussion in 'Risk Management' started by Overflow, Nov 20, 2010.

  1. Overflow


    Hi everyone, I have just read a book by Dr Elder called Trading for a linving and I liked it a lot, I am currently trying to implement his tripple screen trading system in my own trading and I am also writing a new analysis/trading software that will implement it.

    What I would like to know is how good you here at this forum think that the tripple screen system is? Is it outdated perhaps? Since it relys on longtime trends as the first screen it might not "fit" todays volatile markets? Thank you for any input on this subject, as I want to make the most of my software things like this seems good to know.
  2. Do you really think to find a profitable,consistent system in a book of $50 ?:eek:
  3. zdreg


    please provide proof that today's market are more volatile than prior years.
  4. The triple screen is not so much a system per se, but rather a quite common technique that many traders implement one way or another, i.e.: trade in the direction of the main trend, but drill down to shorter time-frames to enter counter-trend (that is, in a pullback of the main trend).

    Volatility has nothing to do with whether the market is trending or not. You can have a trending market with low or high volatility and a range-bound market with equally low or high volatility. Make sure you understand this before you start to trade or you will not be able to use proper stops.

    Trend-following will work great with markets who trend while you have a trade on - but not with markets that <i>have</i> trended before you put on the trade if the trend ends then. Once you understand this you will realize that trading systems are never "outdated".

    If you can find a way to identify markets likely to start trending (or to continue a current trend) and a way to measure which pullbacks offer a good risk/reward, as well as how to identify when the trend may be ending (or temporarily exhausting itself), then you have 80% of what you need to trade (the other 20% being some common-sense position-sizing method).

    Best trading to you.
  5. lindq


    It is, IMO, the very best book for a new trader to be reading. But like any trading book, put attention on the big picture and not so much the details.

    In the case of Triple Screen, the main take-away here is to reference the larger timeframe when trading on a smaller timeframe. The specific applications of this will vary depending on your strategy, but the principle remains the same.

    Also, as I recall, Elder deals mostly with technical indicators. But in many cases you may use an indicator for a longer timeframe, and price action for the shorter. In other words, it isn't all about indicators. But it IS all about thinking in terms of what is happening with the bigger picture when you enter a trade.

    As a simple example, consider that you may want to go long on a stock that has just pulled back. You are watching it intraday on 5 min charts. Would it help to also be aware of what has happened on daily charts prior to today? Yes, it would, absolutely. Weekly charts? Possibly, depending on how long you plan to hold the trade.

    And as an extension beyond that, would be also be helpful to be aware of what is happening, and what has happened lately in the broader market? Definitely yes.

    So Elder's point is a very good one. Most price action happens in a context. And that context is typically (1) What's happened lately with that stock to identify a valuable setup that might lead to a good entry, and (2) What's happened in the overall market that might have contributed to the setup and others like it?

    Every good system has a logic behind it. Ask yourself what is the context? WHY is this happening? What can I learn from it? Is it statistically valid? Elder is asking us to keep that in mind, and understand that developing systems isn't about just blindly crunching numbers and putting faith in computer output.

    In regard to your question about volatility, the same principle applies. Measures of volatility, such as VIX or TrueRange, can impact your setups and entries, just as much as a longer timeframe chart of price. In many cases, you will need to adjust your system parameters based on volatility. So here again, everything is in context. Price action is always in the context of the wider world of the market.

    Look again at the example of buying into a pullback. If the market was flat, at very low volatility, would you be looking at different levels of price for a possible entry, as compared to a highly volatile market? Of course you would. No mystery. It just makes sense. And if a stock itself was experiencing temporary volatility compared to normal fluctuation, might that impact your entry target? Yes, it would. It is all context. The big picture.

    Look first at the forest, then at the trees. That's all Elder is suggesting.
  6. Overflow


    Thank you for the replies. English is not my native tounge and I think I got words like volatile mixed up. Thank you for the input, I have read about 4 books on this subject (which is not much ofc) and I found this one by Elder the best. In the tripple screen system the third screen is money and risk management and even though I found his priciples about setting stop-loss and size of trades etc good I would like to know much more about this subject. I feel this is where my own trading lacks the most. I´d appreciate if anyone have some suggestion on where I can find more good information about risk and money management in a stock trading prespective.

    Also, have anyone used software that incorporates all this, i.e. technical analysis (graphs), money/risk management and strategy creation. As I said I am working on a software for this (I was a software designer before trading) and as I have not seen any other software with all these features I do suspect they exist. My software is mostly for personal use and will probably stay that way if the market is saturated ;)
  7. I am using AMIBROKER very successfully. I am doing FOREX trading and this software allows for everything you've asked for in your question. It can also be used as a trading platform if you trade with IB.

    Their website is: http://www.amibroker.com/. It is the fastest I know so far. It also cost effective. You can get all information on their web.

    I am also using two more similar packages.

    Good luck.
  8. tradewon


  9. What is backatesting platform has to do with what you posted?

    If you follow the link you would see this:

    AmiBroker - Technical Analysis Software
    Featuring automatic Walk-Forward Testing, Multi-monitor floating charts, symbol and interval linking, drag-and-drop indicator creation, Industry fastest, Unlimited-symbol True Portfolio-Level Backtesting and Optimization, now with Smart Evolutionary algorithms, scaling, market-neutral system support and multiple currency handling, free Fundamental data, Multiple Time-Frame support, 3D optimization charts, new Account manager, automated trading interface, volume profile, object-oriented charting, drawing layers, multi-window layouts, formula-based alerts, easy-to-use formula editor, equity function, unique composite indicators, built-in web research browser, direct link to eSignal, Interactive Brokers, IQFeed, myTrack, FastTrack, QP2, TC2000, any DDE compliant feed, MS and more...
  10. As a Christmas gift to the OP, would one of you well educated and better informed traders please post some kind of successful documented trading record by Dr. Elders? Unfortunately, I seemed to have misplaced my copies.

    #10     Dec 25, 2010