How to dig out reversal trades in the forex market on NinjaTrader

How to dig out reversal trades in the forex market on NinjaTrader

In this video we explain how to dig out reversal trades in forex on the NinjaTrader platform using the currency strength indicator and the currency array indicators from Quantum Trading.

00:10

Intro and screen delay issues

00:10

The speaker apologizes for a delay in the video feed caused by running on a mobile device, which makes the screen sluggish and causes lag between speech and visuals. They request patience and mention focusing on yen currency pairs during the session.

00:48

Focus on yen pairs and charts

00:48

The speaker discusses the rapid price movements of the Aussie Yen on a five-second chart, highlighting how indicators function consistently across different timeframes, from seconds to weekly charts. They note the similarity in market behavior across various currency pairs like the Pound/Yen and New Zealand/Yen. The segment also touches on the significance of the London market open at 8:00, mentioning how NinjaTrader software prints data to reflect market activity accurately.

01:51

London and European market opens

01:51

The segment explains how local time alignment helps to clearly identify market activity. It highlights key trading sessions such as the London open at 8:00 UK time and the European open at 7:00 UK time, noting a volume increase during these periods. The London session shows a significant volume uplift, indicating deeper liquidity. The described price movement involved a breakaway with rising volume during a decline, a brief pause, and then further volume increases signaling continued selling pressure.

02:24

Volume-based support and resistance

02:24

This segment discusses the concept of support and resistance from a volume perspective, complementing the traditional price-based approach in technical analysis. It explains that areas with high volume represent congested regions with many pending orders or trapped traders, often centered around the volume point of control where the market has spent the most time. Conversely, low volume areas tend to allow prices to move through quickly due to fewer orders. The segment also highlights the importance of considering multiple time frames in analysis, noting that slower time frames carry more weight than faster ones when evaluating the significance of volume regions.

04:34

Volatility traps at session crossovers

04:34

The speaker discusses market behavior around key session crossovers, especially the London session, highlighting a common volatility trap characterized by rising volume and rapid market moves. This trap often catches traders unaware, as market makers drive sudden price spikes.

05:03

Volatility spikes occur consistently at market session crossovers such as London and New York openings. Traders are advised to close positions before these events to avoid unpredictable price moves, as the risk outweighs potential rewards. It is safer to trade once the market stabilizes after the volatility.

05:37

Volatility is explained as a compression of time, where price moves that usually take longer happen rapidly, creating a fear of missing out (FOMO) among traders. This rapid movement tempts traders to jump in quickly, but often leads to getting trapped in reversals or congestion phases.

06:05

The emotional response triggered by fast market moves can cause poor trading decisions. The usual outcomes after such volatility spikes are either a full trend reversal or a phase of congestion, both of which can be harmful for traders holding positions through them.

06:37

Sitting through congestion after a volatility spike is difficult and painful, as the market may linger without clear direction. This congestion can last several candles and lead to emotional stress, underscoring the importance of recognizing and managing these phases effectively.

07:09

The speaker emphasizes the pain of enduring congestion phases while waiting for a breakout, which may or may not occur favorably. This highlights the value of an indicator designed to alert traders to such conditions, helping them avoid or minimize losses during uncertain market pauses.

07:37

When a volatility trigger occurs and the position is profitable, it’s generally best to close or reduce the trade to secure gains. Traders should wait for the market to calm and show measured price action before re-entering, avoiding the risks of unpredictable snap moves.

08:03

If a trader is in a losing position during volatility or session crossovers, they face a tougher decision on whether to exit or hold. Awareness of these volatility patterns across different timeframes is crucial for making informed decisions and managing risk effectively.

08:34

Currency strength and market sentiment

08:34

The discussion focuses on the market sentiment indicators, highlighting a strong bearish trend evident in the mission trend monitor and currency strength indices. The Japanese yen is notably rising across multiple time frames, while risk currencies like the New Zealand dollar and Australian dollar are heavily sold. The overall sentiment favors buying yen and selling risk currencies, although caution is advised against entering the New Zealand dollar trade due to its oversold condition.

10:12

Attention shifts to watching the Canadian dollar and further monitoring of currency strength across multiple time frames. The speaker emphasizes focusing on the extremes of currency strength indicators to identify early trade opportunities, accepting wider stop losses to accommodate market volatility. The New Zealand dollar remains flat at the bottom, while the Canadian dollar continues to decline, reinforcing the yen’s strength as a key market driver.

11:09

The analysis moves to US equity futures trading on the Globex electronic platform, noting significant divergence and high volume spikes around the London market open despite physical US markets being closed. This near 24/7 electronic trading environment provides insights into risk sentiment. Recent volatility, triggered by events such as the Moderna pharmaceutical stock spike, led to increased trading volume and opportunities, described as a repeat of previous volatile market conditions with plenty of profit potential for informed traders.

13:19

Accumulation distribution and volume

13:19

The speaker discusses traders’ reactions to recent market movements, highlighting regret over premature optimism. They explain the use of support and resistance levels from a price perspective, referencing Ana’s MT45 indicator and the Accumulation Distribution indicator on NinjaTrader. The latter visually emphasizes important levels by thickening lines based on how often they have been tested and held, providing a clearer understanding of key volume-based support and resistance points.

14:18

The analysis continues with a focus on volume and price-based support and resistance levels, noting significant volume clusters around current price points. Despite some recent weakness, the daily timeframe still appears bullish, supported by longer-term factors such as the resolution of the U.S. presidential election uncertainty and potential positive coronavirus developments. These elements contribute to a risk-on environment that supports higher market levels over the longer term, even though intraday price action shows some hesitation.

15:18

The discussion shifts to currency movements, highlighting the Australian dollar’s struggle to rally and its relative weakness compared to the Canadian and New Zealand dollars. Attention turns to the Japanese yen, which is continuing to strengthen. The speaker examines the currency array on multiple timeframes, focusing on the visual representation of risk sentiment through the yen complex. This array helps illustrate risk-on and risk-off dynamics, with the yen often acting as a safe-haven currency.

16:28

Further examination of the currency array reveals the relative strength and weakness of various yen pairs, including the Swiss franc and U.S. dollar, both safe-haven currencies. The visualization shows the incline of buying or selling momentum across these pairs, similar to a currency strength indicator but applied to pairs instead of individual currencies. The New Zealand dollar, in particular, has been heavily sold and is deeply oversold, with the Australian dollar less so. The universal buying of the yen across multiple pairs suggests broad risk-off sentiment, and traders may look for potential reversal opportunities as the yen’s strength is widespread rather than isolated.

18:09

Multiple time frames and reversals

18:09

The speaker explains how to observe currency movements using multiple time frames, illustrating this with New Zealand Yen pairs. They describe a radar sweep effect where the entire array of currency pairs gradually moves upward, starting with the fastest timeframe (3 minutes), then rippling through to 5, 10, and finally 15 minutes. This approach helps identify trend reversals by tracking how these arrays lift off the bottom and move higher across different time frames.

19:11

The discussion continues on how longer-term shifts in sentiment appear on charts as the entire array moves to the top. The speaker introduces a second column that indicates whether a currency pair is moving into oversold or overbought conditions, using color-coded signals. Darker cells with brackets indicate approaching oversold conditions, while bright red or blue cells signal confirmed overbought or oversold states, highlighting potential reversal points such as with the New Zealand pairs on the 15-minute chart.

20:13

The speaker elaborates on how these signals reflect the strength or weakness of currencies like New Zealand. For example, New Zealand is currently very strongly sold, as shown by the clustering of New Zealand pairs at the top and bottom of the array. They emphasize analyzing currency pairs from the perspective of one currency against another, using these arrays to gain insights into potential reversals and the overall market sentiment for individual currencies.

21:03

The final segment notes that while some currencies like the Australian dollar are beginning to recover, no strong trends are developing because the Japanese yen is climbing simultaneously with multiple currencies, including the Australian dollar, pound, and Swiss franc. This synchronized movement across pairs prevents clear directional trends from emerging at the moment.

21:33

Dollar and currency trend analysis

21:33

The segment discusses strong market trends driven by the dollar’s movement. There is significant selling pressure on the US dollar and the Canadian dollar, while currencies like the Australian dollar and the British pound are rising. These dynamics create clear directional trends in currency pairs such as the Aussie dollar versus the US dollar.

21:59

The speaker examines the dollar matrix to explain how the strong selling of the US dollar influences currency movements. For example, cable (GBP/USD) is rising as the dollar weakens. However, the USD/CAD pair is not trending because both currencies are falling at similar rates, neutralizing directional movement.

22:34

An analogy comparing two trains moving in the same direction is used to explain why no strong trend appears when two currencies move similarly. This concept clarifies why USD/CAD lacks a trend despite movement, emphasizing that strong trends emerge when currencies move in opposite or differing directions.

22:54

The discussion highlights that the USD/CAD pair is consolidating around a volume point of control due to parallel movement of both currencies. In contrast, the Australian dollar is showing a clear upward trend, breaking away from volume congestion. The trend monitor reflects bullish signals on both the Aussie dollar and cable (GBP/USD).

23:19

The euro is weakening after a rally and is beginning to move in the same direction as the US dollar, causing congestion in the EUR/USD pair. The Swiss franc is also moving toward congestion after some trending. Meanwhile, the New Zealand dollar is gaining momentum, indicating potential trend developments.

23:45

The New Zealand yen pair shows some movement, but the yen remains strong and overbought, suggesting a potential reversal may be forthcoming. The rise in the VIX index to 23.01 reflects increased market volatility, which correlates with yen buying. This segment emphasizes the importance of analyzing multiple time frames to understand market dynamics fully.

24:12

Quantum Trading education program

24:12

The speaker explains the forex funded program available through quantumtradingeducation.com, which allows students to trade with up to a million dollars of company funds without risking their own money. This opportunity is exclusive to students of the Quantum Trading Education program or customers who have purchased their indicators, with credits applied towards joining. The program includes conservative risk management rules to ensure safe trading and aims to help traders build a solid track record for potential proprietary trading careers or to establish their own funds.

26:13

Traders in the funded program keep their own trading capital while accessing larger funds, providing a unique upgrade path to apply their education practically. The program details and purchase options are available exclusively to Quantum Trading students. Additional resources include Anna Couling’s books available on amazon.com, supporting further learning.

27:10

The speaker highlights the offerings on quantumtrading.com, including various trading software and indicators for platforms like MT4/5, NinjaTrader 7/8, and TradingView. They announce the upcoming launch of TradeStation integration, which will allow trading through Interactive Brokers or TradeStation Securities. Following this, they plan to port missing Forex-specific indicators to TradingView, enabled by recent improvements in Pine Script.

28:06

The full package of TradingView indicators will be provided free of charge to existing customers, with a planned price increase to align with the MT4/5 package. The speaker thanks the audience, hopes they found the session informative, and invites them to join the next session on Sunday afternoon for the US trading session.

By Anna Coulling – creator of volume price analysis