London forex session using volume price analysis

London forex session using volume price analysis

In this morning’s forex trading session we saw the first signs of a change in sentiment following the panic selling of the last few weeks, with risk currencies and safe haven flows sending strong signals of this change. Volume price analysis confirms using Wyckoff’s three laws of supply and demand, cause and effect and finally and most importantly effort vs result.

00:00

Introduction to Forex webinar series

00:00

The webinar begins with a welcome to the London session of the Forex series. This is the first in a short series of webinars scheduled over the next few weeks, with flexibility for attendees to join any or all sessions. The series is timed around Easter and was organized from an ad-hoc approach.

00:31

Market crashes and trading opportunities

00:31

The speaker discusses the current unprecedented market conditions, including recent market crashes. Many people are now at home and considering trading either to supplement their income or for long-term investment. There is also interest in trading as a way to increase personal financial knowledge given the ongoing market volatility.

01:03

Comparing 2020 crash to past crashes

01:03

The speakers reflect on past financial crises, including the events of 1987 and 2008, noting that recent market declines have occurred much faster than before. They emphasize that although the market drop is similar in scale to 2008, the compression of this decline into a short time frame is unprecedented. There is uncertainty about the full extent of the financial situation, especially regarding bank stability and overall debt levels. The Federal Reserve has intervened not only as a lender of last resort but also as a buyer of last resort, entering uncharted territory. Despite the turmoil, the forex market remains accessible and offers opportunities.

02:12

Forex market accessibility and risks

02:12

The speaker discusses the initial capital required to trade, highlighting the availability of demo accounts and numerous brokers as opportunities during market crises. They emphasize the inherent risks in all trading and investing, noting that nothing is risk-free. Specifically addressing the forex market, the speaker argues that with proper knowledge and starting with a small amount of money, forex trading is less risky than commonly perceived. They stress the importance of understanding the market and advise never to risk money that one cannot afford to lose.

03:21

Volume price analysis and market interconnections

03:21

The session introduces the approach of analyzing markets through volume price analysis (VPA) and fundamental factors, emphasizing the interconnectedness of markets rather than viewing them in isolation. Forex is highlighted as central to this analysis. The methodology is inspired by Richard Wyckoff’s three laws, which will be explained later.

04:29

The three Wyckoff laws—effort and result, cause and effect, supply and demand—help frame price action and predict market movements. The presenters have developed specific Forex indicators to support this methodology, which are explained during the webinar. The volume price analysis concepts are integrated into educational programs at Quantum Trading Education, aiding students in improving their trading and investing skills across markets. These indicators are available on several trading platforms and available for independent purchase.

06:09

Current market sentiment and currency moves

06:09

The speaker discusses using a combination of trading platforms, including MP5 and Ninja Trader, focusing on currency trades such as the pound-yen and Aussie-yen. They note a market sell-off of the yen due to shifting sentiment, influenced by positive developments like the slowing epidemic in Italy. This optimism has been reflected in rising futures indices like the Nasdaq and S&P. However, the situation remains uncertain until a definitive medical solution emerges.

07:21

Safe-haven currencies like the dollar, Swiss franc, and yen are being sold off due to improved market sentiment, partly triggered by the Federal Reserve’s actions to support the financial system. The market is also awaiting a stimulus package from the US Congress, where political disagreements continue to cause delays. The British pound, after recent heavy selling, has seen some recovery despite the ongoing lockdown, illustrating how market reactions to news can differ from general perceptions.

08:29

The speaker introduces custom indicators developed to analyze currency movements, showing hourly and daily charts reflecting changing sentiment. The Japanese yen has weakened significantly, while commodity-linked currencies like the Aussie and New Zealand dollars have been more volatile. The pound-yen pair shows less movement ahead of the London trading session, which is expected to bring increased volatility.

09:34

Focus shifts to specific chart analysis using Renko and short-term charts to track trends and volatility in the pound-yen pair. Volatility increases near session crossovers, such as the upcoming London open, often causing erratic price movements and wicks on candles. The speaker advises caution during these times, suggesting traders might close positions and wait for the new market session before re-entering, as reversals or shifts in trend are common. The segment concludes with a handover to a colleague as the London market opens.

11:20

Longer term sentiment and currency strength

11:20

The presenter explains that the focus of the session is primarily on faster, intraday trading timeframes, but acknowledges that this style isn’t suitable for everyone, especially those with full-time jobs. For longer-term trading, the CSI indicator aligns well with market sentiment, showing strong oversold conditions in the Australian and New Zealand dollars and strength in the Japanese yen, Swiss franc, and the US dollar. This suggests a potential significant shift in sentiment over the longer term, despite ongoing negative news and economic challenges globally.

12:54

The discussion continues with a focus on how pandemic-related statistics, like testing and death rates, will influence market sentiment in the coming weeks. The speaker notes signs of market bottoming, especially in heavily impacted currencies like the Australian dollar, which is also reflected in volume profiles and equity, bond, and sentiment markets. Attention then shifts to fundamental news and upcoming important economic releases expected at the end of the month, emphasizing that while current numbers may seem less meaningful, they still carry significance for traders.

14:26

Upcoming economic releases and trader community

14:26

The speaker explains the significance of flash PMI numbers, highlighting their high priority in trading sessions due to their impact on the market. They encourage new traders to ask questions in the chat and emphasize the supportive community atmosphere where experienced traders share knowledge and experiences, especially during the current crisis.

15:35

The PMI data usually triggers market volatility as it reflects global economic conditions. However, due to ongoing crisis hysteria, the market reaction might be muted. The speaker discusses how public sentiment has evolved through stages similar to grief—anger, denial, and now resignation—affecting market behavior and expectations.

16:37

The market has largely resigned to the current situation, anticipating a slow recovery marked by intermittent volatility before stability returns. Medical developments will play a crucial role in easing fears. The speaker introduces three trading principles based on supply and demand, cause and effect, and effort and result, which are key to understanding price movements and volume analysis.

17:42

The three laws relate to chart patterns and volume: supply and demand indicate reversal areas, cause and effect describe congestion and breakouts, and effort and result validate moves through price and volume. The CSI indicator exemplifies market reversals, showing when demand wanes and supply increases, signaling trend changes.

18:48

Market movements are never linear; price fluctuates with ups and downs over time. Recent successful investment funds during the crisis have capitalized on short-term trends, managing volatility effectively. Understanding the three laws of trading helps in timing entries and exits. The segment concludes with a handover to another speaker, David.

By Anna Coulling – creator of volume price analysis