Market maker traps set for unwary currency traders at the London open – but ones you can avoid!

Market maker traps set for unwary currency traders at the London open – but ones you can avoid!

00:08

Introduction and session disclaimer

00:08

The session begins with a reminder to keep microphones on and a welcome to the forex session attendees. The presenter apologizes for the delayed start due to technical issues and highlights an important trading disclaimer, emphasizing the risks involved and advising not to trade with money one cannot afford to lose. The session timing was adjusted to better align with the London trading session and to accommodate traders in Australia, making the timing more convenient for a broader audience.

01:16

Market overview and inflation focus

01:16

The speaker introduces the market update, noting that despite significant news activity in the morning, currency markets remain largely inactive. There is a mixed economic picture for the UK, with some data exceeding expectations but most slightly disappointing. So far, these results have had little impact on the British pound. The primary market focus remains on inflation, a topic that has been central since mid-year.

02:19

Discussion centers on inflation as a persistent issue, with previous beliefs that it was transitory now challenged. Inflation measurement involves multiple metrics beyond just goods prices, including employment figures. Employment is strong with available jobs, but there are concerns about skills shortages and whether people are filling these roles, complicating the inflation outlook.

03:20

The usual economic metrics for assessing inflation and central bank responses are complicated by ongoing uncertainties related to the COVID-19 virus and its variants. The pandemic’s unpredictable effects make it difficult to apply traditional economic indicators reliably. The speaker questions whether new approaches are needed to evaluate the economic environment, but emphasizes that trading opportunities still exist amid these complexities.

04:30

The speaker reviews economic calendars, focusing on UK data such as core inflation and inflation rates. Additional risks include the US debt ceiling and political uncertainties, alongside the continuing impact of the pandemic. These factors contribute to an unpredictable and multifaceted economic landscape.

04:59

Bond market and economic distortions

04:59

The speaker discusses the bond market, emphasizing the importance of the 10-year yield as a benchmark, noting its recent fluctuations around 1.5% to 1.55% and the question of whether it will reach 2%. They highlight that longer-term rates, such as the 30-year, are actually declining, which is unusual. The market environment is described as distorted due to the pandemic and central banks flooding markets with cheap money over the past few years. Despite these distortions, traders still pay attention to bond metrics because they influence market behavior. The current situation is likened to ‘Alice in Wonderland,’ uncertain and unpredictable, with potential for a major correction in stock indices. The speaker also introduces the Russell 2000 index as a highly speculative index that has been trading within a wide range and suggests they will analyze it further.

07:08

Russell 2000 volatility and sentiment

07:08

The speaker discusses the high volatility and possible distribution phase of certain stocks, highlighting how this volatility reflects market sentiment and presents opportunities for intraday trading. They use the Russell 2000 as a key indicator of risk, emphasizing its speculative nature as investors search for the next major tech success. The Nasdaq is noted to be slightly down, with the upcoming earnings season adding complexity to the broader market environment.

08:14

Forex indicators and chart analysis

08:14

The speaker revisits last week’s discussion on counter-trend trading using support and resistance levels, focusing on the Euro-Canadian and Euro-Aussie currency pairs. They introduce proprietary forex market indicators developed with David, including the CSI, the matrix, the array, and the heat map. These tools help identify the flow of money by showing where it has been and where it is likely headed, using multiple time frames for better market insight.

09:30

The discussion emphasizes the use of the hourly time frame for analysis, as it strikes a balance between being too short or too long. The speaker advises against seeing indicator lines clustered in the center or values too low, as this indicates market indecision or subdued activity. They explain that although indicators lag, their effectiveness improves when used across multiple time frames, allowing traders to confirm trends and strength in currency pairs like the Aussie Yen.

11:10

The speaker describes how trend changes ripple from faster to slower time frames, illustrated by the gradual rise in the Aussie on both hourly and 15-minute charts. They note that while the Yen is generally falling, faster time frames may reveal counter-trend opportunities suitable for short-term or scalping traders. Such counter-trend moves might signal temporary trades or the beginning of broader reversals, though certainty is never guaranteed.

12:52

Currency divergence and safe havens

12:52

The speaker explains the importance of volume price analysis (VPA) combined with candle patterns and volume indicators to confirm market trends visible on slower time frames like the hourly chart. They highlight observed divergences between currency movements, such as heavy selling of the yen, and the stock indices, which sometimes move in opposite directions due to underlying market weakness and upcoming inflation and earnings data.

14:31

Safe haven currencies like the Swiss franc, yen, and dollar typically move together based on market risk appetite, but current market conditions show divergence due to multiple concerns. The speaker stresses that the methodology using technical and fundamental analysis is broad but generally effective, though market complexity can cause mixed signals. They recommend focusing on best trading opportunities when faced with such mixed pictures.

15:45

The presenter notes encouraging signs in the pound-yen pair, with volatility calming after the London open. They emphasize the five elements of volume price analysis: price action, volume, candle patterns, and support and resistance. Observing flows on the hourly chart, they suggest possible buying opportunities in the pound as the pair shows signs of divergence and momentum buildup.

17:20

When currency pairs bunch in the middle before pulling apart with angular divergence, it often signals a strong upcoming move, especially if reflected in the market matrix. The dollar remains in a congestion phase with a bullish bias, pausing at key price and volume-based support and resistance levels, including those derived from volume point of control (VPOC) and camarilla levels, which act as magnets for price and potential reversal points.

18:26

The speaker explains the significance of waiting at key support and resistance levels, as price congestion can provide a platform for future moves. The camarilla third and fourth levels are crucial weekly targets that can cause price pauses or reversals. These levels are calculated from hourly to daily charts and offer traders a framework for anticipating market behavior throughout the week.

19:32

Using the euro-Canadian dollar pair as an example, the speaker highlights the impact of congestion phases characterized by narrow ranges and small candles, which make trading on faster time frames difficult. They note that daily charts provide context for expected price behavior and that wider ranges following congestion indicate potential breakout opportunities.

21:19

The volume point of control (VPOC) shifts dynamically as trading ranges expand or contract, offering important reference points for potential price retests. Volume-based support and resistance bands help identify primary and secondary trends as well as possible reversal points. The euro-Canadian dollar recently found support at the S3 level following a significant downward break, suggesting a potential trend reversal.

22:30

Last week’s price action on the euro-Canadian dollar showed a viable counter-trend trade on faster time frames but was ultimately overwhelmed by a relentless primary downtrend. Volume and price patterns, including doji candles and holiday effects, must be interpreted in context. The S3 support level played a key role in halting the decline, illustrating the importance of volume-based levels.

24:09

Analysis of the hourly chart shows a lack of divergence due to the influence of support and resistance levels, resulting in congestion and sideways movement. The Renko chart smooths out this choppiness, revealing that although there is volume, it is insufficient to drive a decisive move. Traders should monitor whether price can break through key levels like R3 to establish a clearer trend direction.

25:18

If the price holds certain support levels on faster time frames and breaks through others, it may aim for the volume point of control on the hourly chart. The speaker discusses flexibility in setting the look-back period for the volume point of control indicator, noting that different settings affect the indicator’s position but do not invalidate its usefulness. An 80-period look-back is suggested for faster time frames.

26:36

Examining the Australian dollar and yen on the 15-minute and hourly charts respectively, the speaker notes that the Australian dollar’s buying momentum has stalled, while the yen shows stronger selling pressure and divergence, making it a better candidate for trading. They emphasize aligning trades with the flow on slower time frames and acknowledging ongoing market divergence leading into the holiday season.

28:52

The presenter acknowledges the lack of momentum in the euro and points listeners toward other market opportunities. They stress the importance of assessing sentiment and flows early in the trading day to identify what is moving and what is not, setting the stage for effective trading decisions based on current market dynamics.

29:46

Using indices and radar panels

29:46

The segment introduces currency indices displayed on TradingView, showing the pound, yen, dollar, and euro to provide a quick overview of market sentiment and movement. It then presents a radar panel developed for TradingView that helps traders gauge bullish and bearish sentiment, volatility, and market activity during key trading sessions, such as shortly after the London session opens.

30:56

The speaker demonstrates the radar panel on TradeStation, highlighting all 28 currency pairs and a yen matrix that visually indicates market sentiment. The panel includes a trend monitor showing positive or negative risk sentiment and a volatility indicator, which signals potential congestion and reversals. The importance of caution when trading during market crossover sessions, like the London open, is emphasized due to increased volatility risks.

32:34

This segment explains the challenges of trading through crossover sessions, especially for intraday and scalping traders, illustrating this with real-time examples from the London open. The speaker notes how many traders overlook the volatility and reversals that typically occur, leading to predictable but risky price spikes across currencies like the New Zealand dollar, US dollar, and euro.

34:03

The discussion shifts to analyzing the Australian dollar across multiple time frames using TradeStation and Ninjatrader platforms. The presenter highlights features like symbol linking and market analyzers that allow quick chart scrolling and snapshots of support, resistance, and volatility. The segment also shows accumulation/distribution indicators and trend monitors to assess market conditions and potential price movements.

35:26

The speaker reviews the pound and yen, demonstrating the pound’s rise and yen’s fall with volatility analysis on NinjaTrader. Additionally, a strong divergence in risk sentiment is observed, emphasizing the value of using futures and other tools to track market risk and volatility in real time.

35:57

Equity markets and yen pair analysis

35:57

The discussion begins with an overview of key market indices, including the E-minis like the YM, Dow 30, Nasdaq 100, and S&P 500, focusing on recent price action over the last three days. Monday’s market showed strong moves in yen pairs with volatility triggers but low volume due to a holiday, which often allows market makers to manipulate prices easily. The markets are described as fragile, lacking strong bullish momentum and currently in a phase of longer-term congestion.

37:02

The speaker highlights the weak market conditions across indices like the Nasdaq 100 and contrasts this with continued strong bullish moves in yen pairs, especially the pound yen. This divergence indicates that while equity markets show little bullish strength, certain currency pairs remain strong. The Aussie yen is also examined, showing a positive but muted move with higher volume than Monday, signaling cautious optimism amid potential market traps.

38:07

The analysis continues with caution about market conditions, noting that Monday’s holiday trading created low volume and potential traps set by market makers. The bond and equity markets, along with other risk currencies, are also factored in. The yen is weakening on a 10-minute chart, confirmed by TradingView data, while indices show mixed movement. The pound yen trend monitor shows consistent bullish signals across multiple timeframes, supported by increased volume, indicating buying interest.

39:09

Further examination of the pound yen reveals healthy volume and buying momentum, though there is a possibility of short-term congestion developing near key volume points. Comparisons with other yen pairs like New Zealand yen and Aussie yen show less strength, with the pound yen standing out as the stronger performer. The markets are described as suitable for intraday trading strategies like scalping, with sideways movement noted in the Aussie dollar and other currencies.

40:06

The focus remains on the pound yen as the preferred currency pair due to its strength on faster timeframes. Other pairs such as pound Swiss are less active. The speaker reviews multiple currency strength indices (CSIs) over different timeframes, noting the pound and Canadian dollar are rising strongly, while the Aussie and New Zealand dollars show some recovery. The yen is identified as the main driver currently, weakening across the board.

41:35

The discussion turns to the overall currency movements, emphasizing the yen’s decline and how it affects pairs. The importance of divergence in currency trends is explained, where strong trends arise when currencies move in opposite directions. The dollar yen and Swiss franc yen pairs are moving together, leading to weaker momentum and fewer trading opportunities. The speaker illustrates this with an analogy comparing trains traveling in the same or opposite directions to explain the concept of momentum and trend strength.

42:30

The explanation of momentum and divergence continues, highlighting that the steepness of currency strength lines indicates the strength of a move and the likelihood of a strong trend. Pairs moving together tend to show weaker momentum compared to those moving divergently. The speaker references pound CAD and pound Aussie as examples of pairs with less strong moves due to their correlated directions. The segment closes with a brief review of volume data on NinjaTrader, confirming normal market conditions before moving on.

44:35

Majors matrix and market trends

44:35

The speaker examines a currency majors matrix focusing on spot market data for major pairs such as pound-dollar, dollar-cad, aussie-dollar, euro-dollar, dollar-swiss, and new zealand dollar. The matrix helps identify whether major pairs are moving together in strength or weakness. While pound-dollar (cable) shows strong buying interest, other pairs like euro-dollar display congestion and lack of clear strength due to the euro falling alongside the dollar. The current market phase is described as congestion following an earlier trend, with key technical levels and volume indicators suggesting a potential future breakout.

46:12

The discussion continues about the importance of patience for breakaway traders waiting for the market to break out of the congestion zone on the five-minute timeframe. Key technical levels are highlighted, including a strong support and resistance area defined by volume and price accumulation. A close above the congestion zone could lead to a move higher, but traders should consider multiple timeframes, not just the five-minute chart, to confirm the trend. Volume patterns show lower activity above the resistance, which is important for assessing the strength of any potential breakout.

47:11

The narrative shifts to the pronounced selling of the US dollar, which is becoming quite strong across markets. The pound is highlighted as providing a favorable trading opportunity, specifically against the yen. The interplay between the pound and yen is emphasized as a key focus for traders looking to capitalize on the dollar’s weakness and the relative strength of the pound in the current market environment.

47:44

Pound yen and pound dollar comparison

47:44

The discussion focuses on trading the pound against different currencies, particularly pound-dollar versus pound-yen. Pound-dollar is expected to move faster currently because the yen has paused. The speaker emphasizes the importance of observing a matrix of currencies moving at similar velocities, noting the euro and Swiss franc are beginning to strengthen against a strong dollar backdrop. This matrix helps identify trading opportunities by tracking relative currency momentum.

48:44

Using a 15-second chart helps anticipate market congestion and volatility, especially in the pound-yen pair. The chart reveals signs of a pause rather than a reversal, confirmed by volume and reflected in short-term charts like the 1-3 minute intervals. Despite this congestion, the pound is still rising and the yen falling, with the dollar showing some pause but overall movement remains valid on lower time frames.

50:08

Analysis shifts to the pound-yen on longer time frames, including the 15-minute and hourly charts. The pound remains the strongest among yen pairs, showing an upward flick indicating potential trend continuation. The discussion highlights the usefulness of indicator crosses as trading signals. Sharp angles on currency strength lines suggest strong selling pressure on the yen, creating a competitive dynamic between the Aussie and pound currency strength.

52:12

Support and resistance levels are examined, focusing on key price points where minor pauses occur before price breaks through. The Renko chart is introduced as a tool to smooth price action, helping traders identify entry points and maintain positions. This approach prioritizes reading the chart’s signals over fixed risk-reward ratios, aiming to better understand price pauses and potential targets.

53:32

The speaker explains their trading philosophy, emphasizing the importance of assessing the potential of a trade rather than relying strictly on fixed risk-reward ratios. They argue that fixed ratios alone do not account for market complexity and that traders must adapt to price action signals to maximize trade opportunities and manage exits more effectively.

54:11

Support, resistance and Renko charts

54:11

The discussion focuses on analyzing price action, volume, and especially support and resistance levels across different time frames. The speaker emphasizes that slower time frames provide stronger support and resistance signals, which influence market pauses and potential reversals. Using the example of the pound and yen, the market is currently pausing at a volume resistance level identified on the hourly and daily charts. Historical levels, even from months ago, still impact current price behavior, suggesting a consolidation phase rather than an immediate reversal.

56:32

Attention shifts to the dynamics between currency pairs such as the pound-yen, Aussie, and New Zealand dollars, illustrating a competitive ‘race’ in price movements. Support and resistance levels continuously guide these price actions, acting as potential springboards for entries and exits. The volume point of control combined with key price levels can create strong opportunities for traders, particularly intraday traders, to identify entry points and anticipate market behavior.

57:48

The speaker introduces the use of Renko charts and proprietary indicators available on MT4 and MT5 platforms, which smooth price action and assist in decision-making. Renko charts help identify trends, pullbacks, and congestion phases more clearly. The trend monitor and trend dot indicators provide visual cues about market momentum, signaling potential entry points when consistent color patterns appear near support and resistance levels. The explanation details how trends and congestion phases precede either continuation or reversal of price movements.

01:00:13

Further analysis covers price divergences, crossovers, and key resistance points on various time frames, including 5-minute, 15-minute, and daily charts. The market is observed to be pausing at volume resistance with signs of buying pressure. Traders are advised to use intermediate levels and slower time frames for exit strategies, while Renko charts are preferred for entries and holding positions. The approach remains discretionary, combining multiple indicators and time frames to make informed trading decisions.

01:01:46

The speaker highlights the correlation between forex pairs, especially yen pairs, and major stock indices like the Dow, Russell, and Nasdaq. Recent movements in the forex market have anticipated sentiment changes seen in these indices, suggesting forex can lead broader market trends. The Renko chart bricks represent price momentum in small increments, with current slow brick completions indicating reduced momentum. This period of low activity often precedes higher volatility, particularly at the start of the London session.

01:03:58

For short-term traders or scalpers, the current low volatility and slow price movement may warrant exiting positions to avoid unnecessary risk. The speaker stresses the importance of personal discretion in trading decisions during such periods. The segment concludes by introducing volume price analysis (VPA) methodology and resources for further learning, including books and a complete forex trading program available through quantumtradingeducation.com, which covers psychology, fundamentals, and relational market analysis.

01:06:06

Forex education and funded program overview

01:06:06

The speaker discusses the technical and mechanical aspects of trading before handing over to David to explain the funded program. They mention their use of Twitter for stock and commodity analysis and announce plans to start a separate Twitter account and blog focused on forex trading, distinct from their current feed which is more stock-oriented. This new platform, called Forex Station, will target forex traders specifically. They emphasize that their trading methodology applies across all markets and time frames. The session concludes with thanks to the audience and a handover to David for the next segment focused on indices, commodities, and stocks.

01:07:46

David welcomes viewers back and briefly discusses recent price movements in the pound/yen currency pair on Trade Station. He notes that the pound moved into overbought territory before dropping into oversold levels and is now beginning to reverse direction.

01:08:30

Funded forex program details and benefits

01:08:30

The speaker discusses trading on faster time frames and highlights a funded forex program available exclusively to students of the Quantum Trading education site. This program allows students to trade large sums of the company’s money with no personal financial risk beyond the entry cost. Students choose from evaluation accounts starting at $5,000, $10,000, or $15,000, and the program focuses on consistency and meeting a simple profit target within a 12-month timeframe.

01:09:30

The evaluation account is designed to test both the trader’s consistency and the company’s evaluation of the trader. Risk management rules apply, but the maximum financial risk to the student is limited to the entry fee, which ranges from $425 to $1,275 depending on the chosen account level. Once enrolled, students cannot lose more than the initial cost of entry.

01:10:02

After reaching the profit target on the initial account—trading 28 spot forex pairs—students progress to the portfolio managed level, where they can trade indices such as UK and US indices, plus gold. The starting capital is multiplied by four at this stage, increasing trading size significantly. The account sizes then double progressively, reaching up to $2 million. Profit sharing improves at each stage, starting with a 35% payout at the evaluation phase and increasing to 50% at the portfolio manager level, with flexible withdrawal or reinvestment options.

01:11:02

At the highest tiers, including the million and two million dollar accounts, traders earn a 60% profit share, making the program highly lucrative. This funded trading opportunity was introduced around September-October the previous year to empower students to apply their knowledge in a risk-free environment with large capital. Students can also trade their own accounts alongside the funded accounts. The program is integrated with various trading platforms and indicators, with ongoing efforts to expand platform support.

01:12:03

Indicator updates and trading platforms

01:12:03

The speaker discusses updates to the market analyzer tool, highlighting that users will have similar scanning options and new indicators coming soon for the NinjaTrader platform. Customers who already own the full package will receive these updates free of charge. Additionally, credits are offered for upgrades or purchases of other products, including indicators and education programs, ensuring flexibility and value for existing users.

01:12:53

The speaker directs viewers to site anacooling.com for the latest market analyses and mentions that related books are available on Amazon in Kindle and paperback formats. They express gratitude for the positive feedback from traders on social media, especially on Twitter, appreciating the engaged and supportive community following their work.

01:13:23

Community feedback and closing remarks

01:13:23

The speaker expresses gratitude for the global groups successfully applying the methodology discussed. They provide links to various related sites and mention availability on Amazon. The session concludes with thanks to the audience and a reminder about an upcoming event later in the afternoon.

01:13:47

The speaker notes the timing of the next session and mentions it may be available on another feed. They thank the audience again and sign off.

By Anna Coulling – creator of volume price analysis