Is the trade you are considering worth taking?

Is the trade you are considering worth taking?

Trading is a risky business. Money chasing higher risk for higher returns, lower risk for lower returns. But when it comes to assessing the risk on the trade, how do we do it? And there is a simple answer to this question. Use the chart. This is the market telling you where it is likely to pause and congest, where it is likely to move quickly through low volume nodes on the volume point of control. All the information is there and when used in multiple timeframes will answer the question for you quickly and more importantly in a logical and common-sense way!

00:12

Introduction and workspace setup

00:12

The speaker warmly welcomes the audience and adjusts the workspace layout to focus on multiple time frames for chart analysis, including 15 seconds, 1 minute, 3 minutes, 5 minutes, 10 minutes, 50 minutes, and daily charts. They highlight monitoring the New Zealand Yen due to a recent significant price movement.

00:40

Market sentiment and indices overview

00:40

The speaker begins by checking the VIX to gauge market sentiment. They then review the major U.S. indices displayed on the screen, including the YM, NQ, and ES, noting that these are shown on Globex while the cash markets are currently closed.

01:10

Market session openings and volume surges

01:10

The speaker explains that NinjaTrader displays real-time data in the user’s local time zone, which helps traders recognize market openings such as the European market at 7 o’clock and the London forex market at 8 o’clock. They highlight a notable surge in trading volume during these session crossovers, which often surprises traders since these markets are closed and trading electronically, yet still show this volume increase.

01:44

Risk on/off and market relationships

01:44

The speaker explains that all financial markets are interconnected through the concept of risk, emphasizing the constant movement of money between low-risk, low-reward safe havens and higher-risk, higher-reward assets. This risk-on and risk-off dynamic drives the flow of capital and links various markets, even those not physically open but operating electronically. The discussion also touches on chart analysis of currency pairs, highlighting that the same principles of risk and market behavior apply across different time frames.

02:54

Using 15-second charts for scalping

02:54

The speaker discusses the use of a 15-second chart for trading, emphasizing its usefulness in maintaining sharp volume and price analysis. This fast timeframe helps traders quickly gauge upcoming market activity within their trading environment, such as the one to three-minute charts. The segment highlights expected volatility and reversals around key market openings, like the London session at 8:00 UK time and the US session around 1:00 UK time. Often, a strong move in one session is followed by a reversal in the next, reflecting shifts in trader sentiment.

04:30

The 15-second chart illustrates rapid market changes, which are also visible on the one-minute chart as volatility continues with volume fluctuations. The price trades near the volume point of control, showing tight pricing and a shift in trend indicators to bearish signals. The speaker explains that for short positions, especially scalping trades, traders must evaluate the potential profit by analyzing volume nodes and market structure, noting areas of declining and light volume that influence trade decisions.

05:32

Volume profile and low volume nodes

05:32

The speaker explains the importance of risk-reward ratios in trading and how volume profiles on charts influence price movements. Low volume nodes indicate areas where price can move quickly due to fewer orders acting as support or resistance. Volume profiles are dynamic, with the volume point of control shifting as volume builds in different price regions. Low volume areas are considered unimportant by the market, so prices tend to move through these regions rapidly without pausing. Conversely, high volume areas are significant and act as support or resistance. This analysis helps traders understand market behavior from a volume perspective.

07:31

Price-based support and resistance levels

07:31

The discussion focuses on price-based support levels that might impact trading decisions, particularly when considering short positions. The speaker explains the accumulation distribution indicator on NinjaTrader, which highlights strong support levels by the thickness of the lines. These levels represent areas tested multiple times and thus indicate strong price support, analogous to how Popeye’s spinach boosts his strength.

08:28

The speaker elaborates on specific tight price ranges, indicating several strong support levels within just a few pips, making it a limited but potentially viable scalping opportunity. They caution that only instruments like the Eurodollar are suitable for such narrow trades due to spreads. The key takeaway is to assess whether the potential reward-to-risk ratio is sufficient based on the chart’s indications and the expected price behavior, emphasizing the importance of using the chart as a guide to determine if entering a trade is worthwhile.

09:59

Multiple time frame analysis and reversals

09:59

The segment discusses analyzing price action across multiple time frames, focusing on a three-minute chart showing a two-bar reversal pattern, also known as a bearish engulfing candle, which indicates a potential transitional change in market direction. It highlights the importance of volume and support levels, noting strong support near the 84-85 price region, reinforced by the volume point of control. This area is expected to act as a congestion zone, slowing down price movement. The analysis emphasizes using multiple time frames to assess the opportunity, observing that while the trend direction is correct, the price action is currently sluggish, making it suitable for scalping strategies. The trend monitors on shorter time frames (15 seconds and one minute) also show transitional red signals, confirming the cautious outlook.

12:25

Sentiment ripples across time frames

12:25

The speaker discusses a shifting market sentiment that is beginning to ripple through shorter time frames, likening it to ripples from a pebble thrown into a pond. This change is evident in three-minute charts and starting to affect one-minute and three-minute intervals, but not yet on five-minute or longer frames. If the change is sustained, it will eventually influence longer time frames, such as five, ten, and even daily charts, although such long-term shifts are less relevant for scalpers. The five-minute chart shows the New Zealand dollar’s gray line descending, indicating a shift in trend, while the Japanese yen appears strongly oversold.

13:21

The speaker emphasizes that certain price levels, like the 1820 mark, serve as benchmarks rather than actionable trading signals. These levels indicate when a currency is approaching or has entered overbought or oversold conditions. This metric is a primary reference point for analyzing currency movement, helping traders gauge market sentiment without implying immediate buy or sell actions.

13:49

Overbought and oversold currency levels

13:49

The speaker explains their trading approach, focusing on identifying overbought and oversold levels to enter trades early and maximize profits, though this strategy involves higher risk. Patience is essential because currency prices can remain in these zones for extended periods before reverting. The forex market behaves like an oscilloscope’s sinusoidal wave, continuously oscillating between highs and lows. Traders must accept wider stop losses to accommodate these fluctuations, balancing risk and reward. Entering trades early means accepting more risk but aiming for greater returns. The speaker also notes that some traders are now joining trends late, such as the strong downward movement of the New Zealand yen.

15:42

Trend strength and risk-off signals

15:42

The speaker explains the current market dynamics, highlighting strong selling pressure and strong buying of the Japanese yen. They note that risk sentiment has shifted from risk-on to risk-off, which is causing indices to sell off. Traders who entered early are already in profit, but those joining the trend now should accept that they have missed part of the move and cannot recover the earlier gains. Jumping onto an ongoing trend means accepting these trade-offs.

16:40

Entering momentum trades and stop losses

16:40

The speaker explains the concept of entering a trade that is already in progress, likening it to jumping on a moving train. They emphasize the importance of recognizing that the trade has momentum, which allows for tighter stop loss placement and requires less risk. The discussion then shifts to analyzing multiple time frames, noting a short rally on a 15-second chart and the significance of breaking through a previously strong support level that has turned into resistance. The presence of high volume at the next level is highlighted as an important factor in the price movement.

17:31

Volume clusters and resistance zones

17:31

The speaker discusses market support and resistance levels, noting a cluster of support below and a strong ceiling overhead that could cap any rally. Rising volume and price indicate positive momentum, but there’s uncertainty whether the support will hold. The trend monitor tool is designed to help traders maintain confidence and stay in profitable trades instead of prematurely closing positions. The speaker emphasizes that successful trading is less about mastering every technical detail and more about managing trades to maximize profits by holding positions through small fluctuations rather than reacting to every market move.

18:58

Managing emotions and staying in trades

18:58

The speaker discusses the importance of entering trades early, particularly at extreme points, to maximize profit potential before emotional pressure causes congestion in the market. They highlight the challenge traders face in maintaining positions as they move favorably, often succumbing to the instinct to take profits prematurely due to an emotional response hardwired into human nature.

19:58

Longer time frame perspective and congestion

19:58

The speaker analyzes a 10-minute chart showing a different perspective on the market opportunity. They highlight a weakness forming near the London market open, indicated by an upthrust candle with a large wick and strong volume. Approaching a volume profile resistance (VProc) and support levels suggest likely congestion around the 84 price level, implying limited further upward movement.

By Anna Coulling – creator of volume price analysis

By Anna Coulling – creator of volume price analysis