The Power of Confluence in the Trading Market
What is confluence and why is it so important when trading the Forex market? In this article I’m going to discuss what confluence is, why it’s so important and how you can integrate it into your current trading strategy to help put the odds in your favor.
What is Confluence?
Before we get into the details of how confluence can improve your trading, we first need to understand what it is. The dictionary has the following definition.
Confluence : a situation in which two things come together or happen at the same time.
So essentially confluence represents two or more “things” coming together at the same time. In terms of trading Forex, we can say that confluence is when two or more factors come together at the same place on a chart.
Some examples of these “things” might be a key support or resistance level, moving average, price action buy or sell signal or even something as simple as a strong trend. All of these things form what we’ll call Confluence Factors. In other words a strong trend might be one factor, a price action buy signal might be a second factor and so on.
Now that we’ve defined what confluence is and how we can apply it to trading, let’s discuss why it’s so important.