3 Golden Types Of Confluence For High-Profit Trade Setups

In this post, I’m going to dish out my top three power-packed points of confluence that should be on your radar for trading.

Hold up!

This isn’t your run-of-the-mill list of confluence points that you’ve seen gazillion times—think support and resistance levels, Fibonacci retracements, trendlines, and the like.

The three points I’m about to share?

They bring the thunder in terms of confluence.

What’s more, when you mix them with other concepts on this site —like supply and demand trading —you’ve got a winning combo.

Alright, let’s dive into the first point of confluence…

Confluence Point #1: Higher Timeframe Supply And Demand Zones

Supply and demand zones are popular spots to watch because they can hint at when big price reversals might happen.

But did you know…

Some zones can also act as strong points of confluence, specifically those that form on a higher time frame.

Here’s the deal: In supply and demand, HTF zones are stronger than LTF zones.

  • The higher the timeframe = the stronger the zone.
  • The lower the TF = the weaker the zone.

Why are higher time zones stronger?

In short: Because of why and how they form – from the long-term smart money traders (banks, hedge funds, etc). These traders aim to profit over a much longer timescale – like weeks or months – than LT traders, so they must enter far bigger positions to reverse price.

Where do they enter these positions?

On the higher timeframes, as that shows a longer timescale.

Simple, right?

So, HTF zones usually prove far stronger than LTF zones: When a HTF zone forms, it reveals the long-term smart money traders – the whales, if you will – have entered massive trading positions. Making a reversal from the zone more likely.

Why else would the SM enter such significant positions?

Now, what this means is…

Higher timeframe zones can provide confluence with lower timeframe zones and we can use them to piggyback the long-term smart money traders’ positions.

Here’s what you need to do:

ImportantNot all timeframes gel with HT confluence.

For example, watching for 5-minute zones inside a daily zone.

Too many lower timeframe zones will form within the higher timeframe zone, which will make knowing which zone to trade difficult and confusing.

Here’s a list of the best TF combos:

  • 1 Hour & Daily – Watch For 1 Hour Or 4 Hour Zones Inside Daily Zones
  • 15 Minute & 1 Hour – Watch For 15 Minute Zones Inside 1 Hour Zones
  • 5 & 15 Minute – Watch For 5 Minute Zones Inside 15 Minute Zones

Note: The super high timeframes (weekly, monthly) aren’t listed because I don’t use those TF’s in my trading – the timescale is too long-term to be useful.

So, finding higher timeframe confluence… What do you do?

For this example, I’ll show you how to determine whether a 15-minute supply zone has confluence with a supply 1-hour zone. The zones overlapping will enhance the probability of price reversing from the 15-minute zone, giving you great confluence.

Here’s the 15-min zone…

First things first…

To see if the zone above has higher timeframe confluence, switch to the 1-hour timeframe and see if a demand zone exists on top of our zone.

If it does, that gives us added confirmation our 15-min zone will cause a reversal.

The 1-hour smart money traders (who trade higher sizes, due to the longer TF) will enter using the 15-min zone, boosting the chance of price reversing from the 15-min zone.

Let’s switch to the 1-hour…


A demand zone sits almost exactly on top of our 15-minute zone, telling us the two zones have confluence.

Cool, huh?

Now, important note…

Sometimes, multiple lower timeframe zones will form within a higher timeframe zone. Rather than one LT zone forming within, two, three or even four zones in extreame cases will form inside the HT zone.

In this situation, which zone do you trade?

The answer…. it depends.

If the risk from those zones combined is higher than the HT zone, just trade the HT zone. Don’t bother trading each zone individually – just focus on the HT zone and trade that! Same applies if you’ve got a big zone hogging most of the HT zone space.

Again, just trade the HT zone.

Forget trading each individual zone – it’s pointless.

Price will have the same chance of reversing but your risk will be way higher.

Back to our example…

So, our 15-minute supply zone has confluence with the demand 1-hour zone.

All that’s left now: Wait for price to return and trade the zone.

Trading lower timeframe zones that have confluence with higher timeframe zones follows the same process as trading any normal supply and demand zone:

  • Wait for price to return to the LT zone,
  • See what price action forms,
  • Then enter your trade. 

Quick Tip:

Keep the HT zone marked on the LT. The outline will give you a heads up on when price could be reversing. Once price breaches the HT zone, ready up and begin watching your 15-minute zone for entry signals; pin bars, engulfing patterns, large range candlesticks.

Here’s how our example played out…


The trade plays out like any normal S & D trade:

Price returns to the zone, a bullish pin bar forms.

Your enter a trade, then place a stop loss.

Once price reverses, you start taking profits.


Confluence Point #2: Psychological Levels (Round Numbers)

Here’s a mind-blowing statement: In my opinion, psychological levels are, hands down, the most crucial technical aspect in forex trading.

And yes, that includes…

S & R levels, trendlines, Fib retracements… everything!

The one exception?

Supply and demand zones.

Psychological levels are the only — I repeat, only — technical level with real statistical evidence, such as academic studies and papers, supporting their significance and existence in the market. You can’t say the same for most other technical points, no matter what any books or gurus claim.

Why are psychological levels so crucial?

Orders — big, juicy orders.

Why are they so important?

Remember: Smart money traders cannot enter a full trading position all at once; not enough liquidity (buyers or sellers) exists due to the position size. To lessen the load, these traders always seek out points where large quantities of orders accumulate.

Here’s how it works:

  1. Smart money traders locate tons of orders and then push price into them.
  2. The orders trigger, the traders execute, causing price to move away.
  3. This lessens the load and allows them to enter more at a single price.

Stop hunts happen for the same reason:

The smart money pushes price into the stops, enters massive positions, and then price reverses. You’re left scratching your head, wondering why the price reversed after spiking your stop by just a couple of pips.

If you examine a chart, you’ll notice that most significant reversals start around psychological levels. Guess what? It’s the smart money! They use the orders around the level to enter positions. Once they jump in, price reverses, and a massive swing kicks off.

For this reason, psychological levels provide incredible confluence…

You know the smart money will probably use the orders to help enter their positions.

For instance: If a psychological level aligns with a demand zone — a point where smart money traders want to buy anyway — the chances of the price reversing are higher. These traders will use the orders around the level to help enter their massive positions.

Let’s walk through a quick example:

Now, let’s run through a quick example:

Here’s a supply zone on the 1-hour chart of Gbp/Usd.

Looks like a great zone, right?

The zone formed after a long preceding move, has a nice base, and is also a RBD zone, which have the highest chance of success. A strong zone in anyones books, but you know what would make this demand stronger, and give price an even better chance of reversing?

If a psychological level – a price ending in 500, 0000 or 00000 – formed inside or near the zone.

Now, look closely…

The 1.26000 level exists a few pips above the demand zone.

This is a psychological level.

Thousands of buy and sell orders exist here, which suggests the smart money traders will push price close to this level before causing a reversal.

And what happens later….

Price pushes through the 1.26000 psychological level before reversing inside the supply zone, just as expected.

See how powerful psychological levels are now?

Confluence Point #3: Williams VIX Fix Bollinger Band

Hold up!

Before y’all get antsy: Yeah, our last point of confluence is a technical indicator.

Introducing the Williams VIX Fix indicatoror let’s just call it VIX FIX, shall we?

This nifty little thing was created by Bill Williams, and now it’s more commonly known as the fear index. Why? Because this indicator can gauge the current level of fear in the market.

So, how does it work?

Here’s a quick breakdown:

The VIX FIX indicator checks and measures how close the current market price is to the lowest price over the past few weeks. It’s all based on market psychology, specifically how traders think and act when it comes to trends.

  • During uptrends, price usually closes near the high.
  • During downtrends, price usually closes near the lows.

In a nutshell:

Instead of calculating volatility over a set period (like those Bollinger Bands), the VIX takes the current volatility from the lowest low and highest high and extrapolates that out 30 days – or for whatever trading period you choose.

The result?

Bars that, through their size and color, give you a sense of the volatility in the market.

But hang on… why the heck should we care about volatility?

Well, my friends, volatility reveals just how greedy or fearful traders are.

Volatility always peaks right before large reversals, as that’s when traders feel the most fear or greed about future prices. So, most of the big bars (which show high volatility a.k.a fear/greed) pop up right before or after price reverses.

With fear and greed running wild, the Smart Money (SM) have a great incentive to make price reverse.

And that’s where the VIX comes in handy!

It helps us get a sense of when price may be reversing by quantifying the level of fear and greed in the market.

Now, the million-dollar question: How can you use that as confluence?

Well, see for yourself…

So, right before those retracements and reversals kicked in, the VIX went wild with volatility – huge bars started showing up, meaning traders were getting super scared or greedy.

And guess what?

The smart money saw their chance and reversed the market, making those traders lose big time.

Crafty, huh?

So that’s it then…

Just wait until large bars appear and jump into the reversal, right?

Hold up, not so fast…

While the Williams VIX FIX indicator does a decent job of hinting at a potential reversal, you can’t rely on it alone; you’ve gotta mix those signals with other trading techniques – you know, look for confluence.

The best way to find confluence?

Keep an eye out for a spike in volatility (those massive bars) when price gets close to a supply or demand zone.

Supply and demand zones form when the smart money place trades, cash in on profits, or close trades. But, they only execute these actions when volatility’s sky-high. That’s when most traders get panicky or greedy about the future, giving the smart money a ton of orders to play around with.

So, by doing some simple analysis…

You can pinpoint when and where the price might do a 180.

The VIX tells us IF the smart money wants the price to flip (via high volatility – big bars). And supply and demand zones show us WHERE the price could turn.

Here’s an example…

Before price reached the supply zone above, volatility went through the roof (see those big ol’ bars?)

This means traders are getting greedy, right?

They see the sharp drop and think, “Oh boy, it’s gonna keep falling!” With all these traders going short, the smart money has a truckload of sell orders to play with.

And what do they do?

Start entering humongous buy trades, which need loads of traders selling!

What happens when they buy?

Price reverses and starts climbing. The greedy shorts are left high and dry, closing out and adding to the buy-side momentum.

This lets the smart money rake in the dough from the fresh upswing.

So, the Williams VIX Fix – not bad, eh?

The indicator provides great confluence with supply and demand zones, but also works well with other technical points – like support and resistance levels, big round numbers, and, of course, fibonacci retracements.

Try it yourself, see what works best for you!

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