Don’t get trapped with FOMO – use the volatility indicator

Don’t get trapped with FOMO – use the volatility indicator

The volatility indicator is such a powerful tool and one which will help to keep you from jumping in too early and joining other traders on the fear of missing out, or FOMO. This is a powerful emotion and one which trap many traders, but with the volatility indicator, you can avoid such traps.

 

00:14

Market congestion and holiday impact

00:14

The speaker reviews multiple currency strength indicators, including the VIX and others, observing that the market currently lacks clear direction as many participants seem to be on holiday. The yen is fluctuating without a strong trend across various short timeframes. Similarly, the Australian dollar shows some buying interest but no decisive trend against the yen. The currency strength indicator reveals congestion and flatlining, indicating a lack of momentum and trend strength in the market at this time.

01:08

VIX indicating low market risk sentiment

01:08

The speaker discusses the stability of certain currency payers, indicating they are unlikely to change much. They reference the VIX index across multiple timeframes (2, 5, 10, and 20 minutes), showing congestion and a lack of strong market movement. The VIX’s recent behavior suggests low risk sentiment and no significant market heat. This is supported by observations of multiples, volume, and point of control. The speaker then shifts focus to the NQ (Nasdaq futures) with a multi-timeframe workspace to analyze further.

02:13

Volume point of control as market fulcrum

02:13

The speaker explains that multiple timeframes from one minute to fifteen minutes all show the volume point of control (VPOC) at the same level, indicating that the market is trading around a key price fulcrum. This suggests market consensus without strong bullish or bearish momentum, likened to a seesaw balanced between two equally weighted people. Only a significant change in market participants’ weight will cause a price movement away from this equilibrium.

03:13

Market waiting ahead of holiday period

03:13

The market is currently in a congestion zone, showing indecision and waiting due to the upcoming three-day holiday and the Fourth of July. Trading activity is low as many traders have left or are preparing to leave for the session. The excitement from the recent Non-Farm Payroll (NFP) release has settled. For scalpers who rely on order flow or order boards, trading during this period requires focusing on very fast timeframes, such as the 15-second chart, to capture small moves in the quiet market.

04:11

Scalping strategies in fast timeframes

04:11

The speaker describes a market scenario featuring a burst of activity triggered by volatility. They anticipate market congestion, which may lead to a reversal, signaled by decent volume under a particular candle wick. The analysis focuses on the potential for the market to weaken and move lower again, but if the price carries through the resistance, it would no longer be suitable for scalping. Observations of the sales data show limited volume and no significant large trades, suggesting that traders who entered early for a quick upside scalp are now trapped as the market congests and possibly reverses.

05:02

Fear of missing out trap explained

05:02

The speaker explains a powerful market indicator triggered when price action moves outside the average true range, signaling market maker participation. This trigger occurs immediately, without waiting for candle closure, and is significant on various timeframes such as 5-minute, 3-minute, 10-minute, and 15-minute charts. The indicator often appears alongside high volume and acts as a trap designed to exploit the fear of missing out (FOMO), luring traders into unfavorable positions.

06:05

The market often reverses after triggering this indicator, leaving impulsive traders in weak positions despite their instinct to quickly enter and exit trades. This indicator works across all timeframes, from 15 seconds to daily charts, as demonstrated on the YM (E-mini Dow futures) daily chart. Recent market pullbacks have given way to rallies with decent volume, presenting valuable opportunities for scalping traders who must act swiftly even on relatively slower timeframes like the 5-minute chart.

07:01

Volume resistance and breakaway moves

07:01

The speaker analyzes volume and resistance levels, noting a strong resistance zone that has been tested multiple times without breaking. A recent breakaway occurred on decent volume, with minor overhead resistance. The volume profile shows a significant amount of volume resistance around 420, with no low volume nodes, which poses a challenge. The speaker highlights the need to decide whether to be comfortable with upside movement despite this volume resistance. They then switch to a slower three-minute timeframe to assess resistance levels and volume fall-off.

07:57

On the three-minute chart, minor resistance is noted around 405, with volume dropping off beyond that level, suggesting potential for a decent run if this resistance is cleared. The speaker cautions about the approaching holiday period, warning that the market is volatile with frequent reversals, making it unsuitable for holding trades for long periods. The current market conditions favor scalping due to rapid movements, though this style may not suit all traders, who might prefer to wait for calmer conditions.

08:50

The discussion turns to monitoring large block trades, emphasizing that significant blocks are more relevant to decision-making than smaller ones. The speaker explains the importance of understanding whether these big trades are executed at the bid or ask and if they drive the market, as this indicates strength or weakness. They mention plans to develop software with TradeStation to simplify this analysis by combining BPI (Bid Price Indicator) analysis with order flow and time sales data.

09:40

The market is hitting resistance again amid congestion and sluggish activity. The speaker links a recent burst of market activity to a drop in the VIX, explaining the inverse relationship between the VIX and market price movements. They suggest drawing support and resistance lines to identify breakouts from congestion phases. The trading principles and methodologies discussed, including Volume Price Analysis (VPA) and multiple timeframe analysis, are applicable across various markets and trading styles.

10:46

Quantum Trading platform and education overview

10:46

The speaker discusses various trading platforms and licenses available through Quantum Trading, including MT4/5, NinjaTrader 7 and 8, and TradingView. They highlight that a single license covers multiple versions of the same platform, managed through the Quantum Trading dashboard. They also mention the recent availability of line and object drawing features on TradingView, enabling the development of previously unavailable indicators such as the currency matrix and heat map. Additionally, TradeStation updates are noted, with versions 9.5 and 10 offering powerful features and integration with Interactive Brokers for discounted trading.

12:14

TradeStation’s latest versions provide enhanced functionalities, including radar screen and other advanced tools. Webinars specific to TradeStation will be offered in the future, with updates posted on the labs site. The speaker then introduces Anna Coulling’s website, which features books in Kindle and paperback formats as well as blog posts. They explain the comprehensive forex trading program available at quantumtradingeducation.com, which covers psychology, fundamentals, related markets, technical analysis, volume price analysis (VPA), and trading mechanics. The program includes over 200 hours of video content, webinars, and access to a private trading group hosted by Anna and the speaker.

13:45

The session concludes with a reminder about the next live webinar scheduled for Tuesday morning at 7:45 UK time, focusing on the London Forex session. The speaker advises caution due to low market liquidity with the US market mostly closed and expects limited market activity. They thank attendees for joining, wish them a good weekend, and sign off.

By Anna Coulling – creator of volume price analysis