Learn how to scalp index futures in congested markets

Learn how to scalp index futures in congested markets

When markets are in congestion, you have two options. Trade or sit on the sidelines and wait for a trend to develop. But if you are going to trade, you have to move to the faster timeframes and scalp, and in this vidoe we show you how.

00:16

Introduction and market overview

00:16

The speaker addresses technical issues with audio and explains differences in trading conditions between today and yesterday. Yesterday was characterized as a ‘big money day,’ marked by a perfect alignment of market factors that created clear momentum and direction, primarily bearish. The session saw a late recovery but was overall straightforward in terms of market sentiment and trading strategy.

01:20

YM daily chart and volatility range

01:20

The speaker discusses recent market movements across various asset classes, noting that most risk markets moved in the same direction. They highlight a significant down day for the YM (Dow futures) on the daily chart, although not as large as another event. A volume anomaly in the data is mentioned but dismissed as a system glitch and not meaningful.

02:16

The YM is still trading within a volatility trigger range on the daily chart, and until it breaks out, the trend remains uncertain. Strong overhead resistance is identified using the accumulation distribution indicator, which has been tested multiple times, capping price gains. For an upward move, the price must break above the current resistance and enter an area with lighter volume, allowing smoother price movement. The market has exited a longer-term upward trend and is fluctuating between positive and negative momentum. Support platforms are noted below, tested multiple times, with significant volume under recent candles suggesting the market is currently trading in a narrow range with ongoing pressure between opening and closing prices.

04:15

NQ daily chart and buying support

04:15

The discussion focuses on the market conditions for the YM and NQ indices. Despite a sharp sell-off in the NQ accompanied by significant volume, the relatively narrow spread candle indicates substantial buying support during the decline. This suggests strong buying activity on the day, as the price action remained narrow despite downward movement. The Nasdaq (NQ) has been leading market trends recently, as observed through daily analysis and commentary.

05:15

Market divergence and index comparison

05:15

The discussion focuses on the current bullish trend indicated by the trend monitor, contrasting the performance of the YM index with the NQ index, which is showing strong divergence. The speaker questions whether the NQ will lead the YM and other indices out of their current congestion phase and lift the overall market higher. However, they express skepticism about this possibility due to prevailing sentiment, particularly relating to the S&P 500 and the Dow, highlighting uncertainty in market relationships.

06:19

Fundamentals vs global pandemic impact

06:19

The speaker explains that current market dynamics are heavily influenced by the global pandemic, making traditional fundamental data like unemployment, interest rates, and housing almost irrelevant. Market relationships have become fragile and interconnected, with global events dominating market movements. Economic data and fundamental news now play a secondary role, often being initially reacted to but quickly ignored as the market is driven primarily by the overarching global situation.

07:24

Trading faster time frames with Renko charts

07:24

The speaker contrasts today’s trading environment with yesterday’s, highlighting that today’s market requires trading on faster time frames like tick charts or Renko charts. They demonstrate this using 15-second Renko charts for the ES, YM, and NQ indices, explaining how volume price analysis is applied on these faster charts alongside equivalent time frame charts below.

08:19

The presenter explains how Renko bricks adjust dynamically during the session, using a 10-point brick size on the YM as an example. They clarify the monetary value of each point depending on the contract size, such as $50 per point for the mini Dow. The NQ and ES use tick-based bricks, with the ES moving faster on a 5-tick basis, illustrating differences in speed and value across these indices.

09:33

A comparison of the three indices (ES, YM, NQ) is made to determine which is more suitable for trend development and trader comfort. The speaker emphasizes that in narrow or congested price action, traders must use faster time frames to trade effectively, as slower time frames are not practical under such conditions.

10:01

Trading strategies in congestion phases

10:01

The speaker emphasizes the necessity of trading in very short time frames, under one minute, where rapid trades capturing small gains are essential. They advise that if traders are uncomfortable with such fast-paced trading, they should either wait for clearer market momentum or switch to slower time frames like hours or days.

10:26

The discussion focuses on the 15-second chart, highlighting a downside volatility trigger with high volume and trading near the volume point of control. A strong resistance level has been tested nine times, which if broken with sufficient volume, could offer an opportunity to gain points on an upward move. Patience is required to wait for this breakout to confirm a safe entry with support below in case of a retest.

11:24

The market on the NQ shows a similar pattern with trading around the volume point of control and a notable resistance level above. There’s a developing support platform that has been tested multiple times, illustrating how channels form around the volume point of control during congestion phases. This central fulcrum represents a balance point where price is in agreement, indicating no strong directional sentiment and the need for patience.

12:18

The speaker explains how congestion regions lead to the formation of key levels that define channels of interest. Traders must decide when these levels are breached and if the volume justifies entering a position. An example is shown where a level has been broken, prompting the question of whether entry is advisable given the current low volume above the breakout.

13:21

Volume analysis and breakout considerations

13:21

The speaker discusses trading volume patterns, noting low volume nodes between 405 and 410 as potential quick gain points. They mention some high volume areas but nothing significant, and emphasize the volatile market conditions with no strong momentum. The strategy focuses on capturing small gains within the range, using Renko charts along with other indices to get a broader market view.

14:18

The discussion shifts to chart structure and resistance levels, highlighting a minor resistance that could develop into something stronger. The trend monitor tool helps maintain a bullish stance, indicating the market never turned bearish during this phase. The speaker advises against holding positions for long, suggesting quick trades to capture 10-20 point gains as the market pushes higher.

15:21

The market shows a positive move with the ES index rising, while the NQ is initially sluggish but starts to pick up volume. The speaker points out the tick speedometer, a tool that measures tick activity (high, medium, or low), which helps traders gauge market activity and adjust strategies quickly. The emphasis remains on rapid in-and-out trades to capture small profits amid fluctuating volume and momentum.

16:23

The speaker advises being nimble in trading, taking quick profits and exiting positions as volume and tick activity drop or shift. They highlight the importance of speed and flexibility in this volatile market environment, describing the approach as ‘gorilla tactics’—jumping in and out to grab points without holding positions for long. The segment ends with a pause, reinforcing the fast-paced nature of the strategy.

By Anna Coulling – creator of volume price analysis