Day trading index futures

Day trading index futures

00:00

Introduction and webinar disclaimer

00:00

The speaker welcomes attendees to the afternoon webinar and introduces herself and her husband, David, who is present but off-camera. She briefly mentions the importance of reviewing the on-screen disclaimer, emphasizing that trading is risky and participants should never use money they cannot afford to lose.

00:30

Volume Price Analysis overview

00:30

The segment introduces Volume Price Analysis (VPA), a method that examines price action alongside trading volume to confirm whether price movements are genuine. It emphasizes that volume should support price trends, and anomalies in volume can signal unusual market behavior. The explanation covers the broad methodology of VPA, including the importance of price action, volume, candlestick patterns, support and resistance levels, and the use of multiple time frames. It also mentions the application of non-time-based charts like Renko for analysis.

01:40

FTSE 100 futures and nostalgia

01:40

The speaker introduces a methodology for traders, supported by a principal book and a companion book with worked examples, both available on Amazon. They present the FTSE 100 futures as a nostalgic trading instrument where they began their trading journey years ago. Despite the risks for new traders, day trading of FTSE 100 futures became popular in the late 1990s and is seeing renewed interest due to recent market volatility linked to the virus. The speaker highlights current notable price action in the FTSE 100 as a reason for focusing on it.

02:46

Support and resistance indicators

02:46

The speaker explains that the price is currently paused at an important support level identified by their Camarilla indicator, which is based on price-based support and resistance methodology. On the MT4 and MT5 platforms, stronger support or resistance levels are visually represented by thicker lines. Similarly, on the NinjaTrader platform, their accumulation distribution indicator shows increasingly thick lines to indicate stronger regions. Due to coding constraints, the same visual thickening effect could not be implemented on MT4/5. The speaker emphasizes their approach to analyzing support and resistance visually through these indicators.

04:00

Volume point of control explained

04:00

The video explains the concept of the volume point of control, described as the fulcrum of the chart that combines volume and price over time. This highlights phases of price action without a clear directional bias, emphasizing regions with increased volume density which act as support and resistance levels. Additionally, the speaker discusses an indicator triggered when price moves outside the average true range, signaled by purple dots on the candle. This trigger occurs during rapid market moves, presenting opportunities for market makers and insiders to trap traders, while also providing additional support and resistance points once the price action stabilizes.

05:14

Volatility candles and market behaviour

05:14

The price action requires a key level to be broken for movement in either direction. On the five-minute chart, a series of volatility candles appeared, with price initially retreating within the candle’s spread before sharply rising again, accompanied by high volume. This reflects a volatile market where price behaves like ripples in a pond after a disturbance, requiring time for the volatility to subside. Following these volatility spikes, a period of congestion typically occurs, marked by price testing highs and lows without breaking the previous high but breaking the low, indicating indecision and potential buildup for the next move.

06:18

Support/resistance hierarchy with Camarilla

06:18

The speaker explains how support and resistance levels are created using price action, volume profile, and indicators like the Camarilla protocol. They highlight a recent price movement on the FTSE 15-minute chart, noting a drop to the S4 level which then paused, indicating potential for reversal or continuation. The discussion includes how intraday support and resistance levels refresh frequently, while hourly levels remain valid for the entire week. This layered approach helps identify key areas where buyers may step in, supported by different technical tools including renko charts.

08:02

Renko charts and price consolidation

08:02

The speaker discusses a recent consolidation and break of a support level at 5762, noting it is not very strong but still significant. The price pause occurs at a confluence of support levels identified on both the 15-minute and hourly charts, implying that breaking through would require substantial volume. These support and resistance levels are useful for setting price targets and stop losses. The speaker also references a question from a FTSE 100 index trader about trading the index, indicating they will share the recording with them.

09:12

Currency impact on FTSE trading

09:12

The discussion focuses on how analyzing the forex market, particularly the British pound, can provide insights into trading indices like the FTSE 100. The speaker highlights that indices reflect the stock market and notes the strong relationship between the FTSE 100 and sterling in 2017. This connection was largely due to the FTSE 100 companies deriving around 70-71% of their revenues from outside the UK, especially in sectors like mining, oil, and commodities, making the index sensitive to currency fluctuations.

11:08

FTSE 100 revenue sources and currency effect

11:08

The speaker explains how currency fluctuations impact company profits, specifically when earnings are in dollars but reported in British pounds. A weaker pound relative to the dollar increases converted revenue values, boosting profits. Using Schroeder’s calculations as an example, they note that a significant portion of profits comes from dollar earnings. The speaker highlights that in 2017, when the FTSE rose by 10.4% and the pound fell by 12.8%, the index benefited from currency effects. They also emphasize the importance of understanding index composition, comparing different indices like the FTSE, DAX, and Nasdaq, noting that the Nasdaq is heavily weighted toward tech stocks which have recently driven much of the US market’s gains.

12:23

Index composition and sector influence

12:23

The speaker discusses the composition of major stock indices, focusing on the FTSE 100. They note that while companies like Facebook, Google, Apple, and Amazon perform well in some indices, many companies in the FTSE have not done as well. They highlight the importance of examining the current constituents and their weightings in the FTSE, mentioning that in June, companies like Carnival and EasyJet were removed and replaced by local firms. The speaker advises traders to consider whether index companies earn most of their income domestically or abroad, as foreign currency exposure can significantly impact the index’s performance and timing of rises or falls.

13:40

Researching index constituents and weightings

13:40

The discussion focuses on UK-based companies and the factors influencing the FTSE index, emphasising the importance of the local economy and Brexit. It highlights the need to research the background of the index and understand how such factors affect the currency. Additionally, the conversation touches on the concept of company weightings within an index, noting that companies do not have equal shares but different weightings that impact overall index performance.

14:45

Earnings impact on index movements

14:45

The speaker discusses the importance of understanding key companies within stock indices, such as the FTSE, SP500, and Nasdaq, especially during their earnings announcements, as these can significantly influence the index’s movement. They emphasize applying fundamental analysis to any index by considering economic factors, including the impact of currency values like the US dollar on companies that earn revenue abroad. This approach helps in assessing potential market shifts for the week.

15:55

The speaker reviews recent market movements, noting a significant drop in the Dow Jones index by nearly a thousand points the previous day, followed by more subdued activity today. They highlight the importance of tracking market volatility indicators such as the VIX for US markets and a similar volatility index available for the FTSE 100, suggesting these tools are useful for gauging market sentiment and futures patterns.

16:29

Market session patterns and volatility

16:29

The speaker discusses the advantage of observing market activity across multiple sessions, particularly the London and US sessions, noting typical patterns where markets rise in the morning but may decline during the US session before potentially recovering. They comment on the Nasdaq’s current fragile state, emphasizing an intraday trading approach where a buy signal is followed regardless of broader conditions. The recent significant fall in the YM (Dow futures) is highlighted along with a quick rebound influenced by speculation about a possible stimulus deal before the election, although that hope has since diminished. Key market drivers remain the upcoming election, the ongoing virus situation, and rising case numbers.

18:03

Upcoming earnings and market risks

18:03

This segment discusses the importance of earnings reports this week, particularly on Thursday, when many major companies like Apple, Amazon, and Alphabet are reporting. The speaker highlights that Thursday is crucial for intraday trading on indices due to the volume of earnings announcements. Additionally, there is mention of the upcoming November 16th date after the election and changes in the Dow, including Exxon being replaced by Salesforce. Traders need to be aware of these shifts and company weightings in the market.

19:07

The speaker emphasizes the need for traders to understand which companies are in or out of indices like the Dow and how currency movements might impact their earnings, especially for companies earning overseas. Examples include General Electric entering the market and pharmaceutical companies like GSK and Moderna, which are relevant due to ongoing virus concerns. The complexity of factors traders must track is acknowledged, and the speaker recommends using calendars and subscribing to financial news sources like Bloomberg and the Financial Times for consolidated data.

20:09

Traders are advised to prepare weekly by knowing which events and earnings reports are upcoming, treating these as potential risk events that can influence price action. The focus is not on predicting outcomes but on being aware of events that might tip the market balance. Having this information helps traders contextualize market movements and react appropriately.

20:40

Current FTSE 100 market status and outlook

20:40

The speaker discusses the Footsie index, noting a modest attempt to rise but overall steady performance without significant volatility on the 15-minute chart. Key levels, including the S4 support, are highlighted as critical points to watch for potential continuation of the downtrend or possible reversals. The cash market in the UK is nearing close, and viewers are invited to ask questions in the chat before the session transitions to David.

By Anna Coulling – creator of volume price analysis