Confluence: The cheat code to getting Lucky in trading
And in other spheres of life
Show up everyday and you will find yourself at the right palce at the right time, everytime.
My peak aspiring trader,
Today I am going to explain to you:
What is Confluence? &, how to use it to get lucky in trading?
Jimmy Anderson vs. Ravi Ashwin.
So what is Confluence?
Oxford defines the word as, “an act or process of merging”.
Trading is a game of probabilities. And Confluence here means the merging of conditions which increases the odds of your trade working and making the odds stronger.
So if you are trading a breakout, looking for signs where it has broken out of multiple resistances would be adding the strength of the breakout.
Similarly, if you are trading a reversal or a pullback then looking at more than 1 sign of supporting signal would add to the strength of the overall support.
We can use this concept similarly in other areas of decision-making.
Want to know if the market is Bullish or bearish?
look for the primary and secondary breadth indicators along with the price.
Look at the no. of stocks Advancing vs Declining.
Or, the no. of 52 WH vs the 52 WL.
Two stocks have the same set-up and you have to choose one?
Look at which stock has a stronger sectoral strength. Which one is a young stock and which one has a better base? Which one is trading near the 52-week highs? etc.
You get the idea, now.
Jimmy Anderson vs. Ravi Ashwin.
Like, imagine a game of cricket, India vs. England. You have to put your money into a bowler taking a wicket and I give you 2 choices, Jimmy Andrson and Ravi Ashwin.
Who would you put your money into?
This would be hard to choose right now, but see if having the following information aids you in your decision-making.
Where is the game being played? At the Lord’s or at the Chinnaswami?
Does the pitch have a green top? Flat or bouncy?
Start of the innings?
Overcast and windy conditions?
Is it a top-order batsman or a tail-ender?
New ball or Old ball?
Is the field set for attacking or neutral?
The answer to each of these questions will add to the confluence of your decision of whether to put your money on Anderson or Ashwin.
Let’s say, the game is played at the Lords. It’s a morning session with a new ball. Overcast conditions on a green pitch with 5 fielders behind the square.
Anderson will have very high odds of taking a wicket. Remember that he might not still.
This is also exactly how the stock market works.
All you can do is gather evidence of a trade working. Measure the odds and place your bets accordingly. Play according to the law of averages and with enough no of trades, there is no doubt that you will be profitable in the long run.
Next week, I will share with you some peak Support confirmation signals. And how to use them to anticipate a peak pullback/reversal.
If you are a beginner trader, struggling to be consistently profitable.
Sakatas Homma can help you level up in the following 2 ways below:
The Sakatas Homma TA masterclass for beginners:
A monster course (12-15 hours total). Hourly sessions on weekends. Twice a year.
Please register for the fall 2023 course (September 2023) using the link below.
https://docs.google.com/forms/d/e/1FAIpQLScfnQA1w9WDTtTAPEHIqzkS9jhRSZFA1BZXuWRZ5JPZ3Qfu8g/viewform
Watch my 1st session of the spring 2023 batch.
Homma Private Access membership:
HPA is a subscription-based educational service (on WhatsApp). Benefits include:
Daily Market Breadth Update.
Access to my scanners and dashboards and charting layouts.
Weekend hourly session and Q&A.
Live updates on my portfolio and the trading setup rationale.
Live updates of key setups I am tracking.
Yearly membership of 6000/- INR only.
UPI payment & WhatsApp @ 9481506784.
This is all for this weekend,
I will see you in the next one. Till then,
Don’t stop asking those stupid questions.
~ Homma
Some Peak Scanners for you:
Pullback to 10/21 ma: https://chartink.com/screener/copy-shpb1021
VCP (long-term timeframe): https://chartink.com/screener/shvcp-epic-modified