How to Develop a Forex trading plan – Trading Confluence; one of the most effective methods to trade forex with high probability.
Video Synopsis -How to develop a forex trading plan – trading confluence 5-29-2009
In the above forex education video I introduce traders to the concept of forex trading using confluence.
Confluence is simply an area where two factors meet and confirm one another; it’s the “weight of evidence” argument. Confluence = an area on a chart where 2 or more trading signals come together at a common point.
When we have a horizontal line on a chart and an uptrend line or a moving average, and the two meet at the same point, this would be an example of confluence.
The beautiful thing is when we are trading we can put into our trading plan conditions that must be met for confluence. Condition 1, do we have confluence of two factors to support the direction we are trading? An example of this would be a moving average cross over to the upside and an uptrend line that aligns at the same point as a moving average, if we then buy a pullback, or go long on weakness in the uptrend at this intersection point of signals, we are then trading at confluence.
A practical example from the video above: Crossover of moving averages to the upside = momentum to upside, also look at the horizontal line, the area where the horizontal line and MA meet is confluence. The 3rd variable is the price action confirmation signal, in his video the price action signal was a pin bar. This is called 3 variable confluence and it’s a very high probability way to trade the forex market.
Entering at “confluence” is the most important factor of any forex trading strategy.