Break-Even vs Profitable Traders: The Power of Confluence in Your Strategy

There's a Difference Between a Break Even Trader and a Profitable Trader

there's a difference between a break even trader and a profitable trader and it's not just discipline it's confluence the ability to stack confirmations and multiple indicators and multiple levels of price action for the cleanest setup in this video I'm going to show you exactly how to do it sigma this video is for you and for those of you that don't know every single week I make a personalized video response to one of your questions in the comments of the previous video sigma asks "Can you please make a video on confluences?" Putting it all together absolutely bro let's get into it

What Is Confluence?

confluence just means multiple things pointing in the same direction when price trend indicators and structure are all aligned you have a high probability setup when they're mixed or conflicting that's where most traders get chopped up

What to Look For When Stacking Confluences

the key things you want to look for here when looking for multiple confluences is structure support and resistance candlestick confirmation indicators like the RSI moving averages or any custom indicators you're using volume and liquidity as well as session timing the more confluences you have the more confidence you should feel but there's a balance too many signals equals analysis paralysis

How I Personally Stack Confluences Before Entering a Trade

Step One: Structure and Trend (Top-Down Analysis)

step one structure and trend top-down analysis start with the higher time frames like the 1 hour or the 4hour and ask yourself is the market trending or is the market ranging

Step Two: Key Levels (Support and Resistance)

step two key levels support and resistance you want to mark up these levels of support and resistance because over time if you mark the previous highs and lows the breaks and the retest zones the fair value gaps or the liquidity pools you will start seeing the patterns over time and what levels price likes to reject at or reverse from

Step Three: Candlestick Confirmation

step three candlestick confirmation this is going to be your entry trigger rejection wicks engulfing candles or breaks of structure or if you guys have been watching me for a long time you know I love the candlestick pattern the three line strike

Step Four: Indicators for Confirmation

step four indicators for confirmation this is optional for those of you that prefer naked trading I however like to use the RSI i like to have a 200 smoothed moving average on my chart to keep my trend analysis in the right direction i also really like happy trail but that's another video and my go-to trading strategy is using divergences i want to catch the full swing of the trend whenever I can so that I'm comfortable in my trade for an extended period of time divergences give me that outlet

Look for Agreement, Not Contradictions

all of these things that you're looking at you need to look for agreement not contradictions let me walk you through a real chart and show you how I would use all of these confluences in action

Real Example: Gold on the 1-Hour Time Frame

this is gold on the 1 hour time frame you can see the time frame up here at the top first I want to mark up my support and resistance using horizontal lines on the higher time frame these are the key levels of support and resistance that I want to focus on the highs the lows and the mid structure where price has rejected off of multiple times and or bounced off of then I draw up my trend line so that I can see historical data of where the price has been trending over the last few months now I can zoom in to where it is right now but let me show you really quick on the 1 hour time frame we are on a downtrend pulling back to this level of support yet we have broken this downtrend with a double bottom and a divergence i'm keeping that in mind as I'm jumping down to the lower time frame on the 15-minute chart

Lower Time Frame Analysis (15-Minute)

now let's analyze this price we had a large wick right here then an engulfing candle to capture liquidity as price shot up this level right here is now an A+ level price used this level to break the downtrend and come back into it retesting the downtrend as well as that same level zooming in a little bit closer you can see right here we had a double bottom wick down retest and a strong rejection and looking at the RSI we had a divergence if I was watching this move I probably would have got it on this candle with my stop loss below but since I can't go back in time let's mark this up the next level of support and resistance is a 0.62 risk-to-reward not worth my risk you always want a 1 one or higher and seeing the RSI that we're at the top of the range we don't want to get into that trade you have to know when it's not worth your risk-to-reward to get into a trade after a move has already gone so going back in time this would have been right at market open giving you nearly a 1:2 risk-to-reward ratio that's a good trade at that time everything lined up all of your confluences were telling you one thing go long

Bonus: Happy Trail Indicator for Scalping

and again this is not needed but if you use the happy trail indicator on the 5-minute time frame looking for scalping knowing that it rejected off of that double bottom this would have been your entry candle and because scalping is tighter stop- losses and shorter position times your trade setup would have looked like this happy trail signal after the double bottom rejection breaking the previous downtrend looking left for your target the previous swing high stop-loss below the previous swing low 1 to 1.8 risk-to-reward

Quick Warning: Avoid Analysis Paralysis

a quick warning don't get addicted to needing seven different confluences you'll hesitate you'll miss entries and you'll overthink and under execute pick three to four key confluences that you trust and get good at spotting them quickly

Final Tips for Trading With Confluence

here are some quick tips don't wait for perfection it's never going to happen trust your system and most importantly track your setups and learn what worked over time we're focusing on consistency here trading with confluences gives you something more than just trades with good entries it gives you confidence the confidence that keeps you from FOMO that keeps you from panicking and that keeps you in the trade the goal isn't to be right all the time it's to stack the odds in your favor every single day over and over master confluences and you'll stop guessing and start executing

Still Struggling?

and if you're still struggling getting into a trade because you keep second-guessing yourself go check out our new earn as you learn program where we provide you the trade setups so that you can see what good trades look like and feel like to make those profits and while you're executing those trades you can learn about day trading so now you don't have to wait 6 months until you can start trading you can do it from day one as you're learning check out the earn as you learn program at trdfloor.com

Wrap-Up

i hope this video helped you guys out and if you have questions that you want answered in a video response put them in the comment section down below thanks so much for watching and we'll see you in the next one