$206 million in the first month. 130 million downloads in the first month. A full 18 months later and kids around the globe still can’t lift their head up from this game long enough to offer a one-word answer to a question.
Welcome to the craze that Pokemon Go created in July of 2016. Amazingly enough, the game seemed to bring people together – even if it meant that they didn’t make eye contact.
Tear a page out of Pokemon Go’s experience and you have one of the most effective trade location strategies in the market today. It’s called confluence – and when you see it, you’ll certainly earn points for your account.
Why? Because it reveals price levels that deliver reliable support and resistance points on your chart. Exactly what you need for intra-day entries, especially when the market is testing all-time highs.
A profile you’ll want to watch in any market
Like all great ideas, Pokemon started out as an April Fool’s Day effort. Except this effort was with a company called Google and it leveraged their maps technology. That was back in 2014, and the buzz that was created with teenagers was unmistakeable.
Much like a Google map, you can spot confluence by mapping it on your chart using a daily volume profile.
If you’re not familiar with a market, or volume profile, or Pokemon Go – here’s a mercifully short explanation: A market profile will tell you the price levels that institutional traders think are cool, and the ones that aren’t cool.
There’s a lot that goes into it – but that’s basically it. Within each market profile, you’ll find:
- Value Area High: Expensive, overbought price levels
- Value Area Low: Cheap, oversold price levels
- Value Area: The sweet spot where 70% of the action takes place.
- POC (Point of Control): The price level where the most volume has taken place – usually within the Value Area.
Why does this matter? Because the edges of the value zone, both at the top (VAH) and bottom (VAL) – along with the POC, are key areas of support and resistance.
When they start merging together – as they often do from one day to the next… that’s confluence.
When levels come together while everyone else isn’t looking
Even though it was a mobile video game, a strange phenomenon took place with Pokemon Go. People started gathering by the hundreds in popular locations designated by the app. You’d be out with your family on a Saturday afternoon, round a corner and see 300 people all looking down at their phone.
You guessed it. They were all playing Pokemon Go. This is a classic case of confluence and it can be applied directly to your futures trading.
To find confluence, simply take the value areas presented with a single day’s profile and combine them with 5-7 other days. A ‘look back’ is created that you can use to chart price action.
Now you’re not just looking for an individual value area price level – you’re looking for concentrations that have come together. Regardless of whether they’re Value Area High, Low or the POC – when they start to run together you’ll want to monitor that price level.
Here’s the same day in July – in the context of 5 other trading days. Notice how the Value Area High, the POC and Value Area Low start to run together? Not a coincidence… it’s market confluence.
Now you have another entry opportunity to stalk!
Trading with confluence for record-setting profits
If you’re wondering how investors did with Pokemon Go – Nintendo’s market value went up by $9 billion dollars within 5 days of the release of Pokemon Go. Not a bad week in any market you might be trading.
When working with confluence, especially in a trending – or even an all-time market – these can be your entry points. Specifically, these become the price levels to stalk for breakouts and/or reversals.
Bear in mind that longer-term market profiles won’t have a lot of historical volume to work with while instruments like the ES continue to make new highs. These are the moments when a 5-7 day look back becomes even more critical in finding and establishing price levels that the institutional traders will be interested in.
Leave the video game trading to everyone else. Start working with daily profiles and confluence to make entries that lead to record-setting profits!