CONFLUENCE IN TRADING
Have you ever wondered what confluence in trading is? How can you combine several elements into one to increase your chances of making significant profits? Regardless of what type of trader you are or what your trading goals are, a confluence is always a great choice for many reasons, which we will discuss below in this post.
A definition of confluence in trading is the combination of more than one trading technique or analysis to increase the chances of winning a trade when you use multiple trading indicators that give the same "signal" as the best way to confirm the validity of a likely buy or sell signal. This applies to any situation where you see multiple trading signals lining up on a chart and signaling you to take a trade.
✳️ WHEN DOES THIS HAPPEN?
It occurs when several technical analysis methods give the same trading signal. Often, these are technical indicators. They can also, however, be combined with the following things:
Price action
Chart patterns
Indicators or oscillators
✳️ A BRIEF EXAMPLE OF CONFLUENCE IN TRADING
Suppose you use one technical analysis tool that provides 40% accuracy in predicting the correct price movement. In addition, you use a second, correlating technical analysis tool to better filter your decision. In this way, you increase your chances of making a profit. In this way, you use the concept of synthesis to find a trading setup using multiple technical analysis methods. Keep in mind that all of these analyses signal the same price direction. This can occur when support and resistance levels are closely related to expansion levels and Fibonacci retracements. The following things can also act as areas of interest:
Dynamic support and resistance levels such as
Moving average
Bollinger bands
Previous highs and lows
Psychological levels
When these levels follow each other, they form more significant resistance and support levels. All of these can be used as take profit levels or entry points.
✳️ FOUR METHODS OF PRICE ACTION FOR TRADING
The main four levels or areas in which a confluence can occur are as follows:
Resistance levels
Support levels
Fibonacci levels
Trend Lines
In short, price action confluence trading is a technical analysis method for observing. To trade on price action, it is important to have the ability to detect price "confluence" as soon as resistance levels, support levels, trend lines, Fibonacci lines, etc. bring the price to a confluence point. So, what are some of the most effective confluence trading strategies that every trader should know about?
✳️ BASIC STRATEGIES FOR CONFLUENCE
Here are some of the most valuable confluence strategies in trading that you can consider for your trading goals and objectives:
▶️ Market Structure (Support and Resistance)
Market structure is a collective reference to support and resistance. These areas in the market act as walls, especially ceilings and floors, that try to prevent price swings up and down.
▶️ Areas of supply and demand
Supply and demand areas are another useful example of trading. They represent a more prominent form of resistance and support and act as a solid barrier to price. In most cases, these are reversals or complete trend reversals.
▶️ Direction of the primary trend
One of the most favorable variables for this type of trade is the direction of the main trend.
▶️ Price action patterns
If you, as a Forex trader, know the different price action patterns, this will allow you to predict and assess the trend reversal. Keep in mind that this is a crucial variable in the confluence list in trading.
▶️ Candlestick Patterns
When it comes to candlestick patterns, it is important to understand that they are important as patterns of price action or even more. If you understand what price is doing and the fundamental philosophy behind the various candlesticks, you can gain an advantage over the market. Thus, this is one of the basic methods of the confluence trading strategy.
▶️ Trend Lines
The trend line and moving averages are also defined as "market structure." The reason for adding market structures to the list is the same as for adding trend lines and/or moving averages. Remember, the main reason for all of this is the underlying market structures, which are horizontal. However, they can also be diagonal in the form of a trend line or dynamic in the form of a moving average.
▶️ Price reversal zones with Fibonacci retracement
Fibonacci retracement zones represent the most important confluence of trading variables that traders should consider, especially when the trading structure has 61.8%, 50%, and 38.2% levels.
▶️ Price rejection
A price rejection indicates that the market is having difficulty breaking through one particular structure. In this case, the price is likely to rebound from the structure, while all price rejection candlesticks come in different shapes.
▶️ Indicators
Nevertheless, the list of confluence trading strategies is complemented by forex indicators, which are generalized graphical representations of past candle data. Traders mostly use these indicators to help themselves understand exactly what the market is doing.
✳️ How can you use confluence to place a good trade in forex?
Suppose you use price patterns formed by candles on your chart, and then you see a pattern that is a buy signal. You may have found that pattern confirmation and confluence may help you be right 70% of the time. Also, if you have tested and found that Fibonacci retracement levels can help you in the right context, you can expect the following.
If your price pattern signals to buy and coincides with a Fibonacci level, this is a great example of an "A" trade. All you can see are price patterns. You only overlay an indicator when you want to check for the right context around a price pattern. If you notice that the pullback level confluences with the pivot point you have been following, keep in mind that this is another form of confluence and that there are numerous other examples of confluences that result in great forex trades.
✳️ Some examples:
USD/CHF 1H
AUD/JPY 4H
UKOIL D
NZD/JPY 4H
GBP/AUD 4H
EUR/NZD 4H
A definition of confluence in trading is the combination of more than one trading technique or analysis to increase the chances of winning a trade when you use multiple trading indicators that give the same "signal" as the best way to confirm the validity of a likely buy or sell signal. This applies to any situation where you see multiple trading signals lining up on a chart and signaling you to take a trade.
✳️ WHEN DOES THIS HAPPEN?
It occurs when several technical analysis methods give the same trading signal. Often, these are technical indicators. They can also, however, be combined with the following things:
Price action
Chart patterns
Indicators or oscillators
✳️ A BRIEF EXAMPLE OF CONFLUENCE IN TRADING
Suppose you use one technical analysis tool that provides 40% accuracy in predicting the correct price movement. In addition, you use a second, correlating technical analysis tool to better filter your decision. In this way, you increase your chances of making a profit. In this way, you use the concept of synthesis to find a trading setup using multiple technical analysis methods. Keep in mind that all of these analyses signal the same price direction. This can occur when support and resistance levels are closely related to expansion levels and Fibonacci retracements. The following things can also act as areas of interest:
Dynamic support and resistance levels such as
Moving average
Bollinger bands
Previous highs and lows
Psychological levels
When these levels follow each other, they form more significant resistance and support levels. All of these can be used as take profit levels or entry points.
✳️ FOUR METHODS OF PRICE ACTION FOR TRADING
The main four levels or areas in which a confluence can occur are as follows:
Resistance levels
Support levels
Fibonacci levels
Trend Lines
In short, price action confluence trading is a technical analysis method for observing. To trade on price action, it is important to have the ability to detect price "confluence" as soon as resistance levels, support levels, trend lines, Fibonacci lines, etc. bring the price to a confluence point. So, what are some of the most effective confluence trading strategies that every trader should know about?
✳️ BASIC STRATEGIES FOR CONFLUENCE
Here are some of the most valuable confluence strategies in trading that you can consider for your trading goals and objectives:
▶️ Market Structure (Support and Resistance)
Market structure is a collective reference to support and resistance. These areas in the market act as walls, especially ceilings and floors, that try to prevent price swings up and down.
▶️ Areas of supply and demand
Supply and demand areas are another useful example of trading. They represent a more prominent form of resistance and support and act as a solid barrier to price. In most cases, these are reversals or complete trend reversals.
▶️ Direction of the primary trend
One of the most favorable variables for this type of trade is the direction of the main trend.
▶️ Price action patterns
If you, as a Forex trader, know the different price action patterns, this will allow you to predict and assess the trend reversal. Keep in mind that this is a crucial variable in the confluence list in trading.
▶️ Candlestick Patterns
When it comes to candlestick patterns, it is important to understand that they are important as patterns of price action or even more. If you understand what price is doing and the fundamental philosophy behind the various candlesticks, you can gain an advantage over the market. Thus, this is one of the basic methods of the confluence trading strategy.
▶️ Trend Lines
The trend line and moving averages are also defined as "market structure." The reason for adding market structures to the list is the same as for adding trend lines and/or moving averages. Remember, the main reason for all of this is the underlying market structures, which are horizontal. However, they can also be diagonal in the form of a trend line or dynamic in the form of a moving average.
▶️ Price reversal zones with Fibonacci retracement
Fibonacci retracement zones represent the most important confluence of trading variables that traders should consider, especially when the trading structure has 61.8%, 50%, and 38.2% levels.
▶️ Price rejection
A price rejection indicates that the market is having difficulty breaking through one particular structure. In this case, the price is likely to rebound from the structure, while all price rejection candlesticks come in different shapes.
▶️ Indicators
Nevertheless, the list of confluence trading strategies is complemented by forex indicators, which are generalized graphical representations of past candle data. Traders mostly use these indicators to help themselves understand exactly what the market is doing.
✳️ How can you use confluence to place a good trade in forex?
Suppose you use price patterns formed by candles on your chart, and then you see a pattern that is a buy signal. You may have found that pattern confirmation and confluence may help you be right 70% of the time. Also, if you have tested and found that Fibonacci retracement levels can help you in the right context, you can expect the following.
If your price pattern signals to buy and coincides with a Fibonacci level, this is a great example of an "A" trade. All you can see are price patterns. You only overlay an indicator when you want to check for the right context around a price pattern. If you notice that the pullback level confluences with the pivot point you have been following, keep in mind that this is another form of confluence and that there are numerous other examples of confluences that result in great forex trades.
✳️ Some examples:
USD/CHF 1H
AUD/JPY 4H
UKOIL D
NZD/JPY 4H
GBP/AUD 4H
EUR/NZD 4H
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🔻FREE Telegram channel🔻
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🔻Contact for Paid SIGNALS🔻
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