1. The first layer of filter----market tide.

The first layer of filter: Use the trend indicators to identify the trend on the weekly chart, and trade completely in the direction of the trend. The "triple filter" first analyzes the long-term trend chart and compares the time frame of your transaction. A level above. Most traders only pay attention to the daily chart, and everyone looks at this chart covering several months of data. If you analyze weekly charts, your perspective will expand five times.

The first layer of the "triple filter" uses trend-following indicators to identify long-term trends. The original system used the slope of the weekly MACD histogram to identify the direction of the tide. The slope is determined by the relationship between the two recent pillar charts. If the slope is upward, it means that the bulls are in control and only the bulls are trading. If the slope is downward, it means that the short side is in control and only the short side is trading, as shown in the figure below:

In the weekly chart, each tick of the MACD histogram represents a change in the trend. An upward jump that occurs below the zero line provides a better buying opportunity than above the zero line. In the same way, a downward jump that occurs above the zero line provides better selling opportunities than below the zero line.

The weekly MACD histogram in the above figure: the first filter of the triple filter: the slope of the MACD histogram is determined by the relationship between the two recent pillar charts. In the first filter of the triple filter, traders must first look at the weekly chart and then analyze the daily chart. If the trend on the weekly chart is up, we can only trade from the long side or watch from the sidelines.

If the trend on the weekly chart is down, we can only trade from the short side or watch from the sidelines. When the weekly MACD histogram slopes upward, it represents a buy signal. When the indicator rises below the zero line, the buying signal is ideal. When the weekly MACD histogram slopes downward, it represents a sell signal. When the indicator falls back above the zero line, the sell signal is ideal. Once you determine the trend of the weekly MACD histogram, move to the daily chart to look for trading opportunities in the same direction.

Some traders use other indicators to identify major trends. Steve Notis published an article in "Futures Magazine" explaining how he uses the "Directional System" as the first layer of the "triple filter". You can even use very simple indicators such as the slope of the 13-week price EMA. The basic principles are the same, and most trend-following indicators can be used as the first layer of the "triple filter". As long as you analyze the trend on the weekly chart first, and then trade on the daily chart in the direction of the trend.

Traders have three options: buy, short, or wait and see. The first filter of the "triple filter" eliminates one of the selections. In a major uptrend, it is only possible to buy or wait and see. In a major downtrend, you can only go short or wait and see. You must move in the direction of the trend, otherwise don't go into the sea.

2. The second layer of filter----market wave

The second layer of filter: using the oscillator on the daily chart, in the weekly upward trend, Take advantage of daily declines to find buying opportunities. In the weekly downtrend, use the daily rally to look for shorting opportunities.

The second layer of filter is to identify waves that are against the direction of the tide. If the weekly trend is up, a daily downtrend represents a buying opportunity. If the weekly trend is down, a daily uptick represents a shorting opportunity. The second filter is to use the oscillator on the daily chart to identify trading opportunities that deviate from the weekly trend. Oscillators provide buy signals during a downtrend and sell signals during an uptrend. According to the specifications of the second filter of the "Triple Filter" trading system, you can only use daily trading signals in the direction of the weekly trend.

When the weekly trend is upward, the "Triple Filter" only accepts buy signals from the daily oscillators and ignores their sell signals. Likewise, when the weekly trend is down, the Triple Filter only accepts short signals from the daily oscillators and ignores their buy signals. The "Strength Index" and the "ADA Pivot Index" are both oscillator indicators suitable for the "Triple Filter", but the "Stochastic" and "William Index" are also good. Assuming the weekly MACD histogram is rising, it would be a buy signal if the 2-day EMA of the Strength Index falls below zero without hitting a new multi-week low. In the same way, assuming that the weekly MACD histogram is falling, if the 2-day EMA of the "Strength Index" crosses the zero line upwards without hitting a new high in several weeks, this is a short signal, as shown in the figure below:

Daily Strength Indicator Chart Above: The Second Filter of the Triple Filter: Many oscillators work well with the second filter of the “triple filter”. The 2-day EMA of the Strength Index is one of them. When the Strength Index falls below the zero line, it represents a buying opportunity; when the Strength Index crosses above the zero line, it represents a shorting opportunity.

If the weekly trend is up, only the buy signal from the daily oscillator is used to establish a long position. If the weekly trend is down, only the sell signal from the daily oscillator is used to open a short position. On the far right side of the graph, the weekly trend is down, wait for the strength index to pick up and go short.

Assuming that the weekly trend is upward, if the "short strength" falls below the zero line and then rises upward, this is the buying signal provided by the "ADA Perspective Indicator" on the daily chart.

In the same way, assuming that the weekly trend is downward, if the "bull power" crosses the zero line upwards and then falls downwards, this is a short signal provided by the "ADA Perspective Indicator" on the daily chart. The trading signals of the stochastic indicator are based on the overbought and oversold zones. If the weekly MACD histogram rises and the daily Stochastic falls below a reading of 30, this is an oversold buying opportunity. If the weekly MACD histogram falls and the daily Stochastic rises above a reading of 70, this is an overbought shorting opportunity. In the "Triple Filter", Williams %R needs to use a 4-day or 5-day period and is used in the same way as the Stochastic indicator. The relative strength index (RSI) is suitable for the overall analysis of the market, but it responds slowly to price changes and is not suitable for the "triple filter".

3. The third layer of filter----Intraday breakthrough

The third layer of filter: If the weekly trend is upward and the daily oscillator is downward, use tracking A stop buy order captures an intraday upside breakout. If the weekly trend is down and the daily oscillator is up, use a trailing stop sell order to capture an intraday breakout to the downside.

In the "triple filter" trading system, the first filter is to identify the tides on the weekly chart. The second filter identifies waves that are against the tide on the daily chart, and the third filter identifies ripples that are along the tide. It sets entry points based on intraday price action.

The third filter does not require the use of charts or indicators. It is a technique used to set entry points after the first and second filters send out buy or short signals. In an upward trend, the third layer of filter is to use a "trailing buy stop order", and in a downward trend, a "trailing sell stop order" is used.

If the weekly trend is upward and the daily trend is downward, use a trailing buy stop order to capture the upward breakthrough. If the weekly trend is down and the daily trend is up, use a trailing sell stop order to capture the downward breakthrough.

1. Weekly trend and daily trend action trading instructions.

2. Rise upward and wait and see.

3. Do long tracking stop buy orders when prices rise and fall.

4. Decline and wait and see. 5. Falling upward short selling tracking stop selling order.

If the weekly trend is upward, wait for the daily oscillator to drop to issue a buy signal, and then use a tracking stop buy order with the price set one notch above the previous day's high price. If the price rises, the stop buy order will be hit and a long position will be established. If the price continues to fall and the originally set stop buy order is not triggered, the price will be lowered to one level above the recent high price the next day. In other words, continue to lower the stop buying price until the stop order is triggered or the weekly indicator reverses and the buying signal is invalid.

See the chart above, trailing stop buying - the third filter of the triple filter: the weekly MACD histogram turned upward in September. The first filter shows an upward trend, and the second filter - the 2-day EMA of the Strength Index - is a buying opportunity every time it falls below the zero line.

1. The strength index falls below the zero line. The next day, set a stop buy order one notch above the high price on day a.

2. The price continues to fall, and the stop buying level is lowered to one level above the high price on day b.

3. Establish a long position when the market opens, and set the stop loss one notch below the low price on day b. The Strength Index has reached a new high, indicating that the trend is very strong and should continue to develop.

4. When the strength index falls below the zero line, set the buy order one notch above the high price on day d.

5. When the price crosses the high price on day d, establish a long position and set the stop loss one notch below the low price on day d.

6. When the strength index falls below the zero line, set the buy order one notch above the f-th high price.

7. The price continues to fall, and the stop buying level is monotonically lowered to one level above the high price on day g.

8. Establish a long position when the market opens, and set the stop loss one notch below the low price on day g. The strength index falls below the zero line, and the buy order is set one notch above the high price on day i.

9. If the price continues to fall, the stop-buy level will be lowered to one level above the j-day high price.

10. Establish a long position when the market opens, and set the stop loss one notch below the low price on the jth day.

11. The price opens low and triggers stop loss. No indicator will be perfect. Remember to set stop loss.

If the weekly trend is downward, wait for the daily oscillator to rise and issue a sell signal. Then use a trailing stop sell order. The price is set one notch below the previous day's low price. If the price falls, the sell stop order will be hit and a short position will be established. If the price continues to rise and the originally set stop sell order is not triggered, the stop price will continue to be raised to one level below the recent low price. In short, the goal of a trailing stop sell order is to follow the weekly downward trend and capture a downward breakthrough during the daily upward trend.

Stop loss:

Proper fund management methods are an indispensable part of successful trading. Traders with strict self-discipline will quickly admit their losses and will never hesitate like losers. The "Triple Screen" trading system uses very tight stops.

Once you enter the market to buy, set your stop loss at the low price of the trading day or the previous day - whichever is lower - one level below; once you enter the market to sell short, set your stop loss Set at the high price on the trading day or the previous day - whichever is higher - one notch above. If the market develops in a favorable direction, adjust the stop loss to a price that breaks even the profit and loss as soon as possible. From now on, the principle of setting stop loss is to protect 50% of the book profit.

Since the Triple Screen only trades in the direction of the tide, tight stops are required. If a trade is not profitable immediately, it indicates that the fundamental situation under the market surface has changed, and it is best to exit quickly. The first opportunity to accept a loss is often the wisest one - allowing you to re-examine the market situation on the sidelines.

Conservative traders should enter the market to buy or sell based on the first signal of the "Triple Filter" trading system, and then continue to hold the position until the main trend reverses or is stopped out. Aggressive traders can continue to take advantage of each new signal from the daily oscillator and use the profits from existing positions to add to their positions.

In terms of closing positions, position traders should follow the signals from the first layer of filters and continue to hold positions until the weekly trend reverses. Short-term traders can take profits based on the signals from the second filter. For example, if a trader enters a long position, and if the Momentum Index turns positive or the Stochastic indicator exceeds 70, he can take profits and sell, and then look for additional buying opportunities.