Confluence is a term used when multiple factors and strategies form around a trading idea.
For example; price action that moves to a strong Fibonacci level, and also happens to be an area of daily support, has found confluence for a potential long position.
While the above example is very brief for the sake of not overwhelming our beginners, there are so many factors that will contribute towards confluence on a chart.
The more you have, the greater probability you will have in your trade setup.
Confluence is a term used when multiple factors and strategies form around a trading idea.
For example; price action that moves to a strong Fibonacci level, and also happens to be an area of daily support, has found confluence for a potential long position.
While the above example is very brief for the sake of not overwhelming our beginners, there are so many factors that will contribute towards confluence on a chart.
The more you have, the greater probability you will have in your trade setup.
Key Points of the Lesson
UTILITY
Finding confluence is key to increasing probabilities and providing you with an edge in trading.
Useful for scalp, intraday and swing trades.
Build a bullish and a bearish case ⇒ determine the strongest confluence.
IMPLEMENTATION
Start analysis from high to low time frame ⇒ higher time frame is stronger.
use different technical analysis tools to see if they intersect or coincide at the same level or area.
Market structure and context should support the hypothesis.
TIPS & TRICKS
High timeframe analysis ⇒ strong confluence with several tolls provides higher probabilities for trade setups.
Low time frame analysis (scalping and day trading) ⇒ Less tools are recommended, use order flow.
High time frame confluence is stronger ⇒ better probabilities than on a low time frame.
TAKE HOME MESSAGE
Increase probabilities with strong confluence. High time frame confluences are stronger. Market structure and context are an integral part of the analysis.