Watch These 3 Part Forex Training Videos FREE That Show How To Predict 5 Day Trends On The 6 Best Forex Pairs in 5 Minutes Per Day!
Powered by MaxBlogPress  
RSS

Triple Screen Trading

October 7, 2009 — 6:46 am

Have you ever traded multiple timeframes? No, then let me explain what multiple timeframe trading is. In multiple timeframe trading, a trader first looks at a longer timeframe like a monthly or weekly chart to determine the overall direction of the trend. Multiple time frame trading is a trading method used extensively by forex traders. It involves the use of multiple timeframes.

Professional traders always use multiple timeframes. Multiple timeframe trading means using three or more timeframes in your trading. You as a trader decide to drill down to a shorter timeframe like the daily or 4 hourly chart to look for dips or pullbacks in the trend if you find a decisive long term trend on this timeframe. First identify the main trend on the long term chart.  A minor downward retracement would represent a potentially high probability entry to get in the trend at a reasonably good price in a strong long term uptrend. Finally the trader may drill down to an even shorter timeframe like the 30 minutes or 15 minutes charts to pinpoint and time the exact entry.

Learn to use multiple timeframes in your trading. How do you trade multiple timeframes? Suppose, you are interested in trading multiple timeframes! You identify the retracement in an uptrend on a 4 hourly chart. What you need to do is to wait for a resistance breakout on a 15 minute chart in the direction of the trend before entering into a long position. Trading is all about reading the charts correctly. Multiple timeframe trading can be very powerful if used correctly. What make multiple timeframe trading so powerful is that it puts the traders on the right side of the market while also identifying the highest probability entries available.

What is Triple Screen trading? Have you heard of the triple screen trading method? One of the multiple timeframe trading strategies is known as Triple Screen. A triple screen resolves the contradiction between the technical indicators and timeframes. The first screen is the long term charts and strategic decisions on long term charts are made using the trend following indicators. How do you decide what is long term? It depends on your favorite timeframe.   The second screen is used to make technical decisions about entries and exits using oscillators. The second screen is the intermediate charts. Suppose your favorite timeframe is the 4 hour chart. Call it your intermediate time frame. The third screen can be an intermediate chart or a short term chart. The third screen is used to place buy and sell orders.

How do you decide what is intermediate and what is long term? Begin by looking at your favorite chart, the one that you use the most. Call it intermediate chart. In our case, the intermediate time frame is the 4 hour chart. Multiply its length by five to find the long term chart. A factor of 4-6 is more flexible and practical. Our long term chart is a daily chart (4X6=24 hours). Now use trend following indicators on the long term charts. Staying out of the trade is a legitimate position. Use these trend following indicators like the moving averages, MACD or trendlines in the long term charts to make your strategic decision to go long, short or stay out of the trade.

Return to the intermediate chart if the long term chart is bearish or bullish. Use oscillators like the Stochastics or RSI to look for entry or exit points in the direction of the long term trend. Set stops and profit targets before you switch to short term charts to fine tune entries and exits. To get at the short term divide the intermediate timeframe with 4-6. In our case, the intermediate timeframe is 4 hours, so the short term would be 1 hour charts. On the short term chart look for the support/resistance breakout in the direction of the long term trend to pinpoint the trade entry! Use it on your demo account to get familiar with it before you trade live with the triple screen method. Triple screen is a simple but ingenious multiple timeframe approach to forex trading.

0 response
Forex, Forex Strategies
, ,
Hassam
 

If you like our blog, click on the "Like" button below. Once you do, you will get FREE Instant Access to the Magic Forex Candlesticks plus the Magic Forex Divergence Trading Guides.

 

Oil Prices And Forex Trading

— 6:36 am

Part of becoming a good investor in forex is learning to understand that the markets evolve and changes with time. As it does, your trading strategies should also evolve and adjust. You will need to make a little tweak here and a little tweak there sometimes in your trading strategies. There will be periods of low returns or losses. But once you have made the changes and adjusted your trading strategies, you will start making profits again.

Don’t get stuck with only one currency pair and one trading strategy. Start looking at macroeconomic events and how different currency pairs react to them. Now, lets discuss a trading strategy that depends on following oil prices in the markets. There are many sources of oil. Some currency pairs react more strongly than other when oil prices change. Fortunately for you, oil prices trend for extended periods. Wall Street hawks watch oil prices closely. Rising oil prices tend to have a major impact on the US as well as the global economy. Right now oil prices have stablized around $60-80 due to the global recesssion and the reduced demand of oil in the global economy. It is being predicted that oil prices are going to skyrocket to the level of $200 in the next 2-3 years when the global economy comes out of the recession and the consumer demand picks up. So watch out. This forex trading strategy may help you when the oil prices start rising!

When oil prices rise, they continue to rise for several months. Almost in the same fashion, when oil prices start declining, they tend to continue declining for several months. In 2008, we saw oil prices on the rise for several months before a sudden collapse. Oil prices than stabilized around $55 for many months. Some of the currencies that react strongly to oil price changes are British Pound (GBP) and the Canadian Dollar (CAD). Lets focus on USD/CAD currency pair in our example. United States is the major importer of Canadian oil.

The value of CAD increases with increase in oil prices in relationship to US Dollar (USD). Increase in oil prices means that the pair USD/CAD should start trending downward. This is a good example of a trend trading strategy. If you watch CNBC daily, then you should watch for times when the oil prices are rising and the exchange rate USD/CAD is decreasing.

Similarly, on CNBC watch for times when oil prices are declining and the exchange rate USD/CAD is increasing. Use CCI (Commodity Channel Index) to trigger your trade. Watch for the 14 period CCI to cross above 100 and then cross back below 100. This tells you that the buyers have made a temporary upward push on the currency pair USD/CAD but was not able to turn the trend around. Enter the trade. Set a limit order of 300 pips and a stop loss order of 75 pips. Go short on USD and long on CAD. This setup gives you a risk to reward ratio of 1:4. This risk to reward is very good and it allows you to be wrong a few times but without ruining your chances of being profitable. 300 pips mean $3000 profit and 75 pips means $750 loss if the trade goes against what you anticipated. Usually such a trade will continue for a month. Prolonged downtrends in the oil prices are usually unlikely.

You can also trade the USD/CAD currency pair in the opposite direction if the oil prices start to decline if it does happen. You can take advantage of the oil price movement. This trading strategy depends on just knowing which way the oil prices are moving right now. Oil prices have again started to climb. Prices have reached around $68. Take advantage of the rising oil prices by trading USD/CAD currency pair as described above.

0 response
Forex, Forex Strategies
, ,
Hassam
RSS