Discover how to pick the best currency pair to trade

Discover how to pick the best currency pair to trade

All trading opportunities are not equal and in this video from the London forex trading session we explain why, and more importantly how to identify those which are strong and those which are weak, and so pick the one which has the greatest momentum in the trend.

00:10

Introduction and multiple time frame analysis

00:10

The speaker welcomes the audience and comments on the chilly weather compared to last week. They confirm audio clarity and mention working on the Pound New Zealand Xanax set using multiple time frames. The discussion highlights the importance of analyzing currency strength multiples and applying a multi-time frame approach to both charts and indicators. Key elements include support and resistance levels, candlestick patterns, volume price analysis (VPA), and combining these tools for a comprehensive trading strategy.

01:17

Pound New Zealand overbought and reversal signs

01:17

The speaker discusses the British pound and New Zealand dollar, highlighting that the pound is very strongly overbought across multiple time frames (2, 5, 10, 15 minutes). Attention is focused on the extremes at the top and bottom of the charts rather than the middle areas. The New Zealand dollar is approaching oversold levels, particularly on shorter time frames, signaling a potential reversal.

01:43

The New Zealand dollar is beginning to show signs of reversal on shorter time frames, although not yet fully oversold on longer ones. The speaker also shifts focus to the euro, which had been moving down sharply but is now starting to reverse. This reversal is becoming noticeable on various charts, indicating changing momentum.

02:14

The euro yen experienced a significant downward move followed by a reversal that is now gaining strength. On the 15-minute chart, the euro is flattening out after falling, while the VIX remains relatively stable with a slight uptick but no dramatic increase. This segment emphasizes the importance of monitoring multiple time frames to understand market dynamics.

02:40

The discussion continues on the yen’s market sentiment, which remains elevated without collapsing. The speaker highlights the value of using multiple time frames in both charts and indicators for better trading decisions. The yen’s strength is evident across these time frames, reinforcing the need for a comprehensive approach to technical analysis.

03:09

Volume and price action on multiple charts

03:09

The New Zealand dollar shows strong buying with a near-vertical upward trend, while the pound experiences significant selling pressure. The analysis focuses on a five-minute chart timeframe, highlighting recent volatility with price snapping into and out of congestion zones and reversals. This sets the stage for potential market moves, with market makers actively participating and influencing price action.

04:03

Examining the five-minute chart reveals a two-bar reversal signaling weakness after a trend higher. The platform used provides accurate timestamps, unlike other software that is often out of sync. The London market open is marked by increased volume, particularly at the volume point of control, indicating a price area where buyers and sellers are in agreement. Volume has shifted upward from earlier levels, reflecting growing market activity.

05:00

Volume has been building at a fulcrum price level with no clear bullish or bearish bias, preceded by volatile congestion and attempts to push prices higher. The presence of wicks on candles with high volume suggests resistance to upward movement. A two-bar reversal pattern further indicates weakening momentum. The ten-minute chart confirms these signals, showing effort to rally followed by collapse and strong selling pressure, supporting a bearish outlook in the short term.

05:55

The pound is positioned at the top of the range while the New Zealand dollar remains near the bottom, suggesting a potential setup for a reversal on slower timeframes. Additional indicators, such as the currency array focusing on the pound, are used to isolate and analyze currency strength and weakness, helping to identify trading opportunities based on current market dynamics.

06:26

Currency strength array and trend signals

06:26

The discussion starts by analyzing currency pairs involving the British pound, highlighting strong buying activity in pound-New Zealand and pound-US dollar pairs across multiple time frames. Pound-yen is noted as lagging behind, showing little movement despite overall positive sentiment for the pound. The buying strength is reflected in market-wide sentiment, indicating robust demand for the pound in these pairs.

07:22

Attention shifts to technical indicators showing that some currency pairs, like cable (GBP/USD), are nearing overbought conditions, flagged by color-coded brackets. These alerts serve as warnings to traders to review charts for potential reversals rather than predicting exact price movements. Conversely, pairs like the euro-pound may be approaching oversold conditions, signaling possible upcoming buying opportunities.

08:23

The speaker explains the importance of observing a ‘sweeping’ market sentiment across various pairs to confirm trends. The pound is currently a strong performer with universal buying across its pairs, especially noticeable about half an hour into the London market open. This broad-based strength reinforces confidence in pound-related trades, regardless of the underlying reasons driving the demand.

09:13

Traders are advised to selectively choose pound pairs to trade, avoiding those like pound-yen which may not be showing strong trends despite usually being volatile. The current weakness in pound-yen contrasts with its typical behavior. The visual strength of trends and sentiment across various pairs helps identify which pairs are more likely to maintain momentum. The segment concludes by transitioning back to chart analysis on a five-minute timeframe to observe these dynamics in real-time.

10:17

Trading reversals and volume point of control

10:17

The speaker discusses the recent market activity showing buying in the New Zealand dollar and a gradual sell-off in the pound, which presents a potential short position opportunity. However, the price is moving back down to the volume point of control, a key level where the market is expected to pause and experience congestion. This suggests that any reversal might face resistance and traders should anticipate some sideways movement before any significant continuation.

11:18

Further analysis emphasizes the importance of the volume point of control across multiple time frames (one, three, five, and ten minutes), which reveals why the market pauses or moves suddenly in certain areas. This multi-time frame approach helps identify subtle market dynamics, candle patterns, and volume price analysis (VPA) insights. It aids traders in managing trade entries, exits, and stop losses, which need to be wider to accommodate expected market buffering around the volume point of control.

12:20

The current market movement is driven mainly by buying pressure in the New Zealand dollar rather than selling pressure in the pound. On shorter time frames, the pound has not yet rolled over and is moving in a similar direction to the New Zealand dollar. This lack of strong opposition means the New Zealand dollar vs. pound pair does not exhibit a strong trend. Stronger trading opportunities exist in New Zealand dollar pairs against currencies like the yen, euro, or Swiss franc, where there is clear selling pressure opposing the New Zealand dollar buying.

13:21

Comparing New Zealand dollar pairs with the Swiss franc, yen, and euro shows a different picture than the New Zealand dollar vs. pound, highlighting that the pound is currently holding steady without significant selling pressure. The New Zealand dollar has shifted from heavy selling to heavy buying, but this shift is not fully reflected in the New Zealand dollar vs. pound pair. The speaker begins to examine the New Zealand dollar vs. yen pair, noting some sluggishness but implying a clearer trend due to stronger selling in the yen.

14:36

New Zealand Yen bullish trend development

14:36

The speaker explains the role of indicators in trading, comparing them to sonar used by fishermen to locate large shoals of fish. The goal is to identify the best trading opportunities by targeting strong market movements rather than weak or insignificant ones.

15:29

Analyzing the New Zealand Yen, the speaker notes a positive trend shift indicated by trend monitors across multiple timeframes, moving from bearish to bullish signals. While shorter timeframes show a clear transition to bullish, longer ones like the daily chart remain generally bullish but less reactive to short-term changes. This indicates a developing bullish trend intraday.

16:23

The speaker examines resistance levels ahead, noting movement into a low volume node that suggests less resistance. On the three-minute chart, a previous strong resistance level was broken with strong volume and no significant price rejection. The discussion highlights that clusters of accumulation/distribution levels indicate stronger resistance, with some minor clusters being tested currently.

17:17

The price has moved through a low volume area smoothly, indicating little resistance so far. However, heavier volume areas ahead may cause pauses or resistance, especially on higher timeframes like the five-minute chart where strong resistance levels have repeatedly capped rally attempts. The speaker notes this as a typical challenge when trading on very short timeframes without the context of longer-term resistance.

18:03

Resistance levels and trade risk assessment

18:03

The speaker discusses a market transition indicated by the trend monitor, highlighting that a current price move is facing resistance and downward pressure. Although there may be a pause or slight pullback, if the price breaks through this resistance in the next 5 to 20 minutes on a five-minute chart, the path ahead appears clear. The volume histogram is falling, suggesting no significant obstacles to price advancement, and technical resistance is minimal up to a higher level around 45.

18:55

Further analysis emphasizes the potential for a strong price run if the current resistance is overcome, with about 30 pips of clear technical space. The example of the pound versus New Zealand dollar is used to show that the current movement is stalled, and any pound selling might arrive too late as the New Zealand dollar move may have already ended. The speaker notes that some currency pairs like New Zealand yen are showing strong opposing moves, while others, like Aussie and New Zealand dollars, both rising strongly together, offer limited trend opportunities due to lack of differential movement.

20:19

Using a train analogy, the speaker explains that when two currencies move in the same direction, there is little trend opportunity, whereas opposite directions create strong trends due to ‘closing speeds.’ On a volume profile chart, the speaker points out key resistance areas, noting some have been tested multiple times and are stronger, while others are minor. Breaking through these volume-based resistance zones could allow smoother price movement, which is critical in assessing trade opportunities and potential for price to move higher.

21:17

The focus shifts to evaluating trade risk versus reward by analyzing multiple time frames and volume areas. The speaker stresses making personal judgment calls on whether the potential return justifies the risk, rather than relying on fixed risk/reward ratios. Patience is emphasized, especially for reversal trades which require wider stop losses. The pound is showing early signs of rolling over while price attempts to push through a resistance region with significant volume underneath, suggesting careful timing is necessary for entry.

22:23

The importance of patience and using tools like the trend monitor to avoid premature exits is highlighted. The trend monitor helps traders hold positions through transitional phases without getting stopped out during minor fluctuations. The speaker advises waiting for a clear close above resistance levels before entering to maximize trade potential. They explain that consistent small losses will prevent account growth unless balanced by capturing larger winning trades, which the trend monitor is designed to facilitate.

24:12

The speaker revisits the pound’s price action on faster time frames, noting it has started to decline after an hour of consolidation, including a session crossover. While there is no guarantee the move will continue, early signs on two-minute charts suggest a downward trend. They discuss analyzing which currency pairs to trade against the pound, ruling out dollar, yen, and Swiss franc due to synchronized movement, and suggest looking at pound versus Australian dollar or Swiss franc for potential opportunities.

25:03

Examining the pound versus other currencies, the speaker notes the Australian dollar is already moving higher, possibly limiting reversal opportunities. They propose focusing on pound versus Swiss franc as the pound and Swiss franc are at extremes of movement. The ongoing process involves constantly monitoring multiple charts and currency crosses to identify trend strength and potential trades. Decisions involve whether to trade reversals or trends and when to enter, acknowledging that some trend moves may already be underway, reducing potential profit.

26:16

The final segment discusses trading style preferences, particularly the choice between trading reversals versus trends. Reversal trading requires patience and wider stop losses, while trend trading may allow tighter stops. Traders must assess their own temperament and decide in advance which approach suits them. Both methods can be combined or alternated, and traders have flexibility to adapt strategies based on market conditions and personal risk tolerance.

26:44

Trading styles: trend vs reversal

26:44

The speaker reviews recent market activity, noting the failure of prices to close above a key level, indicating weakness. Attempts to rally have repeatedly fallen back, suggesting a lack of strength in the current move. The price is trading around the volume point of control with resistance capping gains, signaling that this particular trade setup is no longer viable and it’s time to move on to other opportunities.

27:44

An introduction to the Quantum Trading Education program is provided, highlighting it as a comprehensive forex trading course. It offers a full suite of trading tools for various platforms and covers essential topics, including the complexities of the forex market and trading psychology. The program emphasizes self-understanding and aligning strategies that work best for individual traders.

28:16

Quantum trading education program overview

28:16

The program emphasizes starting with areas that may be uncomfortable, such as scalping or training reversals, to increase chances of success. It includes eight PDF downloads and various tests for self-analysis, focusing on identifying strengths and managing weaknesses. Key modules cover fundamentals, relational analysis of market sentiment linked to risk on/risk off, and technical analysis with a deep dive into volume price analysis (VPA). The course also teaches the mechanics of trading, including entering, managing, and exiting trades. Additionally, students have access to over 200 hours of video tutorials, webinars, and a library of VPA chart examples.

29:34

Students can join a VPA chat room for community support and follow resources on anacooling.com, which offers books in Kindle and paperback formats. The site also links to various analysis tools and Facebook pages. The software supporting the program is available at quantumtrading.com, compatible with MT45, Ninja Trader, and TradingView, with Tradestation coming soon. The platform includes advanced features like radar screen and multiple indicators.

30:27

The team plans to complete the Tradestation integration within weeks and then focus on enhancing the TradingView package by adding missing indicators. Customers who have purchased the full TradingView package will receive these additional indicators free of charge as a thank you before any price increases. This ensures alignment with the MT45 package, providing great value for users invested in the platform.

31:23

The session concludes with thanks to participants, a reminder of the next meeting on Thursday at 5:15 PM UK time, and an invitation to join the US futures session later in the week. The host expresses appreciation and wishes everyone a good trading day.

By Anna Coulling – creator of volume price analysis