CONFLUENCE PRICE ACTION TRADING
*, First of all, take note that my English is not very good. I speak a very different language in my country.
I want to explain the concepts over the period. I have not invented any of these on my own. But during my journey learning how to trade, I have tested a lot of indicators. And eventually, I have found that they are all temporary. Then later I thought of shifting to trading price action because Price is the best indicator of what the market is doing.
So the meaning of the word CONFLUENCE: an act or process of merging.
As I have mentioned above Price is the best indicator we have. Price is very fast and accurate. I want to explain my way of trading in the following posts I hope to make.
Some of the main features I use relating to Price are as follows:
- Currency strength and Weakness
Support and Resistance
- Market & Candle Patterns
- Supply & Demand Zones
I am open to any of the suggestions that you people make to improve this system. Currently, I use the following to find any possible setups. I will explain each one on how I use to trade.
1. CURRENCY STRENGTH & WEAKNESS
There are many ways to calculate the currency strength. I personally use a couple of ways to calculate the currency strength and weakness. I would recommend you, people, to check out DENNIS'S THREAD He has a very easy and simple way to calculate the currency strength.
- I personally use his style because of the simplicity. And it has also proved to be successful for many years.
- Another reason why I like it is that it, not some fancy calculation which involves some complex algorithm to calculate. the data can also be stored in an excel sheet.
It is a simple calculation which involves Price
- I will attach a template of the excel sheet if you want in this thread.
2. SUPPORT AND RESISTANCE
Everybody must be aware of this concept. Many start their Forex journey with the introduction of support and resistance. Many don't realize how important the Support and resistance(going forward call as S/R) are in making trading simple.
I have tested many systems and finally realize that all the basics that i learnt in my first year of trading is what is helping me identify good trades.
OKAY!! NOW THE WAY I IMPLEMENT S/R IN MY STYLE:
* I basically drop down to the Daily TF and use the line charts
* I mark all the S/R I see on the Daily. I always try to not make the chart very clumsy.
* I also prefer to color code the charts, so the S/R on the Daily I mark them in RED line.
* I have attached a picture below which is very much self-explanatory.
Just check how the Wicks and Bodies of the candle respect the S/R area on the DAILY TF.
* Now drop down to the 4HOUR TF and mark the S/R or Area of indecision in between these Daily S/R .
* I use the Dim Green line to indicate the 4H S/R or area of indecision because there will many lines it must not make the charts look confusing.
* I add anywhere from 2-3 lines on the 4H TF in between each DAILY S/R.
* Below is pictrue of both the candlestick chart and the line chart.
Now you are set with the markings. Just do it with your charts also and see for yourself how this works out. This way of marking the S/R we can mark out each wich and bodies of the candle.
The price is respecting this very much and you can try it out yourself.
Now you should look for entries in the 1HOUR TF. For the entries as of matter, you can always consider of using the other technical tools I have mentioned above to confluence it with and take positions.
3. MARKET AND CANDLE PATTERNS
I use the market patterns to looks for breakouts around these support and resistance areas.
for example my trade from this week.
I have used a simple market patter that is a TRIANGLE and i traded based on that around the S/R area.
And candle patterns I use them to identify REVERSALS/BREAKOUTS/CONTINUATION in the market.
I recommend you, people, to check out this FREE SOURCE WEBSITE where all the CANDLE & MARKET patterns are explained.
All of you must have heard or used them in their journey.
I am not going to explain to them how they work. I will just show how I use them in my trading system.
- FIBONACCI RETRACEMENTS
- FIBONACCI EXTENSIONS
I use them in different ways since this is getting too long I will try to give more info in the following posts I put in this thread.
I use retracements for entries and confluence them with the S/R lines.
REMEMBER the MAIN THING HERE IS CONFLUENCE
So I see if the Fib Levels confluence with any of the S/R line.
MORE INFO IN THE FOLLOWING POSTS.
5. SUPPLY AND DEMAND ZONES
- I have a different approach to what supply and demand zones are. I consider these zones as zones of indecision. These are the zones where the price usually has congestion and hence breakout in either direction.
- Generally, Supply zones are sell zones demand zones are buying zones.
- I don't use this much in my analysis but it is a plus. I just think this concept is another version of support and resistance.
So now most of you must have understood my style of trading. 'REMEMBER THE KEY IS TO CONFLUENCE EVERYTHING'
I try to find trades which has confluence. For example, will show a simple trade verbally here:
Suppose I find a trade near the resistance area
the price is near the trend line
the Fibs have a 62% retracement level
candle pattern is a reversal
I see many proofs(in other words confluences) I TAKE THIS TRADE.
Hope people have understood I will keep this updated. This thread is just for information purpose and to document my journey.
I am looking out to help others and to seek help from others.
It took long time type this