Combining Indicators - Learn How to Find Confluence Levels

High probability setups come from the right reading and combination of technical indicators. See actual examples for SPX, SPY, AAPL, NVDA, TSLA and GOOG.

Confluence in trading refers to the situation where multiple technical indicators or analysis methods all point towards the same direction for a security's price movement. It's like different pieces of evidence coming together to strengthen a single conclusion.

Here's a breakdown of the concept:

• Individual Indicators: Technical analysis uses various indicators like Stochastic, RSI, Bollinger Bands, moving averages, etc., to gauge price momentum, direction, and potential support/resistance zones. Each indicator provides its own perspective.

• Combined Strength: While individual indicators can be helpful, their signals can be ambiguous at times. Confluence comes in when several indicators all agree on a particular direction for the price. This combined strength gives traders more confidence in their analysis.

Benefits of Confluence:

• Increased Accuracy: By looking for multiple confirmations, traders aim to reduce the chances of acting on false signals from a single indicator.

• Improved Filtering: Combining indicators helps filter out noise and identify stronger trading opportunities.

• Stronger Conviction: Seeing multiple indicators aligned strengthens a trader's conviction in their trade decisions.

Confluence - Examples

• Uptrend Confirmation: Price bouncing off a support level, Stochastic and RSI crossing upwards, and price moving above a key moving average all suggest a potential uptrend.

  The example for GOOG shows an alignment of several factors:

  A) Potential bullish candle (low wick is short)

  B) Candle below the lower Bollinger Band

  C) Bullish Stochastic Crossover

  D) As confirmation, MACD also shows a bullish crossover (remember MACD does not provide signals of tops or bottoms, it is a confirmation tool)