The Four Screen Trading Method
Trading Bitcoin and Cryptocurrencies
Learning to trade profitably is challenging. The market constantly moves and volume spikes, trend movements, and cryptocurrency price fluctuations can be hard to identify and even harder to profit from.
Here is a typical action cycle traders experience while day and swing trading Bitcoin and playing with other cryptocurrency investments. One minute you think you are entering profitable positions at a market support or resistance level and in a great trade. The next minute, the market moves unexpectedly in the opposite direction, you find your stop loss orders are being triggered, and you end up the in red at a loss. Mean while, the market stabilizes and slides into the perfect profit margin position you identified earlier - only without you and your profitable trade ideas.
Let's talk about one way you can trade the crypto markets using a four time frame perspective and trading method. This method works in analyzing any financial, stock, Bitcoin, cryptocurrency, FOREX, or commodity markets by the way. Its power lies in your ability to read trending indicators across multiple time frames and trade accordingly.
What are multiple screen trading methods?
Using a system of multiple time frames to analyze financial markets is becoming more and more of a mainstream idea when trading Bitcoin and other cryptocurrencies. This method of analysios was popularized in the late 1980s by well-known stock traders like Dr. Alexander Elder, author of Trading For A Living.
The idea was simple. If financial markets worked like the ebb and flow of a tide, adhered to the natural principles of supply and demand, and experienced sine wave-like cycles with Fibonacci ratios, a trader could take a single time frame and multiply it by a factor which is then applied to high time frames to gain insight into the bigger picture of the market action.
The Triple Screen Trading Method
Dr. Alexander Elder's method used the "Triple Screen" trading system as his method of choice. This method uses groups of trend-following indicators like oscillators to identify localized financial market trends on a single time frame at a single point in time. Then, the same indicators were applied to two additional time frames at a multiplying factor of five.
For example, if the first time frame was 1 hour candle chart, the other two would be a 5 hour candle chart and a 25 hour candle chart. This created a short-term, mid-term, and long-term perspectives which could be used to confirm or dismiss a market trade. This method of multiple indicator trend analyses significantly increased the percentage of trade profitability when combined with good risk to reward ratios and trade management.
The outcome when indicator trends are confirmed across multiple charts is a high probability of entering and closing a profitable trade.
Triple Screen Trading Time Frame Multipliers and Uses
- 1 Hour Trading Chart = Short-Term Analysis
- This time frame is used to look for trade entry and exit points in the markets
- 5 Hour Trading Chart = Mid-Term Analysis
- This second time frame is used to look for trend movements in the market and trade entry and exit confirmations
- 1 Day or 24 Hour Trading Chart = Long-Term Analysis
- This third time frame is used to look for global trend movements in the market and reversal points
The Four Screen Trading Method
The four screen trading method uses a similar idea to the triple screen trading method. On a longer time frame, it is based off of 1 hour, 8 hour, 21 hour, and 48 hour trading time frames. These numbers represent significant numbers in the Fibonacci ranges and are useful for identifying trends. You could also use a similar four or five factor multiplier and add that to your beginning time frame to create your own multi-screen analysis method.
The four screen trading method can also be applied with shorter time frames of 5 minutes, 15 minutes, 45 minutes, and 120 minutes or 2 hour trading time frames to develop a set of screens useful for scalping and day trading.
Indicators For Multi Screen Trading
Simple indicators are the best for trading multiple time frames. I use a combination of oscillators and exponential moving averages to gain a fuller picture of the Bitcoin and cryptocurrency markets and price movements.
- Moving Average Convergence Divergence (MACD)
- Relative Strength Index (RSI)
- Stochastic oscillator (Stoch)
- Exponential Moving Averages (EMA)
- 8, 13, 21, 55, 200, 300
- Keltner Channels
- Candle Volume Profiles
Short VS Long Time Frames
Longer Term: Four Screen Trading Time Frame Multipliers and Swing Trade Uses
- 1 Hour Trading Chart = Short-Term Analysis
- This time frame is used to assess the market price action in an immediate time frame to find trade entry and exit points in the markets based on the market indicator signals
- 8 Hour Trading Chart = Mid-Term Analysis
- This second time frame is used to identify support and resistance levels, to look for trending patterns and movements in the market, and to confirm entry and exit trade ideas
- 21 Hour Trading Chart = Longer-Term Analysis
- This third time frame is used to look for patterns and indicators occurring on the larger scale
- 2 Day or 48 Hour Trading Chart = Longest-Term Analysis
- This fourth time frame is used to identify the position of price action in the
Longer Term: Four Trading Screen Swing Trading Example Chart
Check out this swing trading chart on TradingView
Shorter Term: Four Screen Trading Time Frame Multipliers and Day Trade Uses
- 5 Minute Trading Chart = Shortest-Term Scalp Analysis
- This short term time frame is used to identify very short term entry and exit points from the markets for day trades and scalp positions
- 15 Minute Trading Chart = Shorter-Term Scalp Analysis
- This second short term time frame is used to find trades which will have potential for several hours and is used as the main indicator for day trading and scalping
- 45 Minute Trading Chart = Mid-Term Scalp Analysis
- This third short term time frame helps you see when the market is beginning to turn against you on a larger scale so you can careful exit positions while securing profits
- 120 Minute or 2 Hour Trading Chart = Longer-Term Scalp Analysis
- This fourth short term time frame carries much more market weight since the bars are longer and should be used when decided whether or not to carry trades over into the next day or larger time peroid
Shorter Term: Four Trading Screen Day Trading Example Chart
Check out this day trading chart on TradingView
The End Result of Trading Cryptocurrency
The focus of trading Bitcoin and cryptocurrencies is to make money in the markets. Leveraging multiple screens helps you access the current direction of the market, find the windows of opportunity for opening and closing trades, while mitigating your risk by trading in the direction of the market indicators you are following.
It is important to learn about the market indicators and which ones you will use for your trading strategy. If you would like to learn more about indicators, trading strategies, and what each indicator measures, check out the link below.
Learn About Market Indicators
Find the market indicators which are right for you and and learn how to use them.