Congestion phases – the most important price action on the chart

Congestion phases – the most important price action on the chart

Congestion phases are the most important part of any price chart since this is where trends are born, and to succeed all we have to do is be patient and wait for them to break away. This is where volume steps in to confirm the trend away.

00:02

COT data for Euro on UK Investing.com

00:02

The speaker has located the URL for the Commitment of Traders (COT) data on the UK version of investing.com, specifically for the euro. They explain how to access the euro speculative positions data on the site, noting that the speculative positions have risen to 180.6, which is a notably high level historically.

00:46

Bundesbank court case and Euro politics

00:46

The speaker reflects on a significant peak that has been reached, noting it as the highest so far. They provide an update on the Bundesbank situation, mentioning that all issues have been resolved quietly without much public fuss. The discussion highlights the political nature of the euro, describing it as a highly politicized currency, more so than any other, and emphasizing the inherent political challenges surrounding it.

01:21

Euro’s survival and market extremes

01:21

The speaker discusses the euro’s current market situation, cautioning against alarmist headlines declaring its imminent collapse. They note that despite negative sentiment, the euro might be reaching a technical extreme due to unprecedented long positions. This concentration on one side suggests a potential snapback in the currency’s value. To illustrate this, the speaker references the hourly chart of the pound against the Australian dollar, highlighting the alignment of trend lines rather than suggesting a direct trade opportunity.

02:29

Pound/Aussie hourly and 10-min charts

02:29

The speaker explains the concept of market direction and how price movements are aligned over different timeframes, such as the hourly and 10-minute charts. Using NinjaTrader charts as an example, they discuss patience in trading and highlight key market activity during the London open, noting attempts to move prices lower. The volume point of control is introduced as a crucial concept representing the area with the highest traded volume, indicating liquidity and value within the pair, visualized by the histogram shading on the chart.

03:35

Volume Point of Control and congestion

03:35

The discussion focuses on the Pound-Aussie currency pair, which is highly traded and experiencing significant transaction volume, leading to congestion around a volume point of control. The speaker analyzes this congestion on both the two-minute and five-minute charts, noting repeated attempts for price movement away from this level that ultimately revert back. They highlight the importance of observing candle patterns that try to break higher or lower, acknowledging that while longer time frames show this congestion, some traders on very short time frames might interpret the price action differently.

04:43

Price action impact on trading timeframes

04:43

The discussion focuses on trading time frames commonly used by independent retail traders rather than very fast scalping. It emphasizes the importance of using slower charts to provide context when analyzing faster charts, especially during sideways or congested price action. When a pair is in a narrow range on a benchmark chart like the hourly, faster time frames may show small trading opportunities, but the likelihood of a sustained move is low. This situation also increases the risk of trades taken on faster time frames when the benchmark chart indicates congestion or limited trend strength.

06:41

Patience and CSI alert on Pound/Aussie

06:41

The speaker discusses trading strategies on different time frames, emphasizing increased risk when trading fast time frames within narrow congestion zones seen on slower charts. They highlight the importance of patience and mention the volume point of control observed on both five-minute and ten-minute charts. The CSI indicator’s alert function, which signals crossings and potential divergences, is introduced as a helpful tool for identifying trade opportunities, particularly referencing a recent alert on the pound-aussie pair.

07:50

The speaker explains their use of Renko charts for the same trading pair, using two different Renko settings—one based on the 30-second chart and another on the one-minute chart. This approach helps in analyzing price movements more clearly and potentially identifying trade setups amid congestion and divergence signals.

08:21

Renko charts and Camarilla levels

08:21

The speaker analyzes a currency pair trading in congestion around the S4 level using a NinjaTrader version of the Camarilla indicator combined with Renko charts, which is not possible on MT4/MT5 due to platform limitations. They explain that the fourth Camarilla level acts as a key price point where the price attempts to break away but tends to return and retest. Resistance and support levels, including volume point of control, contribute to this price behavior. The sideways movement indicates congestion within the zone between R1 and S1, termed a buffer zone, reinforcing the need for patience. The hourly chart serves as a benchmark for assessing these conditions.

10:07

Hourly chart congestion and breakouts

10:07

The speaker analyzes an hourly chart showing price movement with volatility candles and sideways congestion. They highlight moments where momentum triggered significant moves, followed by periods of congestion where trading opportunities were limited. The discussion notes that faster time frames offered better opportunities with less risk during trends both higher and lower, as seen in the pound-aussie currency pair. The presence of wicks on both tops and bottoms of candles indicates market indecision and potential for whipsaw price action.

11:15

Emphasizing the need for patience, the speaker advises waiting for clear divergences and decisive price breaks before entering trades. They caution that sometimes the market structure does not present worthwhile trading setups, underscoring the importance of recognizing when not to trade. The segment concludes by acknowledging the value of observing price action even when no clear trades are available.

11:51

Understanding signals and market structure

11:51

The speaker emphasizes the importance of analyzing charts across different time frames and using indicators to confirm market trends. They encourage viewers to understand the market themselves so that when receiving buy or sell signals from others, they can critically evaluate their validity. The segment concludes with the speaker stepping back from their detailed explanation.

12:26

Quantum Trading education and indicators

12:26

The speaker directs viewers to the Quantum Trading education site for comprehensive program details, including full access to trading indicators. These indicators are currently available for MT4, MT5, NinjaTrader, and TradingView, with TradeStation support nearly ready. They highlight informative videos by David on the Quantum Trading YouTube channel that explain indicator usage in detail. Although not all indicators are yet available on TradingView, ongoing upgrades to TradingView’s Pine Script will enable uniform indicator availability across all platforms. Further information and education resources can be found at quantumtrading.com and quantumtradingeducation.com.

13:36

Contact info and session conclusion

13:36

The speaker invites viewers to contact Anna or David via email for any questions. They mention that this session was unusual due to restricted associated charts and confirm that the regular session for futures and indices will resume on Thursday. The segment ends with well wishes for the trading day and a farewell until the next session.

By Anna Coulling – creator of volume price analysis