Discover how to select the best currency pair to trade from all those available

Discover how to select the best currency pair to trade from all those available

Trading forex, we are spoiled for choice when it comes to the number of trading opportunities that arrive through the trading session. So how do you choose which trade is likely to deliver the best return for the lowest risk? In this video, we explain the steps using the Quantum Trading currency-specific indicators and, of course, using volume price analysis to confirm.

00:15

Introduction to sentiment and currency focus

00:15

The speaker begins by discussing current market sentiment, focusing initially on the Pound-Aussie pair before shifting attention to the Aussie-Yen due to recent movements reflecting risk-on and risk-off dynamics. They highlight how various indices and currency strength indicators, particularly in five-minute intervals, show strong yen buying and Aussie selling. This interplay exemplifies broader market sentiment shifts, with additional analysis supported by volume price analysis (VPA) examples and tools like NinjaTrader to monitor these trends in real time.

01:48

Volume price analysis and market behavior

01:48

The segment discusses local time referencing and introduces the European trading session starting at 7 o’clock with the London market open at 8 o’clock. It highlights an initial low-volume candle followed by a significant surge in volume, attracting traders who get caught in a sharp reversal. This price action exemplifies Volume Price Analysis (VPA) principles, showcasing a falling market accompanied by rising volume, which signals strong selling pressure despite the short one-minute timeframe.

02:52

This segment explains that a falling market must show rising volume to confirm the downward trend, just as a rising market requires increasing volume to indicate upward effort. It emphasizes that it takes effort to move prices in either direction, comparing this to the concept of gravity. The volume trend monitor changes color to indicate phases in the trend, supporting the analysis of volume and price action. It also introduces the concept of the volume point of control as a key area where the market is expected to consolidate.

03:46

Here, the market moves quickly through a low volume node but slows near the volume point of control (VPOC), where high volume suggests strong support. The accumulation-distribution indicator is introduced, which visually represents the strength of price regions by line thickness. This indicator automatically identifies strong support and resistance areas, providing a more objective measure than manually drawn lines, helping traders anticipate potential price behavior around these levels.

04:55

The segment details how the thickness of lines on the accumulation-distribution indicator corresponds to the strength of support or resistance levels, validated by how often these levels have been tested. A level tested multiple times is stronger and more likely to hold as support or resistance. This analysis helps traders assess the potential potency of price regions and informs decisions about how far price may move before encountering significant barriers.

05:48

This final segment explains that the volume wedge clustered around the volume point of control acts as a robust support or resistance zone, limiting how far price can move. Low volume areas allow price to move quickly, whereas high volume zones cause price to slow or consolidate. The segment concludes by reinforcing that combining volume-based analysis with traditional price support and resistance concepts provides a comprehensive view for evaluating trading opportunities.

06:50

Volume point of control and support levels

06:50

The speaker analyzes the potential trajectory of a trade, noting challenges as the price approaches resistance areas. They focus on market sentiment and the VIX index, which initially spiked from 26.2 to 26.8, indicating a shift from risk-on to risk-off sentiment. This shift is causing a pause in yen buying, but if the VIX begins to decline, the sentiment may reverse back to risk-on, leading to renewed yen selling.

07:59

VIX volatility and market expectations

07:59

The discussion begins by examining the VIX index, highlighting an unusual situation where both the VIX and stock indices rose simultaneously. This anomaly is attributed to markets buying volatility ahead of the U.S. presidential election, anticipating significant market fluctuations as the election outcome could be contested. Traders are positioning for increased volatility in advance of the event.

09:19

Brokerage firms, including Interactive Brokers, are increasing margin requirements in anticipation of heightened volatility surrounding the election. This margin tightening contributes to the VIX remaining at elevated levels. Despite the market not being overly volatile yet, these preparations signal expectations of substantial market swings. The speaker briefly shifts focus to market indices and their movement.

10:19

The analysis moves to daily charts of major indices and currencies, noting a slight increase in yen selling and signs of renewed buying activity after a volatility trigger. However, there is concern as volume is falling while markets rise, indicating potential weakness in the rally. This volume-price divergence is seen across multiple indices, suggesting a longer-term reversal may be underway, influenced by sentiment related to volatility and the upcoming election.

11:10

Multiple time frame currency strength analysis

11:10

The speaker discusses the shifting market sentiment from bearish to bullish, particularly focusing on the Australian dollar’s buying activity. They emphasize the importance of considering multiple time frames when trading, highlighting the differences between very short-term scalping perspectives (like 15 seconds to a few minutes) and longer-term views (10 to 30 minutes). Traders must decide their approach based on how long they plan to hold a trade, whether seconds, minutes, or longer periods. The overview also touches on the challenges traders face in reconciling these differing time frames to make informed decisions.

13:01

The discussion shifts to the strong euro buying activity since the London session began, which has pushed the euro toward overbought levels without a clear counterbalance of selling strength elsewhere. The currency strength indicator is highlighted as a tool to identify promising trading opportunities and filter out less reliable ones, considering the slope and strength of currency lines. Examples are given with the pound’s strength on the one-minute chart, noting its interactions against other currencies like the yen and New Zealand dollar. The segment ends by examining the pound against the Australian dollar on a 30-minute chart, referencing a notable move during session crossovers and linking to previous commentary on similar currency pairs.

14:41

Session crossovers and price movement

14:41

The segment discusses the importance of session crossovers in forex trading, particularly highlighting the London and US sessions. It explains how price action can show strong trends, followed by weaknesses and pauses at key volume points. When price breaks below certain levels, it moves quickly through low volume areas with less resistance, illustrating typical market behavior during session overlaps.

15:38

This part emphasizes that strong moves in one session, like London, do not always carry over into the US session, leading to potential reversals in sentiment and price direction. The speaker refers to a trend monitor showing transitions from blue to bright red, indicating shifts in market momentum and the current state of the market. The daily chart is introduced, showing recent price weakness and its relation to volume patterns.

16:30

The discussion focuses on the daily chart, pointing out a rising market with falling volume, which signals potential weakness. A weak candle has appeared at a significant volume point of control with resistance above, suggesting a possible reversal or pause. Various factors that could trigger such market moves are considered, including Brexit impacts on the pound and risk-related buying of the Australian dollar, illustrating the complexity of influences on forex markets.

17:26

Dollar matrix and currency pair strength

17:26

The speaker analyzes the dollar matrix across major currency pairs on a five-minute timeframe, focusing on whether the dollar is being bought or sold. They highlight that pairs like cable (GBP/USD) and New Zealand and Australian dollars versus the dollar show clearer trends due to opposing currency movements, whereas pairs like dollar/Swiss franc or dollar/yen are less useful because both currencies are moving similarly. Using the currency array and matrix tools, the speaker isolates the New Zealand dollar, noting its current universal selling trend across multiple pairs and timeframes, indicating strong market consensus on its weakness.

18:56

The currency array provides a visual measure of trend strength by showing the angle of currency movement lines, allowing traders to see strength or weakness from both individual currencies and currency pairs perspectives. The speaker notes a ‘full house’ pattern indicating universal selling of the New Zealand dollar on short timeframes, reinforcing confidence in this trend. They discuss how this selling sentiment should ripple through longer timeframes like five and ten minutes, with expectations that related pairs will follow suit. This analysis helps identify which pairs are favorable to trade and which to avoid based on prevailing market flow.

21:03

The speaker explains that some indices like the currency strength indicator (CSI) may appear flat because certain currencies, such as New Zealand dollar and yen, are moving in the same direction, balancing overall sentiment. They describe the ranking ladder, which visually signals when currency pairs approach overbought or oversold conditions by using color-coded brackets. Traders use these signals to investigate chart opportunities by applying volume and price analysis, indicators, and multiple timeframes. The speaker then focuses on the Aussie/New Zealand and Euro/New Zealand pairs, preparing to assess potential moves and market conditions.

22:31

Examining the Euro/New Zealand pair, the speaker notes a minor, choppy move currently stalling near a volume point of control, indicating a congestion or pause area. They highlight that a break above minor resistance with declining volume could signal a move higher, but so far the market shows indecision. On slower timeframes, the selling pressure appears to be diminishing as volume falls alongside price, which suggests a weakening bearish momentum and potential bullish shift. This volume-price relationship is key for anticipating possible reversals or continuations.

24:06

Further analysis on the Euro/New Zealand pair on 10- and 30-minute charts reveals support levels and attempts to push higher after periods of weakness. The speaker mentions an upcoming New Zealand election which could influence market movement. They note that the Euro is becoming overbought and starting to sell off, while the New Zealand dollar is moving similarly, reducing trade momentum. Comparing this to the Euro/Pound pair, where currencies move in opposite directions, the speaker finds more potential for trading opportunities, illustrated by volatility triggers and volume signals suggesting possible congestion or reversal.

26:10

The Euro/Pound pair shows signs of bearish pressure with volume and price patterns indicating potential congestion followed by a breakaway move. The speaker observes that volume is falling at key support levels tested multiple times, which could lead to a bounce or a break below that support. They emphasize the need for patience as markets develop around volume point of control areas and note that daily charts show strong support zones that may limit downward movement. This suggests that short-term trading strategies like scalping might be more appropriate given the limited room for large moves.

28:09

The speaker discusses the challenges of scalping small pip gains in pairs with wide spreads, such as the Euro/Pound, contrasting it with pairs like Euro/Dollar where spreads are tighter. Switching focus to cable (GBP/USD), they highlight a strong upward move breaking through volume congestion areas swiftly, supported by trend monitors across multiple timeframes. Despite some recent volume decline, the move maintains momentum with prices advancing through low volume zones and holding above volume point of control, suggesting a robust bullish trend developing on cable.

30:40

The speaker notes that although volume is declining slightly on the ten-minute chart during a price rise in cable, the overall trend remains supported across faster timeframes. They stress the importance of considering one’s trading horizon—seconds, minutes, hours, or days—and using multiple timeframes, indicators, and volume-price analysis to identify opportunities. The process is likened to picking choices at a sushi bar, emphasizing patience and selective engagement to capitalize on favorable market conditions.

31:32

Using Renko charts for momentum trading

31:32

The speaker explains the concept of selecting dishes from a revolving conveyor belt as an analogy for trading. The principle is the same regardless of the speed of the time frame: you choose your option quickly and move on to the next. This sets the stage for a discussion on using Renko charts across multiple time frames.

32:04

The speaker introduces the Renko optimizer tool in NinjaTrader, which calculates optimal brick sizes for Renko charts based on selected time frames. For a 15-second time frame, the optimal brick size is about 1.5 pips. Trend dots and trend monitors are used together to track price action closely and detect trend changes.

33:04

Trend dots provide near-price trend signals, showing transitions such as shifts from red to blue indicating trend reversals, while the trend monitor confirms the overall trend stability. This combination offers a detailed view of price momentum and trend shifts in real time.

33:30

The speaker sets the Renko optimizer for a 30-second time frame, which results in a 2.5 pip brick size, and then for a one-minute frame, resulting in a 3.7 pip brick size. This demonstrates running multiple Renko charts simultaneously, each aligned with different time frames for a comprehensive analysis.

34:03

Renko charts provide momentum signals independent of time, as bricks close only when the specified pip movement occurs rather than after a set time interval. This contrasts with traditional time charts and allows traders to better capture momentum by combining Renko charts with time-based charts.

34:40

Using Renko charts alongside time-based charts enables traders to see volume, price action, and volatility triggers. The speaker notes signs of congestion and possible reversal on shorter time frames, while longer time frames show less information but confirm a congestion phase with potential for price movement.

35:07

The Renko chart highlights momentum shifts with rapid brick formations, indicating volatility. A volatility trigger on the 15-second chart suggests potential congestion or breakout scenarios, providing early warning signals for traders about upcoming price behavior.

35:35

Trend dots continue to show an uptrend, with some pauses during congestion phases. The speaker explains how trend dots move within candle bodies during trend reversals. This segment emphasizes the importance of monitoring trend dot positioning for identifying transitional phases in price action.

36:04

Additional indicators like accumulation/distribution help determine the strength of support and resistance levels. The combination of multiple time-based and non-time-based charts is highlighted as a key strategy in trading, enhancing the ability to gauge price momentum and potential reversals.

36:35

The speaker discusses the recent flattening of momentum due to strong buying in the pound being offset by weakening selling in the dollar. This balance causes the momentum pause and builds congestion, illustrating how currency strength and weakness interplay impacts trend duration and strength.

37:03

The pause in the current move is attributed to the dollar selling flattening while the pound is buying. Comparing this to the pound-cad pair, where the Canadian dollar is selling strongly, shows how different currency pairs can exhibit stronger or weaker trends based on underlying currency movements.

37:31

The speaker wraps up by suggesting a trading approach focused on selecting one currency and trading multiple pairs involving that currency. This method can help traders concentrate their analysis and make more informed decisions based on consistent currency behavior.

38:20

Setting alerts and trading with CSI indicators

38:20

The speaker explains setting up trading tools such as the CSI (Commodity Strength Index) on platforms like MT4 and NinjaTrader to monitor currency pairs like the pound. They highlight how the CSI helps identify market moves, including cross signals indicating potential reversals or the end of congestion phases. Examples include the British pound and Canadian dollar pairs, noting divergence and congestion patterns.

39:56

Discussion continues about different time frames and indicators, emphasizing the importance of volume, price action, and activity speed in trading decisions. The speaker notes how London market sessions require patience as initial volatility settles, and how key candlestick patterns like bullish engulfing candles near support levels can signal important moves. They stress the use of volume and resistance levels to understand price action.

40:58

The analysis focuses on volume resistance and support levels, with Renko charts used to track price pushes and pullbacks. The speaker points out the significance of rising volume and breaking through resistance levels with strong momentum. They compare monitoring multiple indicators to watching instruments in a car or airplane, suggesting that although complex, understanding these tools together can provide a comprehensive market picture.

43:02

The speaker advises against oversimplifying trading to a single time frame or indicator, highlighting that trading is complex but not complicated. They emphasize integrating volume price action (VPA), support and resistance, candle patterns, and multiple time frames to develop a coherent trading strategy. The segment concludes with a transition back to another speaker, David.

44:02

David addresses a question about trading volume concentration during the London session, clarifying that while London accounts for a significant portion of global forex activity, other sessions like New York also see major moves. He mentions recent large moves in pairs like GBP/AUD and highlights the importance of understanding fundamental factors such as upcoming elections and central bank policies when focusing on specific currencies.

45:47

The conversation turns to differences between spot forex and futures markets, specifically how currency pairs are notated differently in futures (e.g., CAD/USD vs. USD/CAD). This notation affects price values and requires familiarity for traders. The speaker confirms this understanding before transitioning to discuss recent volatility signals observed in the pound market.

46:50

The speakers wrap up by reviewing recent price action on Renko charts, noting a smooth bullish move followed by a reversal to the downside. Indicators such as trend dots and trend monitors confirm the transition, signaling a potential scalping opportunity. They observe that the selling pressure on the pound is emerging across multiple time frames but has not yet reached extreme overbought or oversold levels.

48:13

The session concludes with information on where to find further education, promoting a comprehensive forex trading program designed to provide traders with confidence and a complete understanding of the market. The program covers all necessary aspects for trading forex effectively.

48:41

Overview of the complete forex trading program and tools

48:41

The session begins with an overview of the psychology module, which is highly recommended for students as it covers fundamental, relational, and technical analysis in depth, including advanced volume price analysis (VPA) and trading mechanics such as tactics and timing. The module contains over 200 hours of video content, webinars, and resources. The speaker also introduces the VPA Room and points to Anna’s site, cooling.com, where users can find analysis, books in various formats, and resources globally.

50:05

The speaker discusses the availability of indicators on multiple platforms like MT4/5, NinjaTrader 7/8, TradingView, and the upcoming launch on TradeStation in October. TradeStation offers powerful features, including integration with Interactive Brokers, a discount brokerage, and advanced tools like RadarScreen with all indicators fully developed for monitoring. The development has taken longer than expected but is nearing completion.

51:25

The presentation continues with updates on bringing the full suite of indicators to TradingView, now possible due to new development capabilities including Pine Script enhancements and object/line drawing. Those who purchase the full TradingView package now will receive free updates when the new indicators launch, with prices set to increase afterward. The free indicators include tools like the currency matrix, array, heat map, and VPA components.

52:39

The session wraps up with thanks to attendees and apologies for running over time. The speaker notes a recent spike in the VIX to 27, indicating increased volatility and a risk-off environment intraday. Contact information for further questions is provided, and the presenters mention they need to leave to walk their dog. They invite participants to join the next session in the U.S. trading session later that day or the following week, wishing everyone a safe and successful trading week.

By Anna Coulling – creator of volume price analysis