Confluence is Key to a Solid Forex Trading Plan

[Nial Fuller 10]

Whatever method you use to analyze the forex market one thing is for sure; confluence of signals will lead to greater accuracy for any given trade. Most traders rely on multiple indicators, price levels, or price patterns in their trading method. A solid trading method will require your entry trigger to include a convergence of more than one of the tools you use to analyze the market. When this happens it is called confluence. Confluence of signals is the best way to build your confidence in a trade and gives you the best chance at profits.

 

Where many forex traders go wrong is jumping the gun and entering a trade without confluence, or when they are only seeing one aspect of their entry parameter happening. The urge to trade after a series of winners can be especially strong. This is the exact time that many traders due the most damage to their trading accounts. If you find yourself feeling this way the best thing you can do is remove yourself from your trade station. The next best thing you can do is to read over your trading plan again and stop to ask yourself whether you are truly seeing a confluent trade setup or just acting off emotion.

 

Waiting for confluence of signals means you must have patience. This will require you to pass up many trades that might work out. The point here is that you are acting like a tiger in the wild by laying low and waiting for the most obvious trade to come along with the most confluence. Tigers don’t go running after every gazelle that comes their way, they sit and wait for hours and sometimes days or weeks until the perfect opportunity comes along. This way they give themselves the highest success rate possible with little wasted effort.

 

It is very important that you act like a tiger in the forex market and conserve your trading account by sitting and waiting for the best trade setup with the most confluence to come your way. Traders often think by trading more they are taking advantage of more opportunities and giving themselves a better chance at profiting. This belief is fundamentally wrong but it is how we are wired as humans. This is what makes trading so difficult. You have to realize that not being in the market is a very important and valuable position because you are not losing money and are waiting for a profitable setup to come along.

 

Waiting patiently for all your entry parameters to come together is immensely important in the world of forex trading. Of course first you must define what your trading parameters are. If you look at say a couple price action signals, Fibonacci levels and support and resistance levels, then the best trade setup would be confluence of all of these signals. If you only get one or two of them then you wait. You wafornt the trade setup that is like the baby gazelle in the African plains; just limping along and ripe for the picking. Don’t fall into the trap of thinking that more is better in the forex market, I promise you it is most certainly not.

 

Nial Fuller is an expert on price action forex trading strategies, you can visit his website at Learn To Trade The Market

[Water 10]

Very true. By waiting for the best trades you can increase your winning percentage. When you have a very high and stable winning percentage you can increase your leverage if your risk tolerance allows it. During a given period of time its better to trade 10 lots on one trade using a setup with 95 or greater winning % than 10 trades of 1 lot with 70% winning percentage. Over many periods of time you will be much further ahead taking only the best trades.

[fx_jmcalster 10]

The most difficult thing to do for an active trader is to sit aside and do nothing. But sometimes it is the best option.