More great volume trading lessons on the YM emini

More great volume trading lessons on the YM E-Mini

Wyckoff’s three laws of cause and effect, effort and result, and finally supply and demand perfectly describe the foundational laws of volume price analysis which uses candlesticks, candle patterns and support and resistance in addition. In this session, focusing on the YM E-mini futures contract, we once again have some terrific lessons in volume-price analysis.

00:01

Introduction and webinar overview

00:01

The presenter welcomes the audience from various time zones to the afternoon webinar focused on financial markets, particularly the U.S. indices and gold. They mention a significant event in the forex market involving the British pound that occurred earlier that morning. The speaker also apologizes for technical difficulties caused by persistent pop-up notifications on their computer, which do not affect the recording.

01:02

Volume price analysis basics

01:02

The speaker begins by emphasizing the risks involved in trading and advises viewers not to use money they cannot afford to lose. They introduce the concept of volume price analysis, which examines the relationship between price action and volume to interpret market movements. This method helps determine whether a move on the chart is genuine or a potential trap, guiding predictions about future market direction. Although there is a specific version for forex markets, the core methodology applies universally to various markets and chart types, including bonds, ETFs, and stocks. The speaker notes that price movements should always be considered within their broader context.

02:30

Market context and political risks

02:30

The speaker discusses the broader market context, emphasizing the significance of political risks, particularly the upcoming US elections, on market behavior. They note recent market activity, describing yesterday’s price action as strong but today’s as subdued, with some congestion in the indices. Attention is drawn to an upcoming event at 3:30 that could influence market momentum. The conversation then shifts to volume price analysis (VPA), highlighting companion books that provide worked examples for industry stocks, commodities, and forex. These materials illustrate the consistent application of Wyckoffian laws across different markets and timeframes.

04:13

The discussion elaborates on how volume price analysis helps traders understand market trends, distinguishing between primary and secondary trends regardless of direction. This understanding aids in making informed trading decisions. Additionally, the speakers mention the development of specialized indicators designed to assist with various aspects of VPA, including trend identification and support/resistance levels. These tools enhance the ability to analyze and interpret market dynamics effectively.

05:26

Support and resistance with volume

05:26

The segment explains the concept of support and resistance within volume price analysis, focusing on price-based support and resistance levels as visualized in the NinjaTrader platform. It describes how different colored and thickness lines indicate the strength of these levels, with thicker lines representing stronger regions tested multiple times. Volume is highlighted as the key factor that can push price through these levels, reflecting participation and market activity. Additionally, the volume point of control is introduced, representing the price level with the highest traded volume over time, indicating a balance between buyers and sellers with no strong directional bias. The example uses a 30-minute YM chart to demonstrate these concepts in a slower timeframe context.

07:10

24-hour market rhythm and volume

07:10

The speaker discusses faster time frames and Renko charts, highlighting the challenges of volume distortion due to trading session differences. They reflect on the evolution of 24-hour forex markets, noting that when they and David started, retail traders had limited access to these markets, which were mostly dominated by large banks. The advent of 24-hour trading has increased accessibility, but participation levels and trading volumes still vary significantly depending on the time of day.

08:20

The speaker explains the rhythm of the markets, emphasizing how session crossovers and trader activity affect volume surges and quiet periods. They note that significant volume spikes occur at the start of physical market opens, particularly in North American indices, which dominate 24-hour turnover. For day traders, understanding these rhythms is crucial since, despite 24-hour market availability, trading conditions fluctuate greatly throughout the day.

09:28

The discussion contrasts stock market trading hours with continuous markets like those on Globex, where trading happens around the clock. The speaker stresses the importance of timing trades rather than just choosing what to trade, pointing out that market opens are characterized by influxes of volume and volatility. They illustrate this with the YM futures example, which remained concentrated around a volume point of control, indicating price consolidation over a significant period.

11:00

YM chart price action and indicators

11:00

The discussion begins with an analysis of a narrow trading range, particularly relevant for faster time frames where only small pip movements might present opportunities. The speaker examines a recent price action involving a breakaway attempt through resistance, noting the lack of significant volume and the presence of a two-bar reversal pattern. They also reference the R1 level of a proprietary Camarilla indicator, which is price-based, and how the price was pushed back down to the volume point of control (VPOC), which acts as both support and resistance.

12:03

Further explanation is given about the volume point of control’s support and resistance qualities. The current state of the YM market is described, emphasizing that until price breaks out of the extremes of a volatility candle, it is likely to move sideways. The price action oscillated within a neutral ‘buffer zone’ between the S1 and R1 levels, confirming the VPOC’s influence. Attempts to move higher triggered additional volatility candles, but price repeatedly returned within the initial candle’s range, highlighting indecision among traders depending on their time frame.

13:12

The speaker reviews a minute chart to contextualize the current price action, showing a morning reversal with a sharp upward move followed by a retreat back into the candle spread. A significant candle exhibiting an upthrust to the R1 level also triggered a volatility candle, suggesting a possible reversal opportunity. Transitioning to the 30-minute chart reveals a larger resistance zone, depicting the market’s struggle to recover after a substantial decline. This phase is characterized as a ‘grind,’ where price action involves slow and difficult upward movement.

14:16

The final segment discusses the importance of volume support on slower time frames to validate any upward momentum seen on faster time frames. The speaker highlights that obstacles and potential pauses can often be identified by analyzing slower time frame volume. The commentary concludes with a general market overview, referencing a morning comment that described the current market behavior as a particular pattern or condition, setting the stage for further analysis.

14:46

Market fragility and key events

14:46

The speaker highlights multiple background issues affecting market stability, including the election, the virus, and economic uncertainty. A key factor is the potential appointment of a Supreme Court justice to replace Ruth Bader Ginsburg, which could influence the election outcome, especially if it becomes disputed due to postal voting. The Supreme Court’s balance, particularly a conservative tilt, could advantage the Republican Party, adding complexity to the political and market landscape.

16:25

The importance of who controls the Senate post-election is emphasized, as it affects the power dynamics regardless of the presidential outcome. A scenario where Donald Trump is re-elected but Congress remains controlled by Democrats would create significant market uncertainty. The nomination of a new Supreme Court justice and Senate control are critical factors shaping the future political and economic environment, influencing market reactions and stability.

18:11

The Republicans currently control the Senate, which helped President Trump avoid impeachment earlier in the year. Market charts suggest a continued upward trend, but the rise is slower compared to previous falls, indicating cautious optimism amid ongoing uncertainties. Various indicators are being monitored to assess market direction in this fragile environment.

18:42

Trend indicators and Fed speeches

18:42

The speaker explains the importance of trend analysis using indicators based on Richard Wyckoff’s principles, focusing on the ‘trend dot’ which changes color to indicate market direction or indecision. They analyze recent price action, noting a doji candle signaling indecision followed by an upward move with a blue dot indicating bullish momentum. However, declining volume during this rise raises caution about the strength of the move.

20:16

Despite a large bullish candle, volume remains weak, signaling a fragile market likely to experience a struggle or grind, especially with resistance levels like R1 and volatility candles ahead. The speaker highlights a busy week of Federal Reserve speeches that could impact market movements, emphasizing the importance of knowing which officials have voting power as their statements carry more influence.

21:25

The significance of Fed speakers with voting rights is discussed, along with the recommendation to use reliable news feeds like Financial Juice, which provides timely economic data and speeches. The speaker notes that some popular calendars miss key events, making a good news feed essential for traders. Current futures market updates show modest gains in Nasdaq, Dow, and S&P 500 indices, with volume price analysis (VPA) used to anticipate market moves.

23:22

Volume Point of Control (VPOC) is introduced as a dynamic indicator reflecting price and volume over time, useful for identifying breakaway points in trading. The speaker explains that markets spend more time in consolidation phases than trending, and the longer a consolidation lasts, the stronger the eventual breakout tends to be. An example of the GBP/USD (Cable) market from the morning session is used to illustrate these concepts.

25:07

The GBP/USD experienced a sharp drop following Bank of England Governor Bailey’s speech, which initially caused a crash but was followed by a reversal indicated by a large hammer candle on high volume. The move was influenced by market reactions to hints about negative interest rates. The speaker highlights important support and resistance levels, including the VPOC and Camarilla levels, and notes the interplay between safe-haven buying and equity market trends. The segment ends with a handover to a colleague to discuss gold and an invitation for audience questions.

By Anna Coulling – creator of volume price analysis