Confluence Components
In trading, confluence is the concept of using multiple, independent forms of analysis that all point to the same conclusion. When several indicators agree, the probability of a successful trade increases significantly.
The Smart Signals Assistant includes five optional, yet powerful, confluence components. You can enable them individually to layer additional analysis onto the core signals. Each component is designed to answer a specific question about the market's state, helping you filter out weak signals and identify high-probability setups.
1. Fair Value Trail (FVT)
What it is: The FVT is a dynamic trend-following trail that identifies "fair price" zones. Unlike a simple moving average, it uses a liquidity derived calculation, meaning it pays more attention to price levels where significant trading activity occurs. It effectively acts as an intelligent support and resistance line that adapts to market volatility.
How to Interpret it:
Blue Line/Zone: Indicates a bullish trend. This area acts as dynamic support.
Red Line/Zone: Indicates a bearish trend. This area acts as dynamic resistance.
Small Triangles (▲/▼): These mark "Optimal Entry" points. A blue triangle (▲) appears when the price pulls back to the bullish (blue) trail, suggesting a good entry point in an uptrend. A red triangle (▼) appears when price pulls back to the bearish (red) trail.
How to Use for Confluence:
Trend Confirmation: A bullish Smart Signal (▲) is stronger if the price is above the blue FVT. A bearish Smart Signal (▼) is stronger if the price is below the red FVT.
Entry Refinement: If you receive a bullish Smart Signal, you can wait for an "Optimal Entry" triangle (▲) to appear for a more precise, pullback-based entry.
Settings:
Fair Value Trail Horizon: Adjusts the sensitivity of the trail.Short Termis fast and hugs the price closely, whileLong Termis slower and identifies major trends.
2. Trend Spine
What it is: The Trend Spine is a single, decisive line that acts as the "backbone" of the current trend. It uses a combination of momentum and volatility to provide a clear, unambiguous view of the market's state.
How to Interpret it:
Green Line: The market is in a confirmed bullish trend.
Red Line: The market is in a confirmed bearish trend.
Gray Line: The market is neutral or consolidating. There is no clear directional trend.
How to Use for Confluence:
The Ultimate Confirmation: A bullish Smart Signal (▲) is highly confirmed when the Trend Spine is green. A bearish signal (▼) is highly confirmed when it's red.
The Ultimate Filter: If a Smart Signal appears while the Trend Spine is gray, it's a strong warning that the market lacks direction. These signals carry a higher risk and are often best ignored.
Settings:
Trend Spine Horizon: Controls the lookback period.Short Termreacts quickly, whileLong Termis smoother and confirms more established trends.
3. Trend Bias
What it is: This component visualizes the underlying bullish or bearish pressure in the market as a colored cloud. It analyzes smoothed price metrics to gauge momentum strength.
How to Interpret it:
Light Green Cloud: Strong bullish momentum.
Dark Green Cloud: Weakening bullish momentum.
Light Red Cloud: Strong bearish momentum.
Dark Red Cloud: Weakening bearish momentum.
How to Use for Confluence:
Momentum Gauge: A Smart Signal is strongest when it aligns with a "strong" bias. For example, a bullish signal (▲) appearing when the cloud is light green suggests powerful momentum behind the move.
Warning of Exhaustion: If a bullish signal appears while the cloud has shifted from light to dark green, it indicates that momentum is fading and the trend might be nearing exhaustion.
Settings:
Trend Bias Horizon: Changes the smoothing of the calculation.Long Termprovides a broader view of momentum, whileMedium Termis more responsive.
4. Firmament Clouds
What it is: These are dynamic, multi-layered support and resistance zones. The Firmament Clouds adapt to market volatility to project broad areas where price is likely to react.
How to Interpret it:
Upper Red Cloud: A dynamic resistance zone.
Lower Green Cloud: A dynamic support zone.
Price Above Both Clouds: Strongly bullish territory.
Price Below Both Clouds: Strongly bearish territory.
Price Inside a Cloud: Price is currently testing a support or resistance area.
How to Use for Confluence:
Profit Targets & Risk Assessment: The clouds are excellent for identifying potential take-profit levels. A bullish signal (▲) has more room to run if the upper red cloud is far away. If the signal prints right below the red cloud, be aware that it will face immediate resistance.
Zone Confirmation: A bullish signal is stronger if it forms after bouncing off the green support cloud. A bearish signal is stronger if it forms after being rejected by the red resistance cloud.
Settings:
Firmament Clouds Horizon: Adjusts the calculation period, making the clouds wider and slower (Long Term) or narrower and faster (Short Term).
5. Trend-Range Classifier (TRC)
What it is: This is a machine-learning component that classifies the overall market environment into one of two regimes: Trending or Ranging. It analyzes multiple factors like volatility and momentum to make its prediction, which is then displayed as the chart's background color.
How to Interpret it:
Blue Background: The model has classified the market as Trending. This is an environment with clear directional movement, ideal for trend-following strategies.
Gray Background: The model has classified the market as Ranging. This is a sideways, choppy environment where trend-following strategies typically underperform.
How to Use for Confluence:
Regime Filter: This is one of the most powerful filters in the toolkit. Since the core Smart Signals are a trend-following system, they are most effective in a trending market.
High-Confidence Signal: A Smart Signal (▲ or ▼) that appears when the background is blue is a high-confidence, regime-confirmed signal.
Low-Confidence Signal: A signal that appears when the background is gray should be treated with extreme caution, as the market lacks the directional momentum needed for a strong follow-through.
Settings:
Trend-Range Horizon: Adjusts the input data for the model, influencing its sensitivity to trend/range conditions over different timeframes.
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