Forex Market: What is the confluence and why it is so important to trade the forex market? In this article I will discuss what is the confluence, why it is so important and how you can integrate into your trading strategy to help put the odds in your favor.
Before going into the details of how the confluence can improve your trading we must first understand what it is. The dictionary proposes the following definition.
Confluence: a situation in which two things come together or occur at the same time.
Thus the confluence represents two or more “stuff” that bind at the same time. As for the Forex trading we can say that the confluence occurs when two or more factors come together in the same place on a graph. Examples of these “things” can be a level of support or resistance, moving average, the price action, buying or selling signal or even something as simple as a strong trend. All these things are what we call Factors Confluence. In other words, a strong trend could be the primerofactor, a buy signal may be the second factor and so on. Now that we have defined what is the confluence, let’s talk about why it is so important.
I think I can be so bold to say that consistent profits is the goal of all Forex traders. Well then why only a small part of the operators do at this level? It comes down to the use of confluence. Operators are consistently profitable found a way to identify and harness the power of the confluence in a way that puts the odds in your favor.
The ability to put the odds in your favor is what the trading treats us. Find a way to do this again and again and be well on your way to becoming profitable. This is where the combination of several factors Confluence comes into play. For all purposes, we can see the confluence as a possibility to put the odds in your favor. In other words, the more Confluence factors present in any given setup, the greater the chances that the setup will move in the desired direction.
This is my favorite part because it is where we highlight the power of the confluence, as it refers to a particular trading setup. To begin, let’s say we have a strong uptrend in a given market. We all know that trading with the trend, or the path of least resistance is always a good idea. At the risk of sounding cliché, the old saying, “the trend is your friend” is absolutely true in my experience.
Becomes a strong uptrend. The second thing we noticed is a key support level that has just come into play. The market has fallen from a recent peak and now seems to be finding support at this level.
With respect to the key support level price action it has formed a bullish pin bar from this level. The pin bars can be a great indicator that the market has reached a swing high or low and is about to reverse.
And last but not least important we realize that the tail of this bullish pin bar intersects with our 10 and 20 exponential moving averages we use as part of our trading strategy. So it seems our moving averages are also providing dynamic support in combination with the key support level.
You have an idea. The list could go on and on, and you identify the factors will vary depending on your trading style. However the point to take away from all this is that the more factors Confluence present in any given setup, the greater the chances that the setup will move in the desired direction.
This works both ways. As well as the setup of trading with more factors may be considered higher quality, less factors setup is of lower quality. This is when patience is so important – to be able to wait for the setup of trading that has four or five factors rather than taking the setup that has only two or three factors.
It is important to note that although confluence helps put the odds in your favor, that does not mean that the setup with four or five factors can not fail. Instead, he wants to focus on the big picture. You know that if you wait patiently for those setup of “A +” then your account will begin to grow in the coming weeks, months and years. Become a profitable trader Forex is a marathon, not a sprint.
Like the casino owner does not expect to win each and every hands played, you should not expect to win every trade, no matter how many Confluence factors are present. Having said this, the casino owner knows that at the end of the year will have made a considerable profit because the odds are in your favor. So, start thinking like the owner of casino and use the confluence to put the odds in your favor.
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