Confluence: A point in the market where two or more levels intersect each other, thus forming a ‘hot point’ or confluent point in the market. In the dictionary, confluence means ‘a coming together of people or things; concourse’. So, basically, when we look for confluent areas in the market we are looking for areas where two or more levels or analysis tools are intersecting.
In the chart,we are looking at an example of how to trade price action with confluence. A “confluent” level or
point in the market is one that provides some weight to the trade setup. For example, in the chart below the pin bar is showing rejection of an obvious horizontal resistance level in the market as well as the dynamic resistance between the 8 and 21 day EMAs (red and blue lines). Yet another factor of confluence in the chart below is the downtrend itself.
If you have a price action setup that’s in-line with the trend, as the pin bar in the chart below, that’s also considered a point of confluence. Thus, in the chart below we have 3 factors of confluence validating and strengthening the case
for a short entry from the pin bar setup:
2) Rejection of horizontal resistance
3) Rejection of dynamic resistance
US Dollar Index. At support and ATL break and close beyond the support and ATL weaker dollar and if it holds strong dollar.
10 14221 hours ago
Relative Size of Pattern
This next filter is probably not new to you if you’ve been trading price action for a while, but it’s another pretty important one in my experience.
How large or small the signal candlestick (in this case the shooting star) is in comparison to the previous candlesticks should also be considered.
Larger candlesticks are more significant as far as what they can tell us about current market sentiment.
Therefore, a relatively large shooting star candlestick is a more significant bearish signal than a relatively small one.
The farther back you have to go to find a candlestick of similar size the better.
In this example, the large shooting star candlestick was larger the all the previous 7 candlesticks shown.
However, the small shooting star was one of the smallest candlesticks in the series.
if you want to learn how to trade the market using my price action trading strategies,
i highly recommend purchase my ebook (the candlestick trading bible). if you are interested,check it out in my bio, or send me a private message.