Thursday, June 29, 2017

How To Trade The Confluence of Events

April 11, 2011 by  
Filed under Forex FAQ & Latest Post


In today forex faq, we have a fellow trader who ask the following question.

when to enter the market. Is it when the timeframes of daily, 4h, 1h indicators show the same?

The situation that our fellow trader has pointed out is what is called the confluence of events. If you have been reading this blog, you will find that I often emphasize on this thing. As all of us know, trading is a game of probability. If we are able to increase our winning probability, we will have a higher chance of winning in the game.

When you are new, have you ever entered a trade just because you see the stochastic gets overbought and how often do you win? I must say that the chance is very slim as these kind of trade has very low winning probability.

What we should be looking for as a trader is to have more events that tell us we are on the right track. This will greatly increase our chance of winning as the probability has increased.

For example, you see that the price has hit a major resistance on the higher time frame like the 4 hour.

4 hourly chart major resistance

After that you move to the hourly chart and see that there is a MACD negative divergence forming on the chart

hourly chart MACD Negative Divergence

When you scan down to the 15 minutes chart, you see that the forex stochastic show signs of overbought.

15 min stochastic overbought

To me, this makes a good confluence of events. If you are able to find more things that tells you the same signal, you are in for a good trade. (Do note that there are still time where you can have everything align showing the same signal but get stopped out in the trade, this is because trading is pretty random and you have to accept that as part of the game)

One thing that I want to clear is that you do not need to have all the indicators in all time frame to show the same signal as this is pretty hard to get. You just need to have things or different indicators showing the same entry signal on different time frame and it is good enough.

I hope that I have answered your question and wish you all the best in your trading.

In today forex faq, we have a fellow trader who ask the following question.

when to enter the market. Is it when the timeframes of daily, 4h,1h indicators show the same?

The situation that our fellow trader has pointed out is what is called the confluence of events. If you have been reading this blog, you will find that I often emphasize on this thing. As all of us know, trading is a game of probability. If we are able to increase our winning probability, we will have a higher chance of winning in the game.

When you are new, have you ever entered a trade just because you see the stochastic gets overbought and how often do you win? I must say that the chance is very slim as these kind of trade has very low winning probability.

What we should be looking for as a trader is to have more events that tell us we are on the right track. This will greatly increase our chance of winning as the probability has increased.

For example, you see that the price has hit a major resistance on the higher time frame like the 4 hour.

After that you move to the hourly chart and see that there is a MACD negative divergence forming on the chart

When you scan down to the 15 minutes chart, you see that the stochastic show signs of overbought.

To me, this makes a good confluence of events. If you are able to find more things that tells you the same signal, you are in for a good trade. (Do note that there are still time where you can have everything align showing the same signal but get stopped out in the trade, this is because trading is pretty random and you have to accept that as part of the game)

One thing that I want to clear is that you do not need to have all the indicators in all time frame to show the same signal as this is pretty hard to get. You just need to have things or different indicators showing the same entry signal on different time frame and it is good enough.

I hope that I have answered your question and wish you all the best in your trading.

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