Some great volume lessons on the EUR/AUD in the breakaway trade from congestion

Some great volume lessons on the EUR/AUD in the breakaway trade from congestion

The breakaway trade often gets a bad press due to fakeouts, but if you are a volume trader this is not a problem, as volume reveals the truth behind the price action and therefore whether a move away from the congestion phase is true or false.

00:11

Introduction to Euro Aussie and Pound pairs

00:11

The speaker discusses their ongoing interest in the Euro/Aussie currency pair, highlighting it as a long-term position. Recently, they have focused more on the British pound and its related pairs, sharing analysis on their Learn Forex Trading page on social media platforms like Amazon and Facebook. They note the pound’s strong recent movements and mention the concept of seasonality in currency trading, suggesting that traders might benefit from focusing on a few pairs consistently due to seasonal trends.

01:20

Impact of Brexit and EU summit on Pound

01:20

The discussion focuses on how currencies are influenced by political events, highlighting Brexit and the EU summit as recent examples. Despite minimal fundamental news, the British pound experienced significant volatility with large swings both upward and downward. The speaker notes that Brexit remains the key factor driving these movements. Attention is also drawn to the euro and Australian dollar, which present interesting dynamics from multiple perspectives.

01:54

London and European market opens volatility

01:54

The segment discusses the London market open, highlighting it as a crossover session marked by a surge in trading activity and volume due to the influx of new traders. It notes the European open’s occasional volatility, illustrated by a significant downward move on the 10-minute chart of the Euro Aussie at 7 a.m. The conversation also introduces David’s trading style, which focuses on reversal trading opportunities, considered his preferred approach despite its pros and cons.

03:03

Breakaway vs reversal trading approaches

03:03

The speaker discusses breakaway trading within congestion phases, emphasizing the need for patience due to frequent fake outs. They recommend using methodologies like volume price analysis combined with indicators to improve reliability. An example given is the volume point of control, which represents the area on the chart with the highest transaction volume and is considered the market’s fair value zone where traders are comfortable transacting.

04:13

Volume point of control and indicators

04:13

The speaker discusses the concepts of accumulation and distribution in market trading, focusing on areas of resistance and attempts to break away that fail. They mention challenges faced during the presentation due to technical difficulties but continue explaining the volume point of control indicator developed for NinjaTrader. This indicator identifies fair value areas in the market where no clear directional bias exists. The speaker compares its visualization across platforms, noting that on NinjaTrader the line indicating volume point of control thickens to show strong regions, whereas on MT4 and MT5, the line appears as a uniformly thick line due to programming limitations.

06:08

Overnight Euro Aussie moves and volatility

06:08

The segment explains a strong resistance region and the volume point of control influenced by the Australian dollar’s overnight movement in the Asia session. A significant downward price movement occurred at the European open with low volume, triggering a volatility indicator marked by purple arrows or circles, signaling price action outside the average true range. Typically, the price then retraces within the candle’s spread, which is observed here with sideways price action followed by London market activity attempting to push prices higher before weakness resumes. The trend monitor and trend dots indicate a continuing downward trend. Additional tools mentioned include session crossover awareness, Renko charts, camera indicators, and a tick speed indicator to analyze market behavior without a central exchange.

07:46

Tick speed and volume analysis in Forex

07:46

The speaker explains that in the forex market, volume is analyzed through tick activity, which measures price changes since there is no central exchange providing complete volume data. Tick volume is respected and even used by algorithms to understand market activity. Volume Price Analysis (VPA) combines tick data with candle patterns and spreads, particularly in the Wicks indicator, to validate whether the chart information is genuine and confirm market behavior.

08:54

At 8 o’clock during the London session, there is a significant surge in volume and market participation, often trapping traders in poor positions due to crossover session dynamics. This period features a rush upward with volatility spikes, followed by an immediate retrace within the candle spread. The discussion highlights specific candles with varying volume and spread characteristics, noting a candle with high volume but a narrow spread and wicks indicating market weakness.

10:00

The analysis continues with a down candle showing high volume and strong participation, indicated by green tick speed signals reflecting London session activity. This forms a two-bar reversal pattern as price moves back toward the volume point of control but remains indecisive. The market moves sideways with narrow spread candles and sustained volume, unable to commit to a clear direction, resulting in congestion and effort to rise without significant progress.

11:04

A volatility candle shows a large price move but with relatively low volume, followed by price entering the candle’s spread. The Renko chart is introduced as a smoothing tool that removes noise from candle charts, highlighting initial breaks, pullbacks, and minor corrections. Despite some green candles, the trend monitor and trend dots remain predominantly red, indicating a continuing downtrend. The sideways momentum seen before the London open appears to persist, prompting further analysis with additional indicators.

12:04

Camarilla levels and support/resistance

12:04

The discussion explains the importance of support and resistance levels on charts and how traders assign hierarchy to these levels. Fibonacci levels are commonly used to identify significant price points like 61.8%. The speaker introduces Camarilla levels, particularly emphasizing the fourth level (S4 or R4) as very important on the 60-minute chart for the Euro/Aussie. These levels are recalculated every 24 hours based on price action up to but not including the 60-minute mark.

13:12

The speaker elaborates on price behavior at the fourth Camarilla level, noting that price often breaks through this level but then retraces back to retest it multiple times, especially at S4. This retesting pattern is common across many levels. Using examples from the 10-minute and 5-minute charts, the ongoing price moves in the Euro are analyzed, highlighting how these levels interact across different timeframes.

14:24

Euro and Aussie price action dynamics

14:24

The speaker discusses recent currency movements, noting that the euro has driven the market’s direction while the Australian dollar continues to drift higher. They analyze a 10-minute chart showing potential turning points, particularly emphasizing that the Australian dollar may be overextended but could still rise. The focus then shifts to the euro, where strong selling pressure is influencing the market more than movements in the Australian dollar. The ideal scenario described involves balanced buying and selling forces, using the pound-Swiss pair as an example of a balanced market movement.

15:38

The analysis continues on market asymmetry, highlighting that sometimes buying or selling pressures dominate, as seen with strong buying in the Australian dollar without an equally strong sell-off in the euro. The speaker advises monitoring key levels and volume indicators to understand these dynamics better. They emphasize using a combination of volume, candle patterns, and fundamental news to create a comprehensive, three-dimensional understanding of price action and market conditions.

16:42

Fundamental political impact on Euro

16:42

The speaker explains that there is no major new information today but emphasizes the importance of political developments for the euro, as it is fundamentally a political currency. The bond market plays a crucial role in determining the currency’s success since borrowing costs can make or break a country. The discussion focuses on the spreads between Italian bond yields and the German bund, which serves as a safe haven similar to US Treasuries. Germany benefits from low borrowing costs due to its strong economy and prudent fiscal management, whereas Italy faces higher borrowing costs, reflecting market perceptions of risk.

18:23

Bond markets and borrowing costs influence

18:23

The speaker discusses how Italian markets are being supported by the ECB and frugal countries, influencing market rewards accordingly. They explain the use of Camarilla pivot points for predicting price movements, noting a recent break from the S4 level on both 10 and 60-minute charts. The recalculated daily values suggest the next target could be the S5 level, although this is not guaranteed. The speaker also mentions the importance of combining these signals with support and resistance levels, referencing tools like MT4/5 and accumulation/distribution indicators on NinjaTrader.

19:32

Summary and outlook on Euro Aussie pair

19:32

The speaker discusses monitoring the Euro-Aussie currency pair, expressing satisfaction that it is trending downward, which benefits their long-term positions. Despite some earlier setbacks, they chose to hold their investments and are now optimistic about the pair’s performance today.

By Anna Coulling – creator of volume price analysis