Confluence levels analysis + coding request

Hi guys,

I'm developing a touch trading method based on the confluence of two or more of these levels:

- round numbers (every 100 pips)
- supports or resistances on daily
- supports or resistances on H4

I have attached two indicator which plot support and resistance levels for any timeframe (indicator: Support-Resistance) and plot horizontal lines on big round number (Indicator: Grid_v1_0)

Now download the indicators, open a H4 chart and attach the indicators in order to spot:

- daily resistances or supports in the last 100 bars
- H4 resistances or supports in the last 600 bars
- round numbers every 100 pips.

You can clearly see that there's usually a high probability for price to choppy or bounce where there's a confluence of a round number level and one or more support or resistance level of daily/H4 timeframe within a small range of maximum 10 pips.

Usually the more confluence of those levels we have, the strongest the signal. I attached a chart below where I marked with yellow/orange/red zones the levels where confluence levels lies.

I found very interesting to analyze the behaviour of price when it reaches those zones, and so I decided to post there to request a quick coding to develop a simple indicator which combine all these levels to show only the one where there's a huge confluence.

In particular, the indicator should idenfity all the zones of maximum 10 pips where one round number and a S/R level of daily or H4 lies and then draw a little box (like the one I've drawn by myself), making it start from the point where the R/S was formed.

In addiction, to distinguish the best zones, the EA should:

- Draw a yellow zone where a round number lies near one or more H4 support or resistance level within 10 pips.
- Draw an orange zone where a round number lies near one or more DAILY support or resistance level within 10 pips.
- Draw a red zone where a round number lies near one or more H4 support or resistance level AND one or more DAILY R/S within 10 pips.

You can change the colours to light blue/blue/dark blue but the concept remain the same: the difference in colours is a method to identify levels of price with major confluence.

The interaction of price with those levels (note that I call it "levels" but since we are trying to find confluence within a 10 pips range we might also call them "zones") is quite interesting and it would not be so hard to code an EA to take an advantage from such confluence. Anyway, I believe that an indicator that show those confluence levels would be very useful to any style of trading.

Additional considerations:

- Note how the presence of a notable MACD or RSI divergence while price is touching those levels skyrocket the chance of seeing the price bounce for a nice move (divergence add some more strenght to the confluence)
- It would be nice to additionally include S/R from H1 timeframe AND/OR 50 pips round numbers for trading on lower timeframes
- Note how price tend to touch and reject from those levels. It is very rare for price to break those levels without rejecting for at least 25-30 pips
- Note how when a confluence level is broken by a notable amount of pips as support or resistance, every time price approach again to it price almost never reject (in other words, once a level is broken, it usually lose relevance and it seems to have no more impact on price).
- Some more confluence factor might be found in fibonacci retracements or pivot levels, but i'm not so sure these extra levels would make the confluence levels more reliable.
- It might be useful to display levels where multiple R/S coincide.
- Very useful levels to confirm candle pattern signals.

Behind the simply method I'm showing here, I want to point out that confluence of more than two of these strong levels (which can be a S/R or a pivot or a round number, etc...) I believe is a very interesting concept to work on.

It would be nice to code an indicator to spot those confluence levels, however... let me know you opinions about it. Comments are welcome.

I am not a coder, but I like the thinking a lot. Did u get anything done?

Hi, I still didn't find a coder to code the indicator i originally wanted to. I still belive the idea involved here is very interesting and i'm using it, but without an indicator that put together major supports and resistances it's quite difficult to visually display the few strong confluence levels. If you combine strongest s/r and round numbers and divergence you can identify very few price levels where price has a lot of chance to bounce. That's not rocket science, just basic trading principles put together.

It takes some time to understand and visually display the "method" i discussed above, but i think it will worth the effort. If someone is interested, please pm me.

Hi R3ta for the Support-Resistance Indi this will come in really useful in my trading thanks again

Hey guys,

I want to add some examples as i'm starting to receive some feedback.

Here i attached a random chart of EURUSD 30M (not the more reliable timeframe) and I highlighted maximum 10 pips wide ranges where a 4 hour support or a 4 hour resistance lies near a round nomber (00). In few words I used a minimum confluence combination of H4 R/S (calculated on last 300 candles) and RN.

As you can see, even if the timeframe isn't the best and I used only ONE timeframe S/R combined with round numbers, the results are quite interesting. Looking at the chart we can see that price tend to bounce or react on these levels, maybe surpassing it for 20 pips and then coming back for 100. But that's not enought.

I love confluence. After this random try with a random timeframe, I decided to add a MACD (the line indicator: 12,21,1) and look for divergences. The results are surprising, as you can see from the second picture I added below: if you combine the range made of H4 S/R with round number plus notable divergence on MACD you have a very high probability to see price touch the level and reject.

Of course, for "notable divergence on MACD" I mean that at the time price touch the grey range a strong divergence is on. Strongest confluence means more chance of a strong bounce after touching the "critical range".

On this chart we have only 3 levles of divergence, but I belive it would have been enought to take out a good profit in the last days.

Why price act like this? Price tend to react and bounce at these levels for a simple reason. These are levels where price meet a "trouble area", a level of price where it find a confluence of factors (RN and S/R) that usually means a reverse and pushes the price in the opposite direction: if you add some more confluence like divergence, you have a strong visual tool to predict areas where price has a HIGE chance to bounce. If you want more detail on why price react on S/R and confluence, please search in the forum or in the web.

Also note that 30M is not the more reliable timeframe, since 1H, 4H and daily are much more reliable. I hope I'll catch the attention of more experienced traders and coders so we can improve this strategy and develop an adapted trade management method.

EDIT: I found now some more confluence but I didn't marked it. I also apologies for low quality charts. Ask me for external re-uploading if needed.

Down I attached the same chart switched to 1H timeframe. Notice how price tend to react when it touches a notable confluence level, especially if a notable divergence on macd is on while price approaches the trouble area.

Grey tight levels are made looking for any notable support or resistance levels that lies near a round number (every 50 pips).

The strategy could be very successful and stress-free as all we need is wait for a strong confluence of factor displayed when price hit one of the levels, and so enjoy an exellent R:R trade.

Of course this is not the holy grail, but I'm surprised nobody else before (as I know) tried to code a simple indicator to easily show levels where price meet a strong confluence, using basic but reliable tools like S/R, RN, divergence and so on combined together.

Another chart, this time of USDCAD daily.

I looked for D1 and weekly S/R near a round number.

Acquamarine levels are from daily S/R, grey levels from weekly S/R.

I highlighted some possible trades using macd divergence.

Also note how price gravity near the levels and goes from one to another.

We all know big boys use simple stuff: S/R, round numbers, price action. So why ignore these simple but powerful concepts?

I tried to make a start but not sure it is what you want.

If it is of any use as a starting point then please use and amend to your needs.
The starting time of the zones does not appear to be correct!

Have no time to play with it so amendments are up to you.

Because there are so many levels it is almost certain that every RN level will have a confluence that is why I do not really like it (sorry).

The zones have been set around the RN (would be easy to change to the SR levels)

You can set the RN to whatever number you want.

HTH

M.

Exellent job man.

The indi is well made and follow the rules I posted in my first post (exept for colours, I can't understand how colours are determined, however no big issue). I can't tell you how much I'm grateful for the efforts you've spent on this useful indicator.

I'm now playing with it, since it gives me the ability to test many confluence configurations in very few minutes.

The only problem I found with it is that sometimes the indi doesn't draw the zones from the very first point where the s/r s are generated (on a high or a low). On first chart you can find an example of what im talking about.

However, I also posted some other charts showing the use of this indicator to highlight areas where price is likely to bounce. Adding MACD for divergence and spotting price action candle formation adds some more confluence to the method.