Confluence Trading In Crypto - What????

Confluence trading is a term being heard by majority. In our last post, I explain what the super trend indicator is useful for in Trading and how it can actually help a trader identify buy or sell signal in the market. These signals are very useful as well and the indicator is combined with other indicators to produce perfect results.

This aspects of confluence trading is concerned with the combination of trading indicators. As a trader, it is not advisable to depend on one trading strategy to make your trading decisions. They must confirm in order to make a good investment as the crypto market is highly volatile and the Investment too.

Using the confluence trading which is a combination of multiple trading strategies put together will actually help a trader make a good trading decision. Let's start with the first combination.

	Chart from my account on binance

If you are checking a chat as shown above, the RSI of the price chart is actually showing a bullish trend reversal. These RSI indicator is in the overboard region which indicates that. We can also see the price created a higher high. Relying on this RSI indicator alone can lead to a false signal due to the volatility of the market.

	Chart from my account on binance

If we want to add another trading tool to it, let's say we're adding the EMA, exponential moving average, we may see something different I shown in the chart below. This chart has shown that the bullish trend reversal signal from the RSI indicator is not valid on the EMA. we can see the price of trading above the AMA which indicates the market is very much bullish and a break below it shows or confirms the bullish reversal signal from the RSI indicator.

So these combinations actually serve as a confirmation to to help us make good trading decisions and avoid fakeouts.

Importance

Confluence trading helps in maintaining good risk management which minimizes losses from trading. It also give Traders and age and confidence in his trading decisions. It helps them identify good trading setups using various trading strategies and also help filter false signals, breakout reversals, and continuation signals in the market as the confluence trading would be used to confirm this.

Many technical analyst deploy this form of trading in their trading journey as it gives them that confidence in Trading. So to embark on a trade, I would suggest two or three confluence of a trading setup before making any decision in the market.

Two level confirmation confluence trading and tells using at least two trading strategies to confirm a trade you want to set up and this can be with any trading tool you wish to use or one there best work for you.

From the Steem/USD chart above, we are using a two-level confirmation confluence trading for a setup that is bearish. This is done by combining the Exponential moving average and the RSI indicators, we can see that the price is above the 70 threshold which signals a reversal in the current trend. It is not advisable to rely only on the RSI indicator to confirm this reversal in trend.

	Chart from my account on binance

You should confirm using another trading tool which will help you filter fakeouts from the RSI indicator. We can also observe from the charts that the price was still trading above the exponential moving address after the RSI signal which means that the reversal in trend might be a fakeout as price can be in an overbought position in a trending market that is strong.

To confirm this reversal from the RSI indicator, we need to see the break in price below the EMA line to confirm the reversal signal in order to have a good trading decision.

The three level confirmation confluence trading is the combination of three trading tools to confirm a threat setup and I'll be using the Steem/usdt to explain this confluence trading. This gives a very high accuracy and edge over a setup in a trade. The chart shows three confluence which backs up the sell signal, the RSI the break of market structure and a break below the exponential moving average. These combinations give a strong confirmation to open a sell position.

	Chart from my account on binance

All screenshots gotten from my binance account

In conclusion, this confluence trading is a combination of several indicators or trading strategies that will help in the confirmation of false signals and fallouts in the crypto market. Trading who use this type of trading are less likely to experience losses.

Disclaimer :Any financial and crypto market information provided in this post was written for informational purposes only and does not constitute 100% investment advice. It's just basic knowledge every crypto trader or investor should have