Learn how to start each forex trading session

Learn how to start each forex trading session

00:01

Introduction and health crisis context

00:01

The speaker welcomes viewers to the London Forex webinar, sharing a personal anecdote about walking their older dog in Hampshire. They express hope that everyone is coping well with the ongoing health crisis and note that the webinar offers a positive distraction from current global challenges. The session begins with a reminder to pay attention to the disclaimer displayed on screen.

01:03

Trading risks and methodology overview

01:03

The speaker emphasizes that trading is risky and advises not to use money one cannot afford to lose. The session focuses on analyzing the forex market using a volume price analysis methodology developed over 20 years. This approach involves examining not only technical charts but also fundamental factors and related markets, as all markets are interconnected. The key focus is on tracking money flow, which depends on broader market sentiment and economic conditions.

02:03

Market sentiment and related markets

02:03

The speaker discusses the impact of the recent virus crisis on financial markets, highlighting a severe sell-off in risky assets like equities leading to a significant market crash. They explain how this turmoil is reflected in currency markets, with individual currencies and pairs fluctuating based on market sentiment. The analysis involves both technical methods, such as volume price analysis and Wyckoff’s three laws, and sentiment assessment through platforms like investing.com. They note recent positive movements in indices like the Nasdaq and S&P 500, while also monitoring the VIX, an index tracking options activity in the S&P 500 futures market.

03:11

VIX and market mood analysis

03:11

The VIX has an inverse relationship with the S&P 500, meaning when the S&P is rising and market sentiment is positive, the VIX falls, and vice versa. During market downturns, the VIX spikes, sometimes reaching very high levels, such as nearly 90 during the 2000 financial crisis. This indicator reflects the market’s mood, which influences forex and currency pairs. The session also includes volume price analysis for a deeper understanding.

04:20

Forex specific indicators dashboard

04:20

The speaker discusses specialized forex indicators developed to analyze currency markets efficiently. These tools help identify where money is flowing among individual currencies and currency pairs, simplifying analysis by avoiding the need to examine all 28 pairs manually. The indicators provide insights into current market conditions and potential future movements. For those unfamiliar with the system, the speaker briefly explains the usefulness of having a currency dashboard and how these indicators can aid traders, especially when reviewing market status at the close of a trading session.

06:05

Using screenshots for session review

06:05

The speaker reviews a screenshot taken the previous day around 6-7 PM, related to a post on their forex trading page. The post highlighted important fundamental news from China and Australia, coinciding with the start of the US earnings season. Despite ongoing global economic challenges, fundamental data continues to emerge. The speaker notes the Australian dollar was rising nicely, and there was a notable trade on the euro during a public holiday in the UK and parts of Europe, resulting in low market liquidity and spiky price action. Using an hourly chart, the speaker observed market movements and identified key currency positions, such as the Australian dollar at the top and the euro and Swiss franc lower, illustrating the market’s recent behavior and setting context for future expectations.

08:10

Analyzing currency flows and reversals

08:10

The segment explains how to use screenshots and charts to quickly analyze currency pairs and their movements. The presenter highlights the hourly Currency Strength Indicator (CSI), noting that the Australian dollar was overextended while the euro and Swiss franc showed notable activity. It discusses price behavior such as sell-offs and reversals, emphasizing that overextended currencies often experience pullbacks that may signal trend reversals or continuation.

09:18

This part delves deeper into market trends and reversals, explaining how Volume Price Analysis (VPA) can help distinguish between temporary pullbacks and genuine trend reversals. The euro’s price movements are analyzed using jagged lines that indicate fluctuating money flows in and out of the currency. The discussion focuses on identifying smooth versus erratic money flows to determine the best trading opportunities by observing currency strength and momentum.

10:18

The speaker explains how to analyze individual currency flows to find the best currency pairs to trade. Smooth money flow lines indicate strong buying interest, such as the pound currently being bought. The segment describes using a matrix tool to scan and rank currency pairs, showing that some pairs may be driven more by one currency’s strength than the other. It also touches on how Forex trading is unique because it involves analyzing two currencies simultaneously.

11:24

This section compares Forex trading with trading single instruments like commodities or indices. Forex is more complex because it requires understanding the strength and momentum of two currencies in a pair, rather than a single asset. The example of the pound and dollar is used to illustrate how one currency’s movement can dominate a pair’s price action, demonstrating the need for traders to analyze both currencies individually before making decisions.

12:30

The presenter continues analyzing currency movements, highlighting the British pound’s upward trend and the US dollar’s simultaneous strength. The New Zealand dollar is shown to be weakening, confirming trends seen on the Currency Strength Indicator (CSI). Momentum indicators on shorter time frames reveal that certain pairs, like cable (GBP/USD), are driven primarily by one currency’s strength rather than weakness in the other, illustrating the complexity of Forex trading.

14:06

The final segment stresses the importance of breaking down Forex market movements into money flows of individual currencies based on economic sentiment. It argues that many traders struggle because they do not understand this concept. The analysis of cable (GBP/USD) demonstrates that price movements are more about money flowing into the British pound than selling the US dollar, emphasizing the need for careful disassembly of pair dynamics to trade effectively.

14:44

Fundamental news and China trade balance

14:44

The discussion focuses on comparing economies through trade data amid the current health crisis. The speaker highlights the importance of fundamental news, particularly China’s trade balance, despite skepticism around the reliability of Chinese data. The key takeaway is that market reactions to data, rather than the data’s absolute accuracy, are what traders must focus on.

15:57

The Chinese trade balance data shows a positive figure, indicating more exports than imports, but it missed the forecast of 175 billion, coming in at 139 billion. The market’s reaction is nuanced because the data is neither as good as expected nor as bad as feared. The speaker explains that market responses to data are complex and not simply tied to good or bad news.

17:06

A detailed breakdown of the trade balance data is given, cautioning against internet conspiracy theories and emphasizing the importance of market reactions, especially in the Australian dollar, which is closely linked to China’s economy. Business confidence in China is highlighted as extremely weak, with the confidence index showing a severe decline, signaling deep economic concerns despite the trade balance not being dramatically worse than expected.

18:15

The business confidence figure is shockingly low, dropping from a previous -2 to -66, illustrating the dire economic sentiment in China. The speaker points to charts reflecting this data and transitions to sharing trading positions and insights with a colleague named David.

By Anna Coulling – creator of volume price analysis