The geographic location where two or more rivers converge to form a single body of water is referred to as a confluence. However, using the same reasoning, it can also be used in the context of finance to refer to the collision of various trading signals or investing methods.
When an investor, adviser, or portfolio manager builds a portfolio using diverse techniques, often investing in multiple asset classes, confluence can be accomplished in terms of long-term investment. Most of the time, this would result in portfolio diversity. Note that diversity essentially refers to a portfolio with multiple assets, whereas confluence refers to the combined employment of different tactics.
Confluence in trading and technical analysis (TA) could be defined as creating a trading strategy or plan that considers various trading techniques or TA indicators. The phrase can also refer to the coordinated use of several trading signals to verify the accuracy of a possible buy or sell signal.
