What is the Triple Threat Trade Strategy
The Triple Threat Trade strategy is most commonly used by day traders and swing traders, in order to indicate when they should enter, exit or hold a trade.
It does so by using three Moving Average (MA) indicators, all set over different periods. Theoretically, the crossing over of the indicators would suggest a possible change in trend, and therefore indicate an opportunity for the trader.
But, like many other trading strategies, many people have opposing opinions on Triple Threat Trades. Some claim that Triple Threat Trade alerts could more than double your money, while others have said that it is nothing more than a scam. So, in order to understand the strategy better, and decide whether it is for you, let us delve deeper into the theory behind it.
Indicators for a Triple Threat Trade
A variety of moving averages can be used in order to complete a Triple Threat Trade entry or exit, depending on the time frame that the trader wishes to use. One popular method is to use moving averages set over a period of 15, 30 and 60 days, in order to place longer trades that may take a few hours, or even a few days, to complete.
The moving average periods that you would need for day trading would be significantly smaller, between about 5 and 13, but possibly higher or lower depending on the preferred length of trade.
The reality is that it will vary from person to person, depending on the way that they prefer to trade.
But what is a moving average indicator? It is a simple indicator, often displayed over a candlestick graph, that attempts to "clean up" the representation of stock price, by displaying the average price over a certain period of time. This means that small fluctuations and anomalies would be ignored, making the graphs easier to read.
It is important to note that the moving average indicator is based on past prices, and that the indicator forms as new prices appear. Because of this, a moving average based on a greater period of time will take longer to move than a moving average based on a shorter period of time.
How to Make a Triple Threat Trade
The main indicator of when to enter or exit a trade using the Triple Threat Trade strategy would be when the moving averages cross one another.
When the moving averages cross over one another, so that the shortest period crosses to the top, followed by the second shortest in the middle, leaving the longest period at the bottom. It could indicate an uptrend is approaching, and that it may be a good time to buy.
An indication that the uptrend is being exhausted and that it would be a good time to exit the trade would follow when the moving average line with the shortest period crosses below one, or two of the other moving average lines.
The inverse is true for a downtrend, when the shortest period is at the bottom, followed by the second shortest, with the longest at the top. This would be an indicator to short the stock.
Let's look at the example below:
It is a candlestick graph of Bitcoin from the 6th to the 18th of October, 2020. The moving averages have been set to the periods of 15 days (yellow), 30 days (orange), and 60 days (red).
Notice how the moving averages align themselves with the shortest (yellow) on top, and how this is followed by an uptrend spanning several days. Also notice how the uptrend starts to decrease, until eventually the yellow line crosses over the orange.
In this example, the clear separation of the three moving averages around the 8th of October would have been a good indication to buy, and an indication to exit the trade would have occurred when the yellow line dropped on about the 15th of October.
This is a good example of a Triple Threat Trade spanning multiple days, but if the periods were altered slightly, the same principles would apply to trades that would only span a few minutes.
Should You Rely on Triple Threat Trade Indicators?
As mentioned before, the indicators for a Triple Threat Trade are three moving average indicators, set to different periods. Because of this, there will be a lag, as the moving averages only form as the stock price changes.
A person might see the lines touching one another, or even crossing over slightly, and enter a trade with the assumption that it will prove profitable. Only for them to watch as the indicator corrects itself retrospectively as the prices change, until it seems as if the lines were never touching at all.
This is the problem with any indicator. They all work on data that has been collected from prices that have already passed. Although indicators are designed specifically to try to forecast the market in short periods of time, no indicator can be 100% accurate.
For that reason, it is recommended that a person not rely solely on indicators in order to enter or exit trades.
Is the Triple Threat Trade Strategy a Scam?
Although some people claim that the Triple Threat Trade strategy has helped them make considerable returns, there are also some who have had bad experiences. Like with all trading strategies, Triple Threat Trading is not always successful, and there is some rate of failure that should be taken into account.
Any websites or trade alert programs that advertise otherwise are likely being untruthful, and any testimonials about perfect success rates are likely a scam. But that does not mean that it is not at least partly a viable strategy.
The use of three moving average indicators can provide a lot of information to a trader that, when used with discretion, may prove to assist them in increasing the accuracy and profits of their trades. But, it should only be used along with the trader's own discretion, and with the understanding that a mistake might still occur.
Overall, the basic principles behind the Triple Threat Trade strategy can be useful to analyze stocks and make decisions, provided that it is used correctly.
You might also interested in What is a sweep order in the stock market? and What is a Forward Volatility Agreement?