CONFLUENCE TRADING

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Merry Christmas and a blessed new year to all my fellow hivinas around the world, today is a blessed day, a day of peace, joy, love and kindness. The year is finally coming to an end and it's such a great time for interaction.

Today we will be discussing trading strategies, precisely talking about the confluence trading pattern and how it affects a trader's chances of winning and lossing in the market.

First of all we all know how volatile and unpredictable the crypto and forex market is, it can be a very difficult task to predict market price patterns and actions. That's why traders need reinforcements in form of tools, used to analyze and confirm different signals in the market before venturing into it.

This traders make use of tools like indicators on the price chart, this indicators reflect in different ways the next movement or Breakout of price on the chart. Giving them an advantage in knowing when to make a market entry or not. Some of this indicators include :

  • Half trend indicator

  • Stochastic indicator

  • Espotential moving average(EMA)

  • RSI

All this indicators mentioned above, are utilized by traders on a price chart of an asset or security, when applied they help predict price movement and breakout.

CONFLUENCE TRADING

First of all what is confluence?

Geologists around the world can define confluence as a convergence of two water bodies at one point, this point of convergence is known as the confluence.

This simply means that when two water bodies e.g a river come together at one point there is a situation called a confluence. Here two or more elements are intertwined.

From this above illustration one can derive the definition of confluence trading. It can simply be defined as the use or application of two or more strategies or indicators on a price chart of an asset, to predict future market movements.

As I explained above, humans do not possess the powers to predict the future of price movements on a chart, they rely on elements like this indicators to help in technical analysis.

The picture uploaded below is an example of when confluence trading strategy was utilized.

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In the picture above, one can observe that more than one indicator was applied on the price chart before a market entry was taken. The fibonacci retracement tool, 200 SMA, and falling trend lines were used to predict the next market trend.

They are two different levels or stages of applications of the confluence trading system, and they include:

  • 2 Level
  • 3 Level confluence trading.

Let's break them down one by one.

2 level confirmation confluence trading

This strategy simply involves the use of 2 or more indicators on the price chart of an asset or security, it invloves the use of two or more trading strategy to confirm a trading signal or to confirm a trading setup.

This strategy can be used by applying either trade patterns or trade indicators.

3 level confirmation confluence trading

As the name implies it involves the application of more than three indicators on a price chart. The trader utilizes more than three strategies to confirm a new market trend and predict the new course of price movements.

The application of confluence trading has a lot of advantages,

  • Confluence trading improves a trader's confidence in the market, it gives a trader more assurance that the signal he is receiving is correct, because he doesn't rely on just one source of information, he places his/her odds on two or more factors to predict the next course of price movements.

  • Confluence trading aids a trader to organize his/her own efficient trading setup, for profitable market entries.

  • As I explained before, the crypto market is a very unpredictable And volatile environment, we humans do not possess the powers to effortlessly predict price movements on the chart, when one applies just one technical analysis tool or pattern on the chart, there is always a very big chance that it might be wrong, the indicator might signal a wrong break reversal. So confluence trading helps a trader with good risk management. With the application of more than one indicator, strategy or pattern on the chart, the trader is given more assurance and confirmation that the signal is valid.

I hope with the few points I illustrated above, that I have been able to describe and explain the concept of the confluence trading strategy.

THANK YOU FOR READING... @milezofplay

MONEY IS TIME....

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