Confluence: When the Stars Align (And You Still Manage to Lose Money)

Right. Let’s talk about confluence, shall we? That magical word that gets thrown around trading Discord servers like confetti at a New Year’s party in Shoreditch. “Mate, the confluence is chef’s kiss,” they’ll say, just before their account gets liquidated faster than a pint at a pub on Friday night.

I’ve been trading forex for twenty-three years. I’ve watched this industry evolve from phone calls and Reuters terminals to retail traders thinking they’re fund managers because they’ve got TradingView open on their MacBook whilst sitting in a Starbucks. Confluence is one of those concepts that sounds brilliant in theory—and is absolutely brilliant in theory—but in practice? Well, let’s just say it’s the reason I can afford this office overlooking the Thames.

What Confluence Actually Is (Before You Ruin It)

Confluence, for those who haven’t yet lost their entire inheritance on it, is the convergence of multiple technical indicators or price levels all pointing in the same direction. Think of it as the trading equivalent of a jury verdict: when multiple independent witnesses all confirm the same story, you’ve got something worth paying attention to.

A textbook confluence setup might look like this:

Price testing a historical support level
A 200-day moving average sitting right at that level
An RSI showing oversold conditions
A Fibonacci retracement clustering at the same zone
A round number (like 1.0500) acting as psychological support

When all these elements stack up? Your brain releases dopamine. You feel clever. You feel like you’ve cracked the code. You feel like you’ve found the holy grail.

You haven’t. But you feel like you have.

Why Retail Traders Love Confluence (Spoiler: It’s Not Why You Think)

Here’s what nobody tells you: retail traders love confluence because it justifies taking a trade they already wanted to take anyway.

This is called confirmation bias, and it’s more addictive than cryptocurrency and leverage combined. You spot a support level you fancy, then you spend the next hour drawing lines, adding indicators, and cherry-picking data points until you’ve convinced yourself it’s a 10-to-1 reward-to-risk trade. “Look at all this confluence!” you shout to your mate Dave. “This is a no-brainer!”

Dave nods along whilst pretending to understand your seventeen TradingView windows and your personal Discord server dedicated to discussing the sentiments of central bank officials.

The market moves against you. You’re down 500 pips. Dave stops replying to your messages.

The Uncomfortable Truth About Confluence

Here’s what I learned in 1998, and I’ve had to remind myself of it every single year since:

More information doesn’t increase your edge. It just increases your confidence, which is the enemy of your account.

Confluence feels like edge because it appeals to our human need for pattern recognition. We’re descended from cave people who had to identify threats quickly. Our brains are hardwired to find patterns, even when they’re not there. This is why we see faces in clouds and why your mate Terry swears that trading between 2 PM and 4 PM GMT is “obviously” when the big money moves (it’s not).

When you’re staring at a chart with seven different confluence factors all pointing to the same level, your lizard brain is screaming, “YES! THIS IS THE PATTERN! COMMIT EVERYTHING!”

Your lizard brain has blown more accounts than I’ve had hot dinners.

When Confluence Actually Matters

Right, I’m not here to completely rubbish the concept. Confluence does matter. But only when you understand what it actually is: a filter for reducing false signals, not a predictor of future price movement.

Here’s the distinction that’ll save you money:

Confluence doesn’t tell you the market will go up. It tells you that if the market goes up, this particular level is worth watching. It’s a conditional probability statement, not a prophecy.

I’ve made serious money at confluence zones not because I believe the market must respect them, but because I know other traders believe it. And when enough traders believe something, it becomes a self-fulfilling prophecy—at least for a while.

The key word there is “while.”

The Only Confluence Setup That Matters

After two decades of this, I’ve found exactly one confluence framework that consistently works:

A price level that has proven historically significant (tested multiple times, recently respected)
A timeframe alignment (4-hour and daily both showing the same level)
Volume confirmation (people actually traded there before)
A risk-management plan that works even if you’re completely wrong (because you will be, regularly)

Notice what’s not on this list? Bollinger Bands, MACD crossovers, or whatever indicator the Discord pump group is currently hyping.

Also notice what is on the list? A plan for when you’re wrong. This is the part that separates profitable traders from profitable YouTube finance channels.

The Real Game

Here’s what I actually do with confluence zones: I use them to place my stop-loss, not my entry.

A proper confluence zone tells me where the “invalidation point” is—the level below which my analysis is completely wrong and I should admit defeat. Instead of trying to predict where the market will bounce, I’m identifying where I’ll know I was an idiot.

This is radically different from how most retail traders approach it, and it’s why my account hasn’t been wiped in seventeen years.

The Closing Bell

Confluence is a legitimate concept, but it’s not a crystal ball. It’s not prophecy. It’s not magic.

It’s a tool for identifying where to put your stops, not where to put your entries. It’s a filter for managing risk, not a predictor of returns.

When the stars align and multiple factors converge on the same level, you haven’t found a trade. You’ve found a testing point. That’s the moment you place your stop-loss and see what actually happens.

Everything else is just storytelling we tell ourselves to feel clever while we’re bleeding.

Now, if you’ll excuse me, I’ve got an actual confluence setup to watch—and a stop-loss to place three pips below it.

Cheers.

This post is presented for educational purposes only and should not be considered financial advice. Please use your own due diligence and risk management.