CONFLUENCE TRADING - CRYPTO ACADEMY / S5W6- HOMEWORK POST FOR @reminiscence01

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1. Explain Confluence trading. Explain how a trade setup can be enhanced using confluence trading.

2. Explain the importance of confluence trading in the crypto market?

3. Explain 2-level and 3-level confirmation confluence trading using any crypto chart.

4. Analyze and Open a demo trade on two crypto asset pairs using confluence trading. The following are expected in this question.

• a) Identify the trend.

• b) Explain the strategies/trading tools for your confluence.

• c) What are the different signals observed on the chart?

1. Explain Confluence trading. Explain how a trade setup can be enhanced using confluence trading

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In the financial world as a trader or investor, confluence trading has to do with the process in which that investor or trader combines various trading techniques into a uniform method or trading idea to get an accurate reading of the market's up and downtrends.

Trading takes risks, now to minimize these risks to the lowest, it is really essential that a trader employs the proper use of confluence trading before the drives in to invest His assets on that market.

It is just like three (3) students studying for a particular examination. If the student (A) studies using only His notebook, student (B) studies with his textbook and notebook while a student (C) goes further to do some research online combing them with both his notebook and textbook. When the results are out, student (C) will be ahead of the student (B) that will student above student (A) and this is because the student (C) did involve the combination of different methods of study to get the accuracy he needed in the examination for better results. The same rules apply to confluence trading.

To make trading decisions, an investor highly depends on the use of 2, 3 or more types of indicators to clearly examine a signal in a price trend via confluence trading. In doing this, an investor becomes more confident and aware of the decision he decides to take in the market.

2. Explain the importance of confluence trading in the crypto market?

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• Risk management: As I've made mention before, if it is related to investment then it definitely consists of risks. The solution to reducing these risks is through confluence trading. Even when there might be losses, in the end, confluence trading makes sure that these losses are kept at a minimum.

• Boosts Confidence: When a trader combines the use of various indicators to analyze the market trend, then he is confident in however he chooses to enter the market knowing that his methods of are examining the trends are accurate and not just depending on one just one indicator.

• Identifying legit trading signals: A trader by himself without the use of any indicator will find it difficult to differentiate a true signal from a false one. Now, all that has been made easier through confluence, the mixing of various trading indicators to help the trader identify an accurate signal.

• Finding balance in a trade: Confluence trading gives a trader the balance and edge he needs before he can activate a trade. If a trader isn't balanced on an active trade he may be tempted to close the trade if the market goes against his expectations.

3. Explain 2-level and 3-level confirmation confluence trading using any crypto chart

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2-level confirmation confluence trading:

This is a situation whereby a trader uses two (2) or more indicators to get an accurate reading of the market before he opens a trade.

Below is a screenshot of a chart of BTC/USDT pair, in which I utilized 2 trading indicators:

1. Bull Bear Power
2. Chaikin Oscillator

screenshot source

3-level confirmation confluence trading:

The is when an investor decides to combine three (3) or more trading tools to help enhance his market results during a trade. This method of confirmation gives him more edge and a lot of confidence in the market over the 2-level confirmation. A trader is most likely to reduce his risks in the market when he uses this method.

Below is a chart screenshot of the BTC/USDT pair, which consists of the use of three (3) difference indicators to observe the movements of the trend:

1. Moving Average Ribbon
2. Bull Bear Power
3. Chaikin Oscillator

screenshot source

4. Analyze and Open a demo trade on two crypto asset pairs using confluence trading. The following are expected in this question. a) Identify the trend. (b) Explain the strategies/trading tools for your confluence. (c) What are the different signals observed on the chart?

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I am going to analyze below two different chart orders and the various indicators I used, although because it is the weekend today (Saturday), I couldn't make a trade.

• Buy Order;

[screenshot from MT5]

1. Identify the trend:

   It is an uptrend of BTC/GBP in a 1 Day time frame.

1. Explain the strategies/trading tools for your confluence:

   I used the combination of two (2) trading tools to make my trading decision. If the market was open, it would have been a buy order for me. The two strategies I used were; (a) Andrews Pitchfork & (b) Equidistant Channel.

1. What are the different signals observed on the chart?

   The price makes a long move upward then drops down for a little moment before it returns back to its initial upward movement as it is visible in the chart above.

• Sell Order;

[screenshot from MT5]

1. Identify the trend:

   The chart above is a downtrend of GBP/CHF in a 1 Day time frame.

1. Explain the strategies/trading tools for your confluence:

   I used the combination of three (3) trading strategies to confirm the signals of the trend market. If the market was open, it would have been a sell order for me. The two strategies I used were; (a) Andrews Pitchfork, (b) Equidistant Channel & (c) Fibonacci Retracement.

1. What are the different signals observed on the chart?

   I observe here that the signals in this trend have lower highs and lows, and when a trader notices this then is the correct time to place a sell order in the market because it is a downtrend.

Conclusion

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Prior to the time I read and understood this lecture by Professor @reminiscence01, I honestly had no idea what Confluence Trading was and how an investor can combine multiple trading tools to arrive at accurate results in the market, then I had to learn more by doing more researches online about it. This lecture led me to sign up with TradingView and MetaTrader 5 both on my mobile phone and laptop so that I will be able to attempt question 4. I took my time studying everything because it was all new and confusing to me at first. Completing my work now on a Saturday, I learnt that markets are closed during the weekends so I couldn't place a trade.

I understand how confluence trading works now and I also find out from these trading apps that there are so many indicators and trading strategies for a trader to use. It all comes down to the trader's personal preference and the ones that work best for him. Also, I learnt that you can create your own indicator but that seems a little bit complex for me since I'm still working on the basics.

Season's greetings and Merry Christmas to everyone on SteemitCryptoAcademy community and Thank you Professor @reminiscence01 for this well explained lecture.