# Three-Tool Confirmation System

> Use AlgoEdge, OptionFlow, and DealerEdge together for high-conviction entries. Each tool confirms the next before you trade.

Source: https://tradeecho.com/docs/strategies/three-tool-confirmation (updated 2026-09-30)

Use AlgoEdge, OptionFlow, and DealerEdge together for high-conviction entries. Each tool confirms the next before you trade.

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## Overview

The 3-Tool Confirmation System reduces false signals by requiring alignment across all three Trade Echo tools. Follow the six steps in order for best results.

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## Step 1: AlgoEdge Signal

Look for alerts that meet these criteria:

- **Size:** >1,000 contracts
- **Value:** >$250K
- **Direction:** Single direction only (calls OR puts, not both)
- **Strike:** 5%+ OTM

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## Step 2: OptionFlow Confirmation

Verify with OptionFlow:

- Matching activity in same direction
- Clustered alerts (multiple within minutes)
- Total premium >$100K

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## Step 3: DealerEdge Direction

Use DealerEdge for directional bias:

| Price vs Anchor | Bias |
|-----------------|------|
| Below anchor | Favor calls |
| Above anchor | Favor puts |

Read the GEX rating separately from direction: **4-5** means positive gamma and a more stable, pinning-friendly regime; **1-2** means negative gamma and faster, more volatile moves. The rating guides risk and execution. It does not select calls or puts.

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## Step 4: Price Action Check

Before entering, confirm:

- Key level break (support/resistance)
- High volume on the move
- Trend matches your direction

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## Step 5: Strike Selection

- **Delta:** ~0.20 for balance of leverage and probability
- **Premium:** ~$2 per contract when possible
- **Spreads:** Use tight spreads to reduce slippage

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## Step 6: Risk Management

| Rule | Value |
|------|-------|
| **Max risk per trade** | 1-2% of account |
| **Stop loss** | 20% on position |
| **Exit time** | Before 2 PM ET for 0DTE |

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## Summary

Only take trades when all three tools align. Skipping steps increases false signals and reduces edge.