Homework Question

• 1. Explain Confluence trading. Explain how a trade setup can be enhanced using confluence trading.

• 1. Explain the importance of confluence trading in the crypto market?

• 1. Explain 2-level and 3-level confirmation confluence trading using any crypto chart.

• 1. Analyze and Open a demo trade on two crypto asset pairs using confluence trading. The following are expected in this question.
     a) Identify the trend.
     b) Explain the strategies/trading tools for your confluence.
     c) What are the different signals observed on the chart?

Introduction

Season Greetings Steemians , I will be responding to Home task given by Professor @reminiscence01 , Thank you for your awesome teaching on "Confluence Trading." . below is my homework.

• 1. Explain Confluence trading. Explain how a trade setup can be enhanced using confluence trading.

Cryptocurrency trading is one business that is associated with high level of risk because of it's volatility nature therefore traders needs to have a background knowledge of it so as to know how to make use of confirmation strategy which they need to employ before they can trade.

The word 'confluence' simply means merging two things together and in respect to trading, confluence trading can be define as the combination of different type of trading strategies to so as to get a specific and definite signal. This technical analysis method makes use of two 2 or more strategy altogether in other to interpret the market structure or get a profitable signal .

In trading, using only one trading strategy could be very dangerous so their is need to adopt multiple trading analysis so as to determine the perfect time to enter or exit the market. Confluence in trading is use by traders to manage market volatility and increase the chance of making good decision and also use to track down fake signal in trading.

Source: SCREENSHOT FROM MT5 APP

From the above image you can see it's the DOG/USD chart on 1hr time frame, we make use of the confluence trading strategy and the tools used are : Bollinger band and the stochastic oscillator indicator.

At the double top pattern we discovered, that the two indicators at the double top pattern were pointing at bearish reversal and this how trade set up can be enhanced using confluence trading.

• 1. Explain the importance of confluence trading in the crypto market?

We have numerous importance of confluence trading in crypto space. Below are some importance of confluence trading:

• Risk Management: confluence trading is used by traders to manage the risk of loss in trading.

• Confluence trading decreases the chance of making the wrong move while trading and increases the chances of making more profit on the stand of multiple confirmation which maintain risk management.

• Sieving out False Signal: Sometimes trade don't as expected because of false or fake signal received from the technical tool that was used. Confluence trading helps to sieve out fake signal in crypto market because before a trade can be placed on confluence trading, two or more confirmation strategy will be used before order will be placed.

• It aid to improve the confidence of traders while trading because of multiple confirmation strategy which increase traders confidence before placing trade.

• It improves Trading Skill : Whenever a trader makes use of one particular confluence for trading strategy, It aid to improve the trading skill of the trader so as to as to get accurate prediction.

• 1. Explain 2-level and 3-level confirmation confluence trading using any crypto chart.

2-LEVEL CONFIRMATION CONFLUENCE TRADING

2-Level confirmation confluence trading is just the use of at least two different types of trading tools to confirm the trade setup. This is aim at sieving out fake signal and other irregularities that might arise when using a single strategy. This is achieved by the use of indicators or market patterns to analyze the trading chart.

Source: SCREENSHOT FROM MT5 APP

From the above chart, we used 2 confluence tools . At first there was a break in Market structure thereby disrupting the ascending treadline , also the stochastic indicator is above the 80, this was a nice set up for bearish reversal entry.

3-Level Confirmation Confluence Trading

3-Level confirmation confluence trading is just the use of at least three different types of trading tools to confirm the trade setup. This is aim at sieving out fake signal and other irregularities that might arise when using a single strategy. This is achieved by the use of indicators or market patterns to analyze the trading chart.

Source: SCREENSHOT FROM MT5 APP

From the above chart, we used 3 confluence tools . At first there was a break in Market structure thereby disrupting the descending treadline which also resulted to bullish reversal and there was price movement confirmed by the stochastic indicator which is reading below 20 and also the RSI indicator which was recorded below 30'.

• 1. Analyze and Open a demo trade on two crypto asset pairs using confluence trading. The following are expected in this question.
     a) Identify the trend.
     b) Explain the strategies/trading tools for your confluence.
     c) What are the different signals observed on the chart?

From the image below(UNI/USD Chart),You can see the perfect entry point which is a 'BUY' position when using confluence strategy.
Initially , I made use of trendline to determine the market structure which is a lower-low and lower-high (Bearish trend),There was a reversal in trend at the point where I circled,

For further confirmation I used stochastic oscillator and RSI before a 'BUY' position was placed.

Source: SCREENSHOT FROM MT5 APP

From the below image, it is the price movement to confirm that I made the right decision.

Source: SCREENSHOT FROM MT5 APP

From the image below(SOL/USDChart) is second trade. I used a trendline to determine the market structure , I discovered the bearish trend and I also notice a reversal in trend. I used the stochastic oscillator and RSI to further confirm this, and I notice both the stochastic and RSI were reading below 20 and 30 respectively which means the tools are in confluence. I then proceeded to place a 'BUY' trade again.

Source: SCREENSHOT FROM MT5 APP

I also used a trendline to figure out the market structure first and I observed that it was a bearish trend but at a point the price broke the trend and market structure signalling a reversal in trend.For further confirmation I used stochastic oscillator and RSI before a 'BUY' position was placed.

From the below image, it is the price movement to confirm that I made the right decision.

Source: SCREENSHOT FROM MT5 APP

Source: SCREENSHOT FROM MT5 APP

Conclusion

In this lecture I was able to understand what confluence trading. is all about the important and how to use it

We make use of confluence trading to avoid false breakout and We have indicators that can be used to filter false breakout so as to increase the chances of multiple confirmations and also increase probability of take profit level .

Am Thankful professor Professor @reminiscence01 for this wonderful lecture.