How to Use it to Your Advantage forex

What is confluence and why is it so concrete to your trading the forex market? In this article, I will take you through what confluence is and why it is so important, and how you can inculcate it into yourFX trading strategy to help put the odds in your favor.

What is Confluence?

Before going further into the way confluence can improve your forex trading, we need to understand what confluence is. Accordingto a dictionary definition:

Confluence is a situation whereby two things occur at the same time or come together. To further simplify the description, confluence is achieved when two or more “things” bind together at the same time. In FX trading, we can say that 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, the price action, moving average, buying or selling signal or even something as simple as a strong trend. All these things are what we call Confluence in Foreign Exchange Market. In other words, a strong trend could be the main factor, and a buy signal may be the second factor and so on.

Now that we have defined what confluence is, let’s talk about why it is so important, especially to Forex traders.

Put the odds in your favor

Whether you agree with me or not, a consistent streak of profit is the major goal of all FX traders. Well, “how do l achieve this?” you ask. It comes down to the use of confluence. Forex traders from all over the world are working tirelessly on a great Forex strategy (I do that often, and I’m sure you do that, too.). Traders are, from time to time, looking for a way harness the power of the confluence in a way that would put the odds in their favor.

The ability to put the odds in your favor is the only way for you to make a continuous profit. And if you’re able to find a way to do this over and over again, you’re well on your way to making a massive profit. This is where the need to study all that is relating to confluence, and how you as a trader can benefit from it, is important. In other words, the more Confluence factors present in any given market setup, the greater your chances of having the setup move in your desired direction.

Putting Confluence to Work

This is my favorite part because it is where we highlight the power of confluence, as it helps you achieve your trading goals.

To begin, let us say you have a strong uptrend in a particular market. You know that trading with the trend or the path of least resistance is always a great idea. Just like the famous saying: “the trend is your friend” is so true.

So our Confluence number 1 (Factor # 1) becomes a strong uptrend.

Another thing we observed is “a key support level” that is integral to our achieving profit.

Confluence number 2 (Factor # 2) is a key support level.

So, regarding factor 2, the price action has now created a bullish pin bar. And the bullish pin bars can be a good sign that the Forex market has attaineda swing low or high and is about to reverse.

So, Confluence number 3 (Factor # 3) is bullish pin bar.

And the last but not less important, you realize that the tail of this pin bar (confluence number 3) intersects with your 10 and 20 exponential moving averages that you use as part of your trading plan.

So Confluence number 4 (Factor # 4) is Support dynamic moving averages.

I believe you have an idea of what I’m trying to explain to you. The list is endless; it can continue till you exhaust all the available factors. But, the factors that you’ll include to form the confluence would undoubtedly depend on your Forex trading style. The point I’m trying to make you see is that the more factors present in a given setup, the more likely it would move in your desired direction, the reverse is also true.

Having a lot of factors is not only enough for you to achieve profit by confluence, but by being patient. As I explained to you earlier that the more factors you have, the greater your chances are to attaining profit in the Foreign Exchange Market, if you’re not patient enough, you might jump at a setup with two or three setup up. And, of course, you have a lower chance of hitting your target than for a setup with four to five 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’t fail. But be certain that they would more likely grow your account in the long run than a setup with minimal factors. And, also, have this at the back of your mind, “becoming a profitable Forex trader is a marathon race and not a hundred meter sprint.”