The Logic Behind Super Signals
No trader has a 100% win rate, and being able to dependably increase the likelihood that your trades succeed is essential for long-term, profitable trading.
This need to dependably increase your likelihood of success is the motivation behind the Power Bundle AO indicators, which display real-time win rate statistics on the chart and automatically optimize their settings to achieve the best results.
The Power Bundle AO was designed to adapt to any market condition, especially volatile ones. It consists of three highly successful indicators:
– 1-2-3 Strike! which was designed to excel as a trend following indicator by analyzing volume, volatility, and direction.
– Divergence Cloud – the pullback and trend reversal indicator – uses an innovative form of volatility/trend divergence with a high probability of success.
– Volatility Crusher which was purpose-built to identify strong breakouts using our proprietary relative volatility algorithms.
These indicators are complimentary instead of redundant; they analyze separate chart data with entirely different algorithms and techniques. Their approaches are very different, and their real-time win rate success statistics let you easily know whether or not that indicator’s particular approach is well suited for the current chart.
So we got to thinking: if all three indicators are triggering statistically favorable trades, then what happens in the rare case where they trigger trades simultaneously? Would these ‘combined’ signals be more successful?
The answer is yes – these cases are likely to be very successful, and it’s all a matter of probabilities.
Take the following case for example. If all three of the indicators independently have a long trade win rate of 60% based on historical data, then we can assume based on this historical data set that any long entry signaled by one of these indicators has a 40% chance (or probability = 0.4) of being a loser.
However, if two of the indicators signal the same long trade entry simultaneously, then the odds that it will be a loser drop from 40% to 16%.
Finally, if all three indicators signal the same long trade entry… Then the odds of it being a loser drop to just 6.4%.
This is the power behind what is known as confluence and ultimately the power behind Super Signals.
What is Confluence?
Confluence is more or less a fancy word for “when the good stars align” – when multiple complimentary indicators line up and forecast the same thing.
For example, if both a Moving Average Convergence Divergence (MACD) indicator and Relative Strength Index (RSI) indicator are showing bullish signals at the same time on a particular chart, then this could indicate that now might be an ideal time to buy due to the strong upward momentum being indicated by tools simultaneously. Confluence is basically ‘confirmation from multiple sources’.
But not all confluence between indicators is useful. There is a ‘bad’ kind of confluence between indicators which are too similar in their approach to one another which traders will often erroneously rely on. For example, checking for confluence between the RSI and a related stochastic oscillator is mostly redundant; both indicators rely on the same general approach and data to signal their entries, and you are not actually gaining any new information by combining them.
In fact, it’s likely that you will be hindering yourself by waiting too long for their two approaches to catch up to one another.
This is why the complimentary nature of the Power Bundle AO indicators makes confluence between them so noteworthy. They each analyze different market data and apply different algorithms, so when their signals occur simultaneously we can be sure that many varied factors are converging to help improve our odds.
When the Power Bundle AO indicators converge and there is confluence between their signals, we get highly successful ‘Super Signals’.
What are Super Signals?
Super Signals are based on the idea of confluence between the Power Bundle AO indicators. They occur when two or more of the Power Bundle indicators’ signals or trades converge on the same conclusion. At these moments when they’ve reached a consensus, a Super Signal is triggered, marking a high-probability entry or exit point.
There are four different kinds of Super Signals: Bronze, Silver, Gold, and Platinum, each representing an increasingly rare and successful degree of confluence between the indicators. Each kind of Super Signal includes both long and short signals.
Why do They Work?
All three indicators are tailored to analyze differing sets of data to come to their conclusions about when to take a trade. When these conclusions align, there is a compounded likelihood that they will be correct.
Bronze Super Signals
Bronze signals occur when two of the Power Bundle indicators have an open trade in the same direction and the third indicator does not contradict them.
This indicates uniformity of sentiment, meaning that all three indicators are in majority agreement in their forecasts for the direction of the market, and there are no pressing indications yet which would suggest opening a trade in the opposing direction.
This confluence is suggestive of a continuation in the current trading direction – but it is not necessarily suggestive of the expected duration or a spectacular entry point. Should any of the Power Bundle indicators close their trade or take an entry in the opposite direction, the confluence which triggered the Bronze signal is broken.
These signals are the most common Super Signal because this degree of confluence happens relatively frequently.
Silver Super Signals
When the current trend sentiment calculated by volume and trend in 1-2-3 Strike’s algorithm opposes the volatility-momentum divergence as calculated by Divergence Cloud, the upcoming trend change is less certain. These indecisive periods often precede key turning or pivot points in price action; surface level volume and trend are suggesting a move in one direction, while a divergence between candle volatility and trend are hinting at a reversal.
Silver signals are triggered when a volatile technical breakout or breakdown from Volatility Crusher marks a clear end to this indecisive price action.
These signals are extremely solid entry points and are relatively rare.
Gold Super Signals
Because of their vastly different algorithms, it’s a rare and telling event when two of the Power Bundle indicators trigger an identical entry signal at the exact same time.
This is the type of ‘probability-multiplying’ confluence that we discussed in ‘The Story Behind Super Signals’, and is often the sign of the start or continuation of a major move.
Gold signals are triggered at these rare moments to mark these very high-probability entry points.
Platinum Super Signals
Platinum signals are the rarest and most successful of all. They only occur when all three Power Bundle indicators trigger an identical entry signal simultaneously.
These signals are a sign that trend, volume, volatility, and volatility-momentum divergence are all signaling the same thing: this is a good time to enter.
In the rare event that you see a platinum signal on the chart, there is an exponentially low chance that this is not the start of a crucial trend move.
Custom Super Signals
Custom signals are a feature of the Super Signals indicator which allow you to define your own custom long and short Super Signals based on what the Power Bundle indicators are doing. You come up with your own definition of what the ‘the necessary confluence’ between the indicators needs to be before they are triggered.
They allow you to mix and match conditions to create your own Super Signal.
For example, for your Custom Long Super Signal you can set the requirements such that Divergence Cloud must be currently long, 1-2-3 Strike! must be currently long, and Volatility Crusher must trigger a long entry signal. When these conditions are true, your custom signal will trigger and appear on the chart.
Conversely for your Custom Short Super Signal you can set the requirements such that Divergence Cloud must be currently short, 1-2-3 Strike! must be currently short, and Volatility Crusher must trigger a short entry signal.