More lessons in volume price analysis in the spot forex markets

More lessons in volume price analysis in the spot forex markets

The EUR/USD delivers some more lessons in volume price analysis during the London forex trading session. The volume price analysis methodology is based on Wyckoff’s three laws of effort and result, cause and effect and of course supply and demand.

00:13

Introduction to Eurodollar VPA lessons

00:13

The speaker revisits the MT5 platform, focusing on the Eurodollar to highlight key Volume Price Analysis (VPA) lessons. They mention how the volume point of control, indicated by a yellow line, was initially low on the three-minute chart and marked the start of a strong upward move. The speaker also discusses the timing on MT5, noting a two-hour adjustment needed for their version to align the timestamps correctly. Although the move coincided roughly with the European market opening, it was primarily a successful example of a breakaway trade, with some confusion about chart timeframes resolved by switching back to the three-minute chart.

01:24

Volume Point of Control dynamics explained

01:24

The volume point of control (VPOC) is dynamic and shifts as congestion areas develop in price action. Initially located lower, the VPOC can move higher or lower, marking a key area of trading activity. This point acts as the fulcrum or value area on the chart, representing a zone where traders are comfortable transacting. The value area can vary in width and forms a congestion zone influenced by factors such as fundamental news, reflecting the balance of buying and selling activity within a defined range.

02:27

Market profile and congestion areas

03:06

Primary vs secondary trends and Wyckoff’s laws

03:06

The discussion focuses on identifying whether the primary or secondary trend in trading is genuine or a potential reversal. It highlights a clear breakaway confirming Wyckoff’s second law, following a congestion phase characterized by price oscillation around a strong support level at 72.23. The price repeatedly bounces off this support without breaking strongly. The trend monitor shows fluctuating signals, including a brief bright blue indication that quickly reverts to the volume point of control. Eventually, a definitive break occurs, with trend dots aligning closely with the candle bottoms, indicating significant price movement.

04:07

Volume and tick indicator analysis

04:07

The speaker explains the use of the tick volume indicator during different market sessions, noting that volume is lower during the Asia-Pacific session but increases significantly when London opens. They emphasize the importance of observing rising prices alongside rising volume to confirm a primary trend. The discussion includes interpreting specific candle patterns, such as a hanging man candle with reasonable volume, and advises caution by waiting to see how the market reacts after such formations.

05:46

Analyzing candle patterns and support levels

05:46

The segment analyzes a candle with low volume beneath it, suggesting limited downward movement. However, the next two candles show high volume with narrow spreads, indicating unexpected support and an anomaly. This support is confirmed by a strong support line on a technical indicator. Additionally, a volatility candle shows price moving outside the average true range with some volume, implying a likely price retreat back within the candle’s spread. Momentum persists slightly on the subsequent candle with incoming volume, but the price remains constrained within a narrow range.

07:18

Using Renko charts with time-based charts

07:18

The discussion begins with analyzing the volume point of control (V-POC) on a single chart, focusing on price action and volume. The speaker emphasizes the importance of viewing this data across multiple time frames and introduces the Renko chart as a tool for identifying entry points. The Renko chart, a non-time-based chart, is used alongside traditional time-based charts to confirm clean breakaways from the volume point of control.

07:57

The speaker explains the strategy of waiting for confirmation through matching trend dot colors and trend monitor signals to move out of congestion phases. They note that micro trends or small pullbacks can be tradable but may not always be reliable. The Eurodollar pair is highlighted as one where these small trends and corrections might be more frequent and potentially tradable due to its competitive spread.

08:37

The Eurodollar is described as the most competitive forex pair currently, which influences trading decisions. Traders must consider their own risk tolerance when deciding whether to trade counter-trend moves or wait for clearer, more distinctive price movements. The speaker advises waiting for confirmation of trend breaks on time-based charts before entering trades.

09:16

The segment concludes by illustrating how the Renko chart helps eliminate market noise, maintaining focus on significant support levels and trend movements. The example shows staying within a trend identified on the three-minute time chart by combining price action and volume profile analysis, with the Renko chart providing clearer entry and exit points by filtering out minor fluctuations.

09:48

Multi-timeframe analysis and key resistance levels

09:48

The speaker discusses identifying resistance points in trading, focusing on a significant resistance at 74.46. They explain their use of multiple time frames including three-minute, ten-minute, hourly, and daily charts to analyze trends and congestion phases. The example given is the Euro-Dollar currency pair, which is in a strong trend due to heavy selling of the dollar. The pause at the resistance level is attributed to hierarchical price levels, similar to Fibonacci levels, with a focus on the camarilla indicator.

10:57

The camarilla indicator’s fourth level (R4) is highlighted as a significant price target where price often pauses, congests, or reverses. This level acts as a magnetic point for price action on the ten-minute chart and is updated every 24 hours. The speaker notes that the price has approached and tested this R4 level multiple times, indicating its importance. Understanding these levels and their likely effects on price movement helps traders anticipate market behavior and make informed decisions.

12:15

Managing emotions and decision making in trading

12:15

The speaker explains that when a volatility trigger occurs in a trading position, the price will often snap back within the candle’s spread, resulting in either congestion or a reversal. Understanding this allows traders to make informed decisions, such as whether to hold through the movement or close their position, providing a degree of control rather than being driven purely by emotional reactions like fear.

12:53

The discussion continues on controlling emotions in trading, emphasizing that volume price analysis and quantum indicators are designed to give traders some control over their actions. While much in life and trading is uncontrollable, these tools help manage when to enter and exit trades, reducing impulsive decisions driven by fear of loss or fear of missing out.

13:25

The speaker highlights the importance of recognizing pauses in price movements on short-term charts, such as the three-minute chart. They mention that the volume point of control (V-POC) has shifted upward and currently supports the price action, acting as support rather than resistance. This insight helps traders better understand market dynamics and make strategic decisions.

14:00

Renko indicator and volatility insights

14:00

The speaker discusses the Renko indicator amid recent market volatility and a significant pullback, noting that despite these fluctuations, the indicator suggests holding positions as the trend may continue higher if it breaks through the R4 resistance level. They highlight the possibility of a retest before a decisive move and compare the Euro Dollar’s price action to the DXY index due to its currency weighting, observing a strong upward primary trend for the Euro.

15:08

The Euro’s recent pullback is attributed to the Dollar attempting to establish a base at a strong weekly support level. The primary upward trend is expected to resume, with emphasis on using non-time-based chart analysis such as volume and price levels across multiple time frames. The speaker stresses that understanding these technical signals and levels is crucial for not only entering trades but also navigating the market effectively.

16:22

Challenges in holding positions and trend view

16:22

The speaker discusses the challenges of not just entering a trade but maintaining the position and anticipating its next move. They analyze a slower hourly chart showing consolidation around the R3 level, suggesting a logical target at R4 near 1796. Additionally, they overlay individual currency data from the CSI to gain clearer insights into the euro and US dollar movements.

17:41

Focusing on the euro and US dollar separately reveals strong buying pressure on the euro and a downturn in the dollar. The speaker indicates the importance of checking the Dixie index to determine if a significant weekly support level will hold, which could influence future price action.

18:14

Currency comparison and congestion phases

18:14

The speaker explains that when the lines move together without divergence, it reflects a congestion phase visible on the hourly chart. For scalpers using faster time frames, there might have been trading opportunities within the spread of a single candle despite the focus being on the hourly chart to gauge the pair’s overall direction.

18:43

The euro may continue rising while the dollar flattens, potentially causing congestion between resistance levels R3 and R4. On the 10-minute chart, the euro has broken through the R4 level, prompting analysis of whether this will be a clean breakout or if a retest will occur.

19:21

The euro has turned upward on the 10-minute chart, driven by ongoing US dollar weakness, creating an asymmetric price movement. The next logical target is 1.1779. The hourly chart shows divergence, supporting the possibility that this upward trend can continue.

20:02

Volatility candles and price action expectations

20:02

The speaker explains the importance of analyzing multiple time frames and candle patterns, specifically mentioning volatility candles on the three-minute chart. They discuss possible price movements such as retraces, congestion, reversals, or continuation higher. Renko charts help identify momentum and volatility injections, which are crucial for driving price movements. Traders are cautioned against jumping into trades impulsively based on momentum injections without proper indicators, as this often leads to losses.

21:17

The discussion continues about anticipating price action using volume and price indicators, which support trade entry, maintenance, and exit decisions. The example of the Euro Dollar is used to illustrate how Volume Price Analysis (VPA) lessons and indicators can guide traders. Exits depend on the trader’s individual approach or trading persona, emphasizing the personalized nature of trading strategies.

21:58

A brief mention is made about the concept of a ‘trading persona’ as defined in their program, highlighting the importance of understanding one’s own trading style and behavior.

By Anna Coulling – creator of volume price analysis