So, as I understood it, confluence is when for example you got two different strategies , and when they both issue a buy or sell signal at the same time, you open a trade, because you augment the probability of the global system, more than both strategies separately. Apparently from what i've seen, two crappy strategies can make an average one

but what about exits ? the two strategies have different exit signals. So which one to take ?

several possibilities arise :
1) close the trade at the first exit signal (the 1st or second strategy)
2) close half the trade at signal of first strategy. and half at the second
3) close everything at the last signal ?
4) do something else ?

i'm not sure which one is the best statistically tho. If anyone can help me

thanks

Jeff

ionone wrote: Thu Aug 04, 2022 9:59 pm So, as I understood it, confluence is when for example you got two different strategies , and when they both issue a buy or sell signal at the same time, you open a trade, because you augment the probability of the global system, more than both strategies separately. Apparently from what i've seen, two crappy strategies can make an average one

but what about exits ? the two strategies have different exit signals. So which one to take ?

several possibilities arise :
1) close the trade at the first exit signal (the 1st or second strategy)
2) close half the trade at signal of first strategy. and half at the second
3) close everything at the last signal ?
4) do something else ?

i'm not sure which one is the best statistically tho. If anyone can help me

thanks

Jeff

My understanding would be that confluence of 2 strategies or markets or indicators is where the 2 compliment eachother to confirm and do not conflict.

If you are left choosing between the 2 then they're not complimenting but are just confusing the picture. Like when you see people with 3 different oscillators on their chart and they're all saying something different - what's the point? May as well just have the 1.

ionone wrote: Thu Aug 04, 2022 9:59 pm Apparently from what i've seen, two crappy strategies can make an average one

a) if your indicator is any good, you don't need confluence. What you need is: one signal for
bias
entry
exit
b) "two crappy strategies can make an average one": I think every person that actually trades knows that this is not true.
c) "i'm not sure which one is the best statistically tho": in that case don't trade.
Before you start trading always test your strategy yourself (between 100-400 trades) and make sure that you really have an edge.
Whatever anyone else will tell you is of no use to you at all (discretionary trading is called discretionary because tiniest differences can make the difference between a winning and a losing strategy; a simple difference like entry at market price vs limit entry, for example).

we first need someone who knows probabilities to tell us if confluence improves the winrate of a system, or if it do nothing at all

Jeff

ionone wrote: Thu Aug 04, 2022 11:52 pm we first need someone who knows probabilities to tell us if confluence improves the winrate of a system, or if it do nothing at all

I don't want to spoil your afternoon but statistical probability has nothing at all to say about "confluence" in general, as it is much too vague a concept for any evaluation.
As I said above: if you have a concrete strategy with very precise entries and exits you can run tests etc.
No offence but: Are you sure you understand the concept of statistical probability?

Hello,

In my opinion more isn't always better because things can start to get confusing.

With the right combination of indicators and inputs anything is possible i guess

You could backtest the merged strategies with one exit type to find out which exit type has a higher win rate

Just an idea:)

josi wrote: Fri Aug 05, 2022 12:58 am I don't want to spoil your afternoon but statistical probability has nothing at all to say about "confluence" in general, as it is much too vague a concept for any evaluation.
As I said above: if you have a concrete strategy with very precise entries and exits you can run tests etc.
No offence but: Are you sure you understand the concept of statistical probability?

no it's not a vague concept.
it's like the gambler's fallacy, there is mathematical and statistical ways to say that it has or doesn't have any merit.

I personally have 3 different strategies that I use in different Market environments.
1. Trending Market -> Buddy System I have shared
2. Ranging Market
3. Reversal system

Nr 3 is my exit signal in this case for nr1. those 2 systems are well in synch with each other and end up helping me to be more profitable.

Nr2 instead helps me to keep in green while nr1 is taking losses.


Now generally to take 2 average systems to make a more profitable one is possible on my opinion but it's very difficult.
Why? Because those 2 systems have to be in synch but at the same time be different enough to filter each other out. This is very very difficult. Creating a single system that does it is already difficult enough.

I don't think I have answered your question/s with that but maybe it still helped someone.

ok so to find out if confluence plays a role in raising the win rate of a system, I designed this simple tool : confluence test

it uses RSI and CCI in very a simple trading system.
You can select RSI, CCI or the confluence of both.
also two different exits : first indicator (whichever one comes first), or both indicators in conjonction

here are some results (default settings) :

• pair : GBPUSD
  RSI : 69.03%
  CCI : 67.34%
  Confluence (first exit) : 68.80%
  Confluence (both exits) : 69.24%

• pair : USDJPY
  RSI : 66.81%
  CCI : 65.40%
  Confluence (first exit) : 65.80%
  Confluence (both exits) : 65.38%

• pair : AUDCAD
  RSI : 68.57%
  CCI : 69.64%
  Confluence (first exit) : 67.16%
  Confluence (both exits) : 68.14%

• pair : CADCHF
  RSI : 71.37%
  CCI : 69.05%
  Confluence (first exit) : 68.57%
  Confluence (both exits) : 71.24%

• pair : EURAUD
  RSI : 65.11%
  CCI : 67.58%
  Confluence (first exit) : 64.00%
  Confluence (both exits) : 65.49%

so overall we see that win rate isn't really improved and that if we opt for confluence then it's best to wait for both strategies to have outputed exit signals before exiting.
it seems to be closer to a mean between both systems than a clear improvement, even if sometimes the win rate is higher than both


Jeff

ionone wrote: Fri Aug 05, 2022 9:31 pm

Oh, my....
MrStochastics...

Which TFs did you test? (what were the differences?)
Which markets (US; Asia; Europe...)? (what were the differences?)
How many tests did you run on each pair (hundreds?)?
Which trades did you take (limit, market, stop)? (what were the differences?)
Which SL did you use (and why?)
Why did you choose RSI & CCI? (In which way are they representative for "confluence"?)
What were your inputs, thresholds etc?
What were your entry signals (and why did you use those)?
What were your exit signals (and why did you use those)?
How did changes in any of these aspects affect the outcomes...
...

"it's like the gambler's fallacy" (simile; are we doing poetry here?)
Really? In which way exactly is it like "gambler's fallacy"?

I wish you all the best on your way forward...