How to read the chart using multiple timeframes

How to read the chart using multiple timeframes

00:02

Introduction and webinar start delay

00:02

The speaker welcomes everyone to the London Forest webinar and thanks them for their patience due to a slightly delayed start caused by waiting for someone to arrive at the house. They explain the need to pause briefly to allow access to the garden before proceeding with the session.

00:34

Forex market overview and disclaimer

00:34

The speaker introduces a discussion about the forex market and upcoming chart analysis. A disclaimer is presented, emphasizing the risks of trading and advising viewers not to use money they cannot afford to lose. The speaker also acknowledges new viewers and briefly mentions reviewing a list related to the audience.

01:01

Volume Price Analysis methodology

01:01

The speaker introduces the session focused on volume price analysis, a method that examines both price action and trading volume to validate market movements. This approach is detailed further in their published books. Beyond technical analysis, the speaker emphasizes the importance of considering fundamental news and related capital markets such as commodities, bonds, and equities to gauge market sentiment. They highlight the relevance of these interlinked markets in understanding forex instruments like the Canadian dollar.

02:14

Related markets impact on currencies

02:14

The discussion highlights the impact of oil markets on the Canadian dollar, emphasizing how commodity prices directly influence currency pairs. It explains that market movements are not solely driven by general sentiment like risk-on or risk-off but also by specific relationships between currencies and other financial instruments. The speakers mention the use of a comprehensive suite of indicators developed by them and their colleague David, designed to analyze forex markets by tracking money flows between currencies, identifying which currency is strengthening and which is weakening.

03:20

Currency strength indicators explained

03:20

The video explains currency strength indicators that show which currencies are rising or falling and whether a currency is at an extreme or stable without directional bias. It also covers pairing currencies to evaluate performance using tools like the currency strength indicator, a matrix that ranks pairs by strength and weakness, a currency array that assesses trend strength, and a currency heat map that displays pair performance across multiple time frames.

04:19

Currency dashboard and technical tools

04:19

The speaker explains that different algorithms are used for ranking in forex compared to arrays and matrices. The dashboard includes forex-specific tools as well as support and resistance indicators, volatility indicators, and trend indicators. Volume price analysis incorporates volume, price action, candle patterns, and support and resistance, all of which are crucial for analyzing chart behavior effectively.

04:58

Importance of multiple time frames in VPA

04:58

The speaker discusses the fifth element of VPA (Volume Price Analysis), which relates to time and involves multiple time frames. They mention receiving many emails with questions about VPA, which help clarify how traders interpret the methodology and provide useful lessons for explaining it. The discussion briefly shifts to current market conditions, noting it’s mid-August with little significant news. The only notable event related to the European currency is the London occurrences and a 30-year bond auction, though its timing is uncertain.

06:12

Market conditions and upcoming events

06:12

The speaker explains that August is typically a quiet month in financial markets due to summer holidays, resulting in low volatility and reduced liquidity. This combination can cause erratic, sharp market movements despite overall low volatility. The week ahead is expected to be relatively quiet initially, with important events including Federal Reserve and ECB minutes scheduled. Brexit talks are also resuming but are not expected to produce significant developments this week. Additionally, the formal nominations for the upcoming U.S. elections, including Biden and Harris for the Democrats and Trump for the Republicans, are set to begin.

08:12

US election impact on markets

08:12

The upcoming U.S. presidential election is expected to dominate market attention, with uncertainty around postal voting and the potential acceptance of results if Trump loses. Despite this, the market is currently ignoring these concerns, reaching all-time highs amid low volatility. The situation is expected to intensify as election day approaches, with unclear timing for the final result, unlike UK elections where outcomes are known quickly. Viewers are advised to note important dates related to these events as they will increasingly impact the market.

09:50

Volatility and trading range examples

09:50

The speaker discusses checking volatility for currency pairs on the UK version of investing.com, using the Euro-Aussie pair as an example. They highlight how the pair’s daily pip range has been decreasing since July 22nd, which can make trading more challenging. The site also provides information on when the pair is most active and the best days for potential trades. Additionally, the Euro is currently popular among traders, with recent data showing an all-time high in long positions according to last week’s CFTC report.

11:28

Euro long positions and CFTC data

11:28

The speaker discusses extreme positioning in the euro based on COT data, emphasizing that while this data is not useful for intraday trading, it signals potential market reactions when positions become heavily skewed. They use the euro as an example, noting that long positions have increased from 180 to nearly 200, indicating strong buying interest. The segment concludes with a reference to reviewing the CSI on an hourly chart for further market overview.

12:33

Currency strength and market sentiment

12:33

The speaker discusses recent currency market movements, highlighting that the US dollar has been sold off after attempts to rise. Overextended currencies can remain so for a long time, but their eventual reversal can lead to significant moves. The New Zealand dollar has been beaten down and briefly reversed during the US session but is selling off again. The Japanese yen is rising despite market sentiment and equity indices moving higher, suggesting a possible market divergence. The pound is showing strong buying interest, while the euro is selling off. The speaker notes that long-term sentiment indicators, like the CFTC data, can differ from short-term movements, emphasizing the need to consider both.

14:07

The speaker explains how the steepness or angle of currency movement lines indicates the strength of a move, citing the pound’s clear upward momentum compared to the more gradual rise of the Canadian dollar. The euro shows signs of turning, the New Zealand dollar is not gaining significant momentum, and the US dollar remains weak at the bottom. While the dollar may decline further, a reversal could present a good trading opportunity. The discussion ends by noting that currency pair trends can differ across time frames, underscoring the importance of analyzing multiple time frames for a comprehensive market view.

15:52

Using multiple time frames for trading

15:52

The speaker explains the importance of analyzing price action across multiple time frames when trading. While some traders focus on a single chart, it’s crucial to consider at least two time frames to gain proper context. They mention that they personally analyze three to four time frames, though that might be too complex for many. The example given involves the Pound/New Zealand currency pair and a stock, illustrating that volume price analysis (VPA) applies across various markets regardless of the asset type.

17:01

Volatility indicator and price traps

17:01

The speaker discusses a volatile biotech stock priced at ten dollars, focusing on a specific price action accompanied by high volume. They explain how this price movement triggered a volatility indicator because it was outside the average true range, signaling sudden momentum in the market. This indicator can lead to either a reversal or congestion in price. In this case, it produced a notable two-bar reversal pattern, suggesting the initial move was likely a trap for traders who might be misled by rapid momentum.

18:43

The speaker continues analyzing the volatility triggers seen in the chart, noting how fear of missing out (FOMO) often causes traders to rush into these fast moves. They describe a similar volatility event where price congested and reversed again, emphasizing that volume levels differed between moves. The speaker explains that the questioner was only observing a single timeframe, but a broader view on the 10-minute chart reveals the price action is part of a larger range, highlighted by a shooting star candlestick pattern, which is a critical factor in understanding why the price did not continue higher.

19:53

Support, resistance and volume point of control

19:53

The segment explains the concept of trading within a range, emphasizing the importance of support and resistance lines. A strong support line is identified by its thickness on the indicator, indicating it has been tested multiple times, thus strengthening its significance.

20:20

This part discusses trading between support and the volume point of control, describing the latter as the market’s fulcrum. Traders tend to trade around this point, indicating a consolidation phase with no clear directional bias, reflecting market indecision.

20:55

Here, the speaker highlights price action attempts to break support or resistance, noting that such decisions should not be made solely on one timeframe. Instead, price movements should be analyzed in the context of multiple timeframes, such as two-minute and ten-minute charts.

21:27

This segment encourages traders to experiment with different timeframe combinations, suggesting that two and ten-minute charts work well together. It acknowledges that price action between strong support and resistance can be choppy, offering potential trading opportunities for fast scalpers.

22:01

The volume point of control is reiterated as the market’s fulcrum, representing the value area where fair value is established. The market tends to trade around this area in the absence of significant news or events that might drive price decisively in one direction.

22:29

The speaker advises viewing price action on a faster timeframe in the context of a slower one to understand market movements better. Choppy price action and volatility on a shorter timeframe may contrast with trends on higher timeframes, underscoring the importance of multi-timeframe analysis.

23:04

Contextualizing price action across time frames

23:04

The discussion focuses on using Volume Price Analysis (VPA) alongside support and resistance levels to understand market structure. On the 10-minute chart, the price appears to be moving sideways with potential to move higher if it clears the volume point of control. This contrasts with a bearish view taken from the 2-minute chart, highlighting how different timeframes can show differing perspectives on price movement.

24:40

The speaker references a previous analysis of the Pound Yen currency pair, noting a strong upward move followed by signs of weakness indicated by a shooting star candlestick with high volume. This example illustrates how volume and price action can signal potential reversals or changes in trend.

24:44

Pound Yen analysis and Wyckoff distribution

24:44

The speaker discusses common questions about entry signals in trading, emphasizing that a strong price action signal, supported by volume, can indicate potential reversals. However, they caution that such signals may only be part of a larger pattern, such as a distribution phase. They describe how after an initial rise and fallback, the market often moves into a congestion phase with weak signals, which can lead to a sideways distribution before moving lower.

26:24

The segment continues with an example of a two-bar reversal within congestion, showing buying pressure before an eventual break lower. The speaker references the Pound/Yen chart from a recent trading day, explaining how volatility and price cycles on shorter timeframes may contrast with trends on higher timeframes. They highlight the importance of volume-price analysis (VPA) in identifying support and resistance, and note the challenge of applying these lessons live in the market.

28:10

Live market analysis with currency divergence

28:10

The speaker analyzes currency movements, focusing on the Pound versus New Zealand Dollar (NZD). They explain how they monitor individual currency lines on separate charts using platforms like MT4, MT5, and NinjaTrader. Observing the Pound against the GBM shows no divergence, indicating less trading interest currently. However, the Pound versus NZD displays a clear divergence, with the Pound rising strongly while the NZD falls. The Pound is noted as overextended at 93, suggesting a potential roll-over, but further analysis on other time frames is needed. The divergence signals are important as they often precede significant price moves, as illustrated on the 10-minute chart showing recent price action.

29:45

Price movement, volume, and session impact

29:45

The speaker explains that market price movements are not linear but involve volatility and congestion phases. They describe observing volume patterns during pullbacks to determine if these indicate reversals or secondary trends. Volume tends to fall during downward moves and picks up during pushes higher, especially influenced by trading sessions such as London opening, which brings significant volume. Despite different session participation levels, these variations do not invalidate the analysis of price action and volume.

31:17

The discussion continues about the possibility of a two-bar reversal forming, noting the current low volume on the downward candle and the ongoing upward push of the pound within this timeframe. The speaker indicates uncertainty and suggests waiting to see how the price action develops. They then hand over the session to David, who has spent more time analyzing the market.

31:49

The speaker invites viewers to ask questions in the chat and expresses willingness to provide answers, concluding their part of the session.

By Anna Coulling – creator of volume price analysis