What is Confluence?
Confluence occurs when multiple independent signals point in the same direction.
Why Confluence Matters
Single signals fail often. But when multiple factors align:
- False signals filter out
- Probability increases
- Risk/reward improves
The Three Lights System
| Light | Source | What It Confirms |
|---|---|---|
| Technical 🔴🟢 | Price action | Structure supports direction |
| Flow 🔴🟢 | Options market | Smart money agrees |
| Sentiment 🔴🟢 | News/social | Narrative supports |
Light Combinations
| Pattern | Interpretation | Action |
|---|---|---|
| 🟢🟢🟢 | Full confluence | High conviction trade |
| 🟢🟢🔴 | Strong | Standard trade |
| 🟢🔴🔴 | Weak | Skip or reduce size |
| 🔴🔴🔴 | Opposing | Fade the signal |
Key Takeaways
- More confluence = higher probability
- Never trade 1/3 confluence
- 3/3 green ("High Voltage") = Best opportunities