Chart Analysis · Lesson 17 · Advanced
Multi-Timeframe and Triple Screen as an Integrating System
You combine the tools into a top-down process in which the higher timeframe sets the direction and the lower one sets the timing.
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Direction first, then timing
The higher timeframe sets the direction as a trend filter, the lower one sets the timing. Always start with the larger chart, otherwise you have biased eyes and mistake a correction for a trend break.
Triple Screen
Elder stacks three screens: Screen 1 (4h) censors the permitted direction via the slope, Screen 2 (30min) uses an oscillator to look for counter-moves, Screen 3 (5min) provides the entry technique via a buy stop just above the last bar.
Triple Screen from top to bottom
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Walk through the top-down process step by step.
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The key points at a glance
- Always start with the larger chart, it sets the permitted direction.
- Triple Screen (Elder): 4h trend, 30min oscillator, 5min entry.
- Chart analysis delivers probabilities and timing, the account survives only through stops.
Deep dive
Why the market is fractal
The same principles apply on the monthly, weekly, and 5-minute chart, and every trend sits inside a larger one. What looks like a rally on 5 minutes may just be the pullback in a downtrend on 4 hours. This is exactly where the most expensive mistake comes from.
- Always start with the larger chart, otherwise your eyes are biased
- The higher timeframe gives the direction, the lower one only the timing
- A factor of 4 to 6 between levels, three screens at most
Triple screen: censor, timing, trigger
Screen 1 on the highest timeframe is the censor and sets the allowed direction. Screen 2 uses an oscillator to find the counter-move within the allowed bias, Screen 3 delivers the entry technique. The most common mistake is reading Screen 2 wrong.
Confluence and the limits of chart technique
The best signals arise when trend, level, oscillator extreme, and close line up. A single signal on one timeframe is close to noise. In a range the trend filter fails: Murphy estimates prices are sideways at least a third of the time, and then standing aside is often the most profitable.
Even a perfect system delivers only probabilities. The account survives through the stop behind a valid level and the position size derived from the stop distance. You can rehearse the whole process on the demo exchange.
Sources: Elder, Murphy, Goodman, Schwager, Taleb
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