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Confirmation

Requiring an additional piece of evidence before acting on a setup, which raises the proportion of winners but worsens entry price.

Confirmation can be a close beyond a level, a following bar in the expected direction, a volume expansion, or agreement from a second timeframe. The intent is always the same: filter out the signals that fail immediately.

The trade-off is exact. Every bar you wait improves the odds slightly and costs you entry price, which widens the stop and reduces the risk-reward-ratio. Whether that is worth it depends entirely on your target size.

The failure mode is confirmation creep, where each loss prompts one more required condition until the system almost never trades. If you keep adding filters after losing trades, you are fitting to recent history rather than improving the method. See overfitting.

Related: candlestick-confirmation, indicator-lag, risk-reward-ratio, overfitting, trade-location

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