Blog : Understanding Entry and Exit Trigger Conditions and Confluence Conditions

What is a Trigger Condition?

An entry/exit trigger condition is a specific criterion that must be met for a trade to be executed. For example, an entry trigger might be the price crossing above a moving average, while an exit trigger could be stochastic cross below an overbought level. These conditions are designed to open or close trades based on precise market actions.

What is a Confluence Condition?

An entry/exit confluence condition involves multiple criteria being met simultaneously to confirm a trade. The first criterion can be the trigger condition, and additional confluence conditions provide further validation. For instance, you might use a moving average cross as a trigger and combine it with RSI and volume indicators as confluence conditions to strengthen the trade signal.

Main Differences Between Trigger and Confluence Conditions?

  • Single vs. Multiple Criteria: Trigger conditions involve a single criterion, while confluence conditions combine the trigger with additional criteria for validation.
  • Speed vs. Confirmation: Trigger conditions can lead to quicker trades, whereas confluence conditions provide stronger confirmation and potentially more reliable trades.

How to Use Them?

  • Setting Up Triggers: Choose specific indicators or price actions as your entry and exit triggers.
  • Defining Confluence: Combine multiple indicators or signals to create a robust entry/exit confluence condition.
  • Testing and Adjustment: Backtest your conditions to ensure they meet your trading strategy goals and adjust as necessary.

Practical Example of Using Trigger and Confluence Conditions

Trend Following

Long Entry

Trigger Condition

1 Price cross above the Moving Average

Confluence Conditions

1 RSI is above Middle Level (50)

2 Volume is above the Average Volume

Long Exit

Trigger Condition

1 Price cross below the Moving Average

Confluence Conditions

1 RSI is above Middle Level (50)

Mean Reversion

Long Entry

Trigger Condition

1 Price crosses below the Moving Average

Confluence Conditions

1 RSI is below oversold level (30)

2 Volume is above the Average Volume

Long Exit

Trigger Condition

1 Price crosses above the Moving Average

Confluence Conditions

1 RSI is above Overbought Level (70)

Idea to Reality

Creating a strategy script on getpinescript is simple with the code generator form. Here's a step-by-step guide:

Pine Script Code Generator Form Screen
  • 1 Name: Enter a name for your script, like "RSI+SMA+Volume Strategy Script".
  • 2 Script Type: Choose between "Strategy" or "Indicator"
  • 3 Condition Type: Select either "Trend Following" or "Mean Reversion"
  • 4 Entry Direction(s): Choose "Long (Buy)", "Short (Sell)", or "Both"
  • 5 Entry Trigger Condition: Select the primary trigger, such as "SMA"
  • 6 Entry Confluence Condition(s): Add additional conditions like "RSI" and "Volume"
  • 7 Exit Trigger Condition: Set your exit trigger, like "SMA"
  • 8 Exit Confluence Condition(s): Add exit confluence conditions, such as "RSI"

By following these steps, you can easily create a strategy or an indicator script.