Several independent reasons pointing to the same price level or direction at the same time.
Confluence is when a support zone, a moving-average, a fibonacci-retracement level, and a point-of-control all sit at roughly the same price. Any one of them alone is weak; together they define a level that many different traders are watching.
The trap is stacking indicators that measure the same thing (three momentum oscillators are one reason, not three) and calling it confluence.
Example: a stock pulls back to $84, which is the 50-day moving average, the 61.8% retracement of the last leg, and the top of a prior consolidation. That is three separate reasons to treat $84 as a level.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Fibonacci retracement levels. Take one move from a swing low to a swing high and mark off fixed fractions of it — 23.6, 38.2, 50, 61.8 and 78.6 per cent. Traders watch those lines to see how much of the move a pullback gives back; here it stalls at 61.8 per cent.Support, resistance and the flip. Support is a price where buyers keep stepping in and the fall stops; resistance is a price where sellers keep stepping in and the rise stops. Once price closes above an old ceiling, that same level often acts as the new floor.
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