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Using Confluence for Your Forex Trading Plan

Newbies to trading gold on forex can easily get overwhelmed by all the terms used in the market. Confluence is one of those terms that can be difficult to understand, but valuable once it’s learned. When you understand what confluence is and what it signifies, you’ll be able to make better trading decisions. Not to mention, you’ll be a step ahead of the crowd since many gold traders likely don’t spend the time to learn about confluence. You’re in the right place to learn the basics of confluence and how it can help you succeed in forex gold trading.

What is Confluence?

You’ve figured out the answer to your question, “What is gold trading?” Now you need to ask yourself, “What is confluence?” When looking at a chart or graph, you can identify confluence as being the area where multiple trading signals meet at any given point.

An example of confluence is when you draw a horizontal line on a chart and it meets with a moving average. These two areas meeting up is called confluence.

How Confluence Relates to Support and Resistance

When you use confluence to identify support and resistance, you’ll be able to more easily see when market swings will occur. This is vital for forex gold trading, because it identifies probabilities of what will happen in the near future.

The important thing to remember as well is to identify specific conditions for confluence as it relates to your trading plan. Confluence needs to support your trading plan in order for it to be valuable for you. The ideal goal would be to have a moving average meet at the same point as an uptrend line. Of course, it’s important to remember everyone’s trading plan is different and needs to be adjusted accordingly.

Look For Signals

Anyone experienced with trading gold on forex knows there is no such thing as a guarantee. Instead, gold traders have to look for signals for probabilities, since accurate predictions don’t exist. Look for price action signals, reversals and confluence to make trades at the right time. Any gold trader who enters at the point of confluence will most likely be making the best decision.

Using confluence in your forex gold trading plan will undoubtedly set you up for future success. Spend some time learning more about the benefits of confluence and reap the rewards in the near future.

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