How to trade forex at the London open using volume price analysis

How to trade forex at the London open using volume price analysis

00:10

Forex session introduction and disclaimer

00:10

The session begins with a welcome to the morning forex session, hosted by David and the speaker. They aim to analyze the forex market for potential trading opportunities. A disclaimer is emphasized, reminding viewers that trading involves significant risk and advising not to use money they cannot afford to lose.

00:40

Review of economic news and calendars

00:40

The speaker prepares to analyze market charts by first reviewing the day’s economic news and general market sentiment. They mention using multiple economic calendars, including Forex Factory, to track important releases and updates.

01:16

ECB announcement and market impact

01:16

The segment discusses key upcoming financial events, focusing on the ECB announcement at 12:45 and the press conference at 1:30, which often causes market volatility as traders try to interpret the ECB president’s statements. This timing coincides with the release of advanced US GDP data and the crossover with New York trading hours, leading to potentially unpredictable market fluctuations.

03:07

The speaker advises intraday traders who have profits to consider closing positions before the volatility peaks and waiting for the market to settle. They compare different financial news sources, noting that calendars vary in what they classify as high-impact events. Central bank announcements like the ECB’s are consistently marked as important, but other data releases, such as US jobless claims, may be flagged differently depending on the source.

04:41

Attention is drawn to the importance of the US PCE inflation metric, the Fed’s preferred measure, which is not always highlighted by common financial calendars. The speaker also mentions Trading Economics as a comprehensive source that highlights various economic releases, including pending home sales, which tend to affect equities more than forex. The segment ends with a brief commentary on the cautious, tentative movement in major equity indices like the Nasdaq.

05:25

Currency strength and market flow analysis

05:25

The speaker discusses the behavior of risk and safe haven currencies amid rising indices, noting that the yen, expected to fall, is instead stabilizing. An hourly chart of the CSI shows currency flows clustered centrally without clear divergence, indicating no strong signals for reversal or continuation trades yet.

05:56

As market activity increases with the London open, the speaker observes that currency flow movements remain subdued without significant divergence. The current state is described as uncertain and lacking momentum, based on a matrix that compares currency pair strengths.

06:30

The currency strength indicator shows modest values, with the strongest flow at +22 and the weakest at -16, which are not impressive for this timeframe. This suggests limited momentum in the market as the indicators lack strong directional signals.

07:01

The speaker emphasizes the absence of strong, symmetrical divergence in currency strength lines, which is typically desired for clear trading signals. The pound’s fluctuations exemplify the current indecisive market conditions, requiring patience before momentum develops.

07:33

Highlighting recent events, the speaker notes the Bank of Canada’s impact on the Canadian dollar, which sold off against most pairs earlier in the day. Attention shifts to the upcoming ECB announcement, suggesting potential for increased market activity and currency movement.

08:07

Bank of Canada decision effects

08:07

The Bank of Canada (BoC) surprised markets by abruptly ending its tapering of the bond-buying program, causing the Canadian dollar to surge, especially against the euro. This highlights the importance of monitoring currency movements ahead of central bank announcements, as currencies like the Canadian dollar can reach extreme positions that may offer profitable reversal trades. While the euro is not currently at an extreme before the European Central Bank (ECB) meeting, traders should remain observant of relative currency strength to identify trade opportunities.

09:49

The discussion emphasizes following market flow, particularly in forex where mean reversion creates oscillations that traders can exploit. Using tools like the Currency Strength Indicator (CSI), traders can identify directional flow and probable trade setups, though confirmation is needed to avoid congested or range-bound pairs. Currently, the pound is seeing buying interest but not universally strong across pairs, and the market remains range-bound on the dollar index between key support and resistance levels, indicating limited trading opportunities until a breakout occurs.

12:02

Market levels play a crucial role in identifying potential reversals and congestion zones. Currently, the dollar index is trading within a narrow range, reflected by a doji candle on the daily chart, signaling indecision and expected choppy price action on faster time frames. Without clear directional momentum on the daily chart, trading becomes challenging across time frames. The speaker also prepares to discuss the euro-Canadian dollar (EUR/CAD) cross, highlighting how central bank announcements can provoke significant moves in cross pairs.

14:23

The euro-Canadian dollar pair experienced a strong move following the unexpected BoC announcement, with the Canadian dollar sharply appreciated. Cross pairs like EUR/CAD can exhibit notable volatility or trends during central bank events. Traders are advised to watch the euro carefully for overbought or oversold conditions indicated by the CSI, as these technical signals may anticipate market reactions to ECB announcements, potentially leading to profitable trades when surprises occur.

16:26

The focus shifts to the British pound, which is currently volatile and lacks clear direction. The speaker mentions monitoring usual currency pairs and expresses some caution about current values. Additionally, the bond market, particularly the 10-year yield, is highlighted as an important sentiment indicator that influences currency movement, especially between risk and safe-haven currencies. Due to complexity, bond market analysis will be covered in more detail in a future session before passing discussion to David.

17:44

Pound and yen trading setups

17:44

The speaker welcomes viewers and outlines the trading setups using multiple platforms such as MT4, Ninja Trader, TradingView, and TradeStation, focusing on currency pairs involving the pound. Early London open moves show strong momentum and volatility with potential for congestion or reversals, supported by volume indicators and volatility triggers on various time frames. The radar screen tracking 28 pairs allows quick identification of trends, with the yen complex showing positive signals and the pound yen pair highlighted.

19:13

Detailed analysis of five-minute charts shows congestion forming in the pound and yen pairs just after the London open, indicated by price wicks and volatility triggers. The dollar index is in congestion with minimal movement, highlighting that momentum is concentrated in pairs like pound yen. The euro is trending down moderately. The speaker emphasizes avoiding trading pairs like euro yen when both currencies move similarly, as this indicates congestion and low opportunity.

20:08

The discussion shifts to the Currency Strength Indicator (CSI), which helps visualize which currencies are strong or weak and identifies overbought or oversold conditions. The speaker compares this with a cryptocurrency strength indicator that tracks cryptos against tether, noting that cryptos tend to move more uniformly than traditional currencies. These tools provide intuitive insights into market dynamics and help anticipate potential price movements by showing individual currency momentum.

22:11

The speaker explains the numerical values on the TradingView currency matrix, clarifying they represent relative rankings rather than absolute significance. The matrix incorporates all-time highs and average highs to signal when currencies approach extreme overbought or oversold levels, akin to the CSI. These features are being integrated into other platforms like NinjaTrader and TradeStation. Additionally, the currency heat map on TradingView offers unique flexibility in selecting multiple time frames, enhancing market analysis.

24:16

Focus returns to the pound, which after a strong rise near the London open, begins to reverse. Multiple time-frame CSIs show this rolling over at shorter intervals but still rising on the 15-minute chart. The speaker uses a horse blinkers analogy to emphasize the importance of defining trading objectives and time frames in advance to avoid confusion and overtrading. Scalpers and longer-term traders should maintain separate strategies and accounts to manage different market noise and signals effectively.

26:21

Traders are advised to maintain discipline by focusing on their chosen time frames and not to shift between them impulsively. The recent strong moves were driven by a rising pound and falling yen, but with those two now moving in the same direction, the pound yen pair is showing sideways action. Meanwhile, buying interest is noted in the Aussie and New Zealand dollars, whereas the US dollar remains rangebound with little directional momentum.

28:27

On the daily chart, the yen complex appears fragile despite some support, reflecting broader fragility in US markets. The Dow shows weak volume and effort-to-result imbalance, indicating limited upside. The Nasdaq experienced a sharp rally followed by a significant close lower, suggesting resistance around key levels. Market participants are contending with multiple fundamental factors including bond markets, inflation, central bank policy surprises, and ongoing pandemic uncertainty, which could culminate in a significant short-term reversal.

30:04

The speaker presents a majors currency matrix as a useful tool for quickly assessing dollar strength and related price action across major pairs. The matrix reflects how pairs typically move in unison when the dollar trends strongly. Currently, the dollar is mostly sideways with notable volatility in pairs like USD/CAD and AUD/USD. This overview helps traders identify where volatility and trend signals are aligning or congesting, facilitating more informed trading decisions across various currency complexes.

32:11

The radar panel tool, developed for TradingView and being adapted for NinjaTrader, consolidates visual indicators like volatility triggers and trend colors across many pairs for rapid market scanning. Symbol links allow quick navigation between charts. The speaker highlights the ease of spotting opportunities such as a negative trend in EUR/CHF or volatility in AUD/JPY. The session concludes with a focus on pound and yen pairs showing volume and volatility spikes around the London open, illustrating practical application of these tools.

34:18

Volatility triggers and London open effects

34:18

The speaker explains volatility as a compression of time in price action, where movements that typically span 10-15 minutes are condensed into shorter candles, such as five minutes on NinjaTrader. Market makers use this to induce fear of missing out, causing traders to jump in quickly and often get trapped in congestion or reversals. Key market events like the London open and the crossover into the US session are prime examples where market makers profit from this dynamic.

36:13

The volatility indicator discussed works in real time by detecting deviations from typical price action using the average true range, signaling with purple arrows when price moves atypically. Traders are advised to take profits when price breaks through support or resistance levels quickly, as the market can move swiftly and unpredictably. The speaker emphasizes the simplicity and effectiveness of this tool.

37:36

The discussion shifts to the currency matrix tool showing sentiment across multiple time frames. The speaker highlights the importance of universal currency sentiment, likening it to paddling a canoe with the current. On very fast time frames, such as one minute, clear directional movement in a currency like the Canadian dollar indicates alignment with market flow, which is a strong signal for trading decisions.

39:19

The speaker explains the concept of trend confirmation through multiple time frames, where a trend begins on the fastest chart and ripples outwards to slower ones, like ripples in a pond. Observing this progression helps confirm genuine trend changes. The speaker also refers to indices and currency indices showing sideways or weak moves, underscoring the need to identify clear trend signals before trading.

41:33

A detailed explanation of the volume point of control (VPOC) is provided, which marks price agreement between bulls and bears, acting as a key support or resistance level. The accumulation distribution indicator complements this by visually representing the strength of these levels based on how often they have been tested and held. These tools help traders identify strong tactical entry points for breakout or reversal trades.

43:25

The speaker emphasizes patience when trading congestion phases around the VPOC, as these are where trends originate. Once price breaks away from these levels, it often develops into a trend. The presence of strong volume and price-based resistance levels provides traders with high-probability setups and precise stop loss placement, minimizing risk and maximizing protection during pullbacks or reversals.

45:11

Further tactical advice is given on placing stop losses above key resistance lines to protect positions. The speaker highlights signs of a potential market reversal, including buying volume and low volume nodes that suggest rapid price movement through those areas. The euro’s sideways movement is noted alongside the trend monitor indicator transitioning between bearish and neutral phases, reinforcing the current market’s indecision.

46:57

The trend monitor is described as a tool designed to hold traders in positions by providing confidence through trend phases, focusing on the size of winning trades versus smaller, more frequent losses. The speaker discusses the importance of focusing on one tactical approach and limiting the number of pairs traded to build discipline. Trading congestion patiently is highlighted as the foundation where trends begin, despite it being less exciting for many traders.

49:30

Market observations reveal the pound gaining momentum and the yen remaining flat. The dollar and yen are moving similarly, and attention is drawn to the dollar-yen pair showing volatility with significant volume. The speaker examines the pound-yen pair on a 15-second chart, noting high volume and a volatility candle indicating a potential breakout or reversal, emphasizing caution and the need to wait for confirmation.

51:28

The discussion focuses on the dollar-switzerland franc pair, showing strong buying interest and defined resistance levels on the accumulation distribution indicator. A breakout above key resistance points would signal a trade entry, while breaks below support could indicate rapid downward movement due to low volume areas. The trend monitor confirms a strong bearish move, and a volatility trigger on the one-minute chart suggests upcoming market congestion.

53:19

Volatility triggers across multiple time frames are discussed, with slower time frame triggers carrying more significance due to the weight of time. Rising volume and deep wicks on candles indicate buying pressure, while traders weigh profit-taking and market maker activity. The speaker explains the process of loading multiple time frame sentiment indicators on NinjaTrader and notes mixed signals across various currency pairs, emphasizing disciplined trade management.

55:22

The speaker reviews multiple currency pairs, noting strong selling on the dollar and buying on the swiss franc, as well as potential reversal setups on the pound-euro pair. Emphasis is placed on making timely decisions—entering trades when setups align and exiting promptly if conditions change. The session concludes with a reminder that all indicators mentioned are available at quantumtrading.com for various platforms, encouraging disciplined and tactical trading.

56:44

Quantum Trading education and funded forex program

56:44

The speaker explains that customers always receive credits for past purchases when upgrading or moving to different product bundles, regardless of how long ago the original purchase was made. Investing in the full package grants access to all future indicators developed at no extra cost. They are currently working on porting indicators to NinjaTrader and the Market Analyzer, with new indicators coming for NinjaTrader as well. Support is available 24/7 year-round for global customers. The complete forex trading program offered covers all essential areas including psychology, fundamentals, relational and technical analysis, VPA, and trading mechanics, supported by an extensive library of over 450 lessons and 250-300 hours of video.

59:34

The program includes a funded forex component exclusive to students, allowing them to trade with up to two million dollars of the company’s capital. Students begin with smaller evaluation accounts ranging from $5,000 to $15,000 and must meet profit targets to progress. Successful traders can move up to managing larger portfolios including indices and gold, with trading amounts doubling at each level up to two million dollars. Profit sharing is structured with a 35% payout at evaluation stages and up to 60% at the highest levels, paid monthly. Strict risk and money management rules apply throughout.

01:02:30

The speaker highlights the website anacooling.com as the hub for their market analysis across forex, stocks, commodities, and indices. A dedicated Twitter feed for forex analysis is being developed to separate it from other market updates. Their books, available on Amazon in both Kindle and paperback formats, have received numerous five-star reviews and positive feedback. The session concludes with thanks to attendees, information about upcoming sessions scheduled for late Wednesday evening and early Thursday morning, and well wishes for safety and success in trading.

 

By Anna Coulling – creator of volume price analysis