Confluence trading is a combination of one or more trading strategies or techniques that come together and form a high probability buy/sell zone in a certain area in the market.

Market patterns (Elliott Waves, Harmonic, Candlestick patterns, etc.), price action (Support & Resistance, Fibonacci retracements, etc.), and indicators (RSI, Moving Average, Stochastic, etc.) are technical strategies/techniques used when trading a confluence setup.

On Oct. 29, 2021, we advised that the EUR/AUD pair was going to move lower.

EUR/AUD One-Hour Chart for Oct. 29, 2021

Trade Setup

1. Termination of blue wave (ii) correction signaling a move lower.
2. Price respects Support/Resistance Zone (Blue).
3. Price respects Dynamic Resistance 200 MA (Pink).
4. RSI Bearish Trend Continuation Divergence (Black).
5. Stochastic (Overbought).

We entered the trade on the RSI sell trigger at 1.5470 with a Stop Loss at 1.5525 and targets at the 1:1.5 RR minimum and a full target at the 1:2 RR. The EUR/AUD pair moved lower and the price hit the 1:2 RR target at 1.5360 from 1.5470 for +110 pips (+2% gain risking 1% on every trade) on Oct. 29.

A trader should always have multiple strategies all lined up before entering a trade. Never trade off of one simple strategy. When multiple strategies all line up, it allows a trader to see a clearer trade setup.