Some volume price analysis lessons in the London forex session

Some volume price analysis lessons in the London forex session

Traders can always depend on the London forex session to deliver great trading opportunities through volume-price analysis.

00:14

Introduction and majors matrix overview

00:14

The speaker begins by introducing a majors matrix displaying various currency pairs involving the US dollar, including pound-dollar, dollar-CAD, Aussie-dollar, euro-dollar, dollar-Swiss, and New Zealand dollar. The matrix highlights significant recent selling pressure on the dollar, visible across these pairs. This tool provides a comprehensive view of volume and price analysis, helping traders identify opportunities. The speaker explains that in spot markets, dollar selling can be traded either by buying majors like cable (GBP/USD) or selling majors like dollar-CAD or dollar-Swiss. They note that markets tend to move faster downward than upward, so they prefer trading short positions and focus on selling the market, particularly favoring pairs like dollar-CAD and dollar-Swiss in the current environment. Additionally, the matrix offers other signals that might influence trading decisions.

02:17

Volume price analysis and volatility signals

02:17

The analysis begins with a focus on the dollar Swiss pair, highlighting a volatility trigger on the five-minute chart that may lead to congestion or a possible reversal. Despite strong buying indicated by narrow spreads under a particular candle, there has been no follow-through yet. The trend monitor remains strongly bearish, suggesting continued selling pressure on the dollar, although no full reversal is currently expected.

03:13

Congestion is building below key price levels, with the trend monitor still showing strong bearish momentum. The dollar is very oversold on the five-minute currency strength indicator, while currencies like the pound, Swiss franc, and Australian dollar are moving toward overbought conditions. This setup points to potential reversal opportunities emerging soon.

04:11

Some minor buying is noted in dollar CAD with a small hammer candle, but volumes remain low. The Australian dollar shows signs of weakness with some selling pressure despite higher candle bodies and decent volume, indicating at least a pause in the current trend. The volume patterns suggest traders are taking profits and closing positions, contributing to this slight market hesitation.

05:02

Volume analysis confirms mild weakness as traders exit profitable positions. The discussion shifts to examining the currency strength indicator across multiple time frames, aiming to provide a clearer view of the broader market context and potential near-term movements.

05:30

Currency strength indicator and trend analysis

05:30

The speaker analyzes currency movements over 15-minute intervals, noting heavy selling pressure on the dollar. While the 15-minute chart shows the dollar nearing oversold levels, shorter one-minute charts indicate a potential reversal as the pound begins to strengthen. However, this reversal is not yet confirmed on longer timeframes like the 5 or 10-minute charts.

05:58

The discussion continues about whether the observed price action represents a genuine trend reversal or just a minor pullback. If it is a minor pullback, the pound will fall and the dollar will rise again, causing small fluctuations in the indicators. The speaker emphasizes the importance of watching for confirmation across multiple timeframes before concluding a full trend change.

06:32

The speaker describes the current market behavior as small kinks and curls in currency strength indicators rather than a strong reversal on the 15-minute chart. For a full reversal to develop, these movements must persist and be reflected on slower timeframes like the 5-minute chart, showing sustained changes in the pound and dollar directions.

07:07

The segment explains that a genuine trend reversal requires consistent movement across multiple timeframes, with the pound turning down and the dollar up on the 5-minute chart and beyond. Meanwhile, short-term scalpers may trade aggressively on very short intervals such as 15 or 30 seconds, while longer-term traders rely on higher timeframe confirmations.

07:40

Traders’ mindset and time frame focus

07:40

The speaker explains the importance of focusing on the relevant time frame when trading, using the analogy of a blinkered horse that concentrates only on the winning line without distraction. Traders should put on their ‘blinkers’ to avoid being distracted by irrelevant market movements. They warn about confirmation bias, where after entering a trade, traders look for evidence to support their initial decision, which can lead to mistakes.

09:04

Traders should decide their trading strategy before entering the market, whether it’s a quick scalp lasting seconds or minutes or a longer-term position held for 5 to 15 minutes or more. The speaker advises using separate accounts for different trading styles to avoid confusion. This helps maintain clarity on the approach being used in each trade.

09:56

Current market observations highlight mixed movements among currencies. The US dollar is rising, with the pound also increasing despite this, leading to possible congestion in the pound-dollar pair. The Australian dollar is weakening, and the Swiss franc is selling off. There may be minor trends developing depending on the momentum in dollar buying, but no strong trends are expected in some pairs, such as pound-dollar and dollar-Canadian dollar.

11:13

The Canadian dollar and US dollar are showing strong buying momentum, while the New Zealand dollar is not moving significantly. The Japanese yen is selling off strongly and is also heavily oversold. The speaker emphasizes the importance of assessing indices and market conditions to identify trading opportunities and decide how long to hold positions.

12:11

Dollar Swiss volatility and market congestion

12:11

The speaker analyzes the Dollar-Swiss currency pair, noting a volatility trigger followed by price congestion. Despite a compressing candle pattern, buying activity is evident, indicating potential strength rather than selling pressure. The market shows early signals of weakness at higher levels but still maintains buying interest.

12:36

Volume analysis highlights increased activity around the European session open at 8 AM UK time, following earlier movements from the Asian session and the volume point of control. A strong support line is forming with rising volume, particularly at the UK forex market open, indicating significant market interest.

13:03

Despite strong volume during the UK market open, candles show upper wicks and wide spreads without significant upward movement, signaling emerging weakness. The market is not delivering strong bullish momentum, suggesting caution despite the high volume.

13:32

Further signs of market weakness appear with indecision candles like dojis and wicks to the upside. While this does not confirm a reversal yet, it signals a potential pause or slowdown in upward momentum. Traders holding long positions should be alert to this developing uncertainty.

13:57

Trend monitors still indicate bullish momentum without signaling a pause, but the market shows signs of hesitation. The dollar’s buying strength is starting to manifest, although it has yet to fully develop across other currencies like the pound, suggesting early stages of a trend shift.

14:26

The Australian dollar is showing clear signs of selling pressure, rolling over from overbought conditions with strong dollar buying. Volume patterns confirm weakening rallies and falling volume on attempts to move higher, reinforcing the emerging downtrend in this currency pair.

14:55

Price may retreat to the volume point of control, where a low volume node just below suggests price could move quickly through that area due to minimal support. This sets up a potential short opportunity, with attention on how price interacts with these volume-based support levels.

15:21

Below the low volume node, minor price-based support exists but is relatively weak, offering little resistance to downward movement. Deeper volume wedges around 30 and 23 levels provide stronger support zones, which are crucial to monitor for potential price reactions on any decline.

15:55

When considering short trade setups, multiple time frames should be analyzed to identify significant volume areas that could cause congestion or sideways price action. Understanding where heavy volume clusters lie helps anticipate potential pauses or reversals, enhancing trade decision-making.

16:21

Scalping vs longer term trading strategies

16:21

The speaker discusses market behavior during a pause, noting that scalping traders exploit short-term moves while longer-term traders may view these as minor pullbacks. They analyze the pound-yen currency pair across multiple time frames, observing flat price action and trading around the volume point of control, indicating consolidation rather than strong trends.

17:14

There is a significant spike in volume accompanied by a volatile price candle signaling potential market congestion. Market makers are actively participating, causing rapid price moves that can trap traders who enter on the expectation of a continued trend. This behavior exploits traders’ fear of missing out, a psychological trait deeply rooted in human biology that market makers understand and use to their advantage.

18:24

Emotional squeeze and fear of missing out

18:24

The speaker explains the concept of fear of missing out in fast-moving markets, where traders jump in quickly to profit from rapid price moves. This is often accompanied by increased volume, indicating market maker participation. The volume point of control (VPOC) is dynamic and shifts based on volume distribution, rather than being fixed. During congestion phases, traders experience emotional pressure as price movements create uncertainty about the validity of their trades.

19:17

The emotional squeeze during congestion phases can be brief or prolonged, depending on the chart timeframe, causing trader discomfort. The trend monitor indicates a potential continuation higher into a low volume area. Traders are advised to manage risk by scaling out of positions when volatility signals appear, such as reducing lots to preserve profits and limit exposure. This approach helps mitigate stress and potential losses during uncertain price action.

20:14

The volatility indicator triggers based on price movement exceeding the average true range for the instrument and timeframe, providing early warnings before candle closes. This is especially useful on longer timeframes like five or fifteen minutes, allowing traders to exit positions early and avoid stress. The indicator’s effectiveness is supported by anecdotal evidence from students who credit it with protecting their trades during volatile sessions.

21:16

When the volatility indicator triggers with high volume, it signals significant market activity, which can help traders decide whether to close profitable positions or cut losses. Without volume, price moves may be deceptive traps created by market makers to mislead traders into weak positions. The speaker notes that selling pressure can diminish during these phases, and the volume point of control shifts as volume concentrates in different price areas, reflecting changing market dynamics.

22:06

In congestion phases, volume accumulates at the volume point of control, often forming strong support and resistance channels visible on trading platforms like NinjaTrader. These channels help traders identify breakaway points from congestion and optimize stop placements. Combining price-based support and resistance with volume-based indicators like the VPOC offers a powerful method for understanding market structure and improving trade decisions during accumulation and distribution phases.

23:06

Volume point of control and price support

23:06

The speaker analyzes recent price action, highlighting indecision and congestion in the market. They discuss a lack of strong conviction in price movements within candle spreads, noting minor reversals and small rallies in the Euro and Aussie dollar pairs. The presence of candles with small bodies and wicks signals uncertainty and some buying interest, but overall strength remains weak.

24:12

Further examination of volume and candle patterns reveals diminishing buying interest despite a brief rally. The market remains indecisive with doji candles showing significant volatility but no clear breakout from the congestion zone. Traders who entered on quick price moves may now be trapped, facing uncertainty about whether the price will continue downwards or reverse upwards.

25:05

The Euro dollar pair continues to show signs of weakness with heavy volume but little directional progress, suggesting this is not a strong primary trend reversal but rather a congested or pullback phase. The speaker emphasizes the importance of distinguishing between primary trend reversals and secondary pullbacks using volume price analysis (VPA) across different time frames. This helps traders understand whether the main trend will reassert itself or if a new trend is forming.

26:44

After a brief pause, the focus returns to the Cable (GBP/USD) pair with analysis using a three-minute chart. Volume comparisons are made relative to different trading sessions (London, European, Asia), noting significant volume increases at certain price levels. Observations include some selling pressure and weak rallies, indicating limited upward movement.

27:45

Price approaches a key volume point of control (VPOC), which acts as strong support due to heavy volume concentration. The speaker explains that prices rarely collapse through this level easily because of the underlying volume structure. This support level is crucial for understanding potential price behavior and stability in the market across various time frames.

28:42

Volume areas and market behavior

28:42

The speaker explains that high volume areas act as resistance or support because they contain various types of orders, such as market orders and limit orders, and traders trapped in weak positions. These volume zones indicate where the market considers important, while low volume areas are less significant. When price approaches high volume zones, it is likely to congest rather than move through easily. This is demonstrated by observing a move downward with little volume, signaling diminished selling pressure and emerging buying interest, although the buying is currently weak.

30:39

The speaker experiences some technical issues but continues by discussing a specific price chart for the British pound (Cable). They highlight a significant volume area that previously acted as a breakaway and now serves as support. For the price to rise further, volume must increase in the relevant candles. The price is expected to target an area just below 129.25, but it needs to overcome this resistance level with sufficient volume to move higher.

32:07

The speaker reviews 15-minute and 30-minute charts focusing on areas with dense volume created over time, referred to as volume point of control (VPOC) zones. These zones represent past congestion phases and are challenging for prices to traverse. Price movements upward generally face more resistance, especially when passing through these dense volume areas, requiring more effort to break through. The market tends to grind higher slowly but can fall faster, emphasizing the importance of volume in understanding price struggles at these zones.

33:21

The speaker discusses the use of Renko charts alongside time-based charts to analyze price action. Renko charts help smooth out fluctuations and price oscillations seen in candlestick charts by focusing on raw price movement in uniform bricks. This technique provides a clearer view of underlying trends by filtering out noise, aiding in better understanding of market behavior during periods of volume congestion.

33:55

Renko charts and trend confirmation

33:55

The speaker explains how the indicator measures trends and corrections on Renko charts, highlighting the importance of identifying primary and secondary trends. They suggest using the trend monitor in conjunction with the trend dot for confirmation, especially looking for bright colors that signal trend strength. Transitions from bright colors to intermediate colors usually indicate congestion rather than a clear trend change, requiring traders to carefully assess the chart and volume before making decisions.

35:46

The discussion emphasizes the importance of volume analysis alongside price action, noting that high volume under certain candles can indicate strength despite minor pullbacks. The speaker references a professional trader, Mike Katz, who uses volume price analysis (VPA) to identify anomalies in the market, which serve as warning signals against false moves. Anomalies help traders recognize deceptive price actions that might attempt to mislead them into premature trades.

37:21

The speaker introduces the camarilla indicator as an additional tool to identify key price levels and potential targets. They stress the importance of distinguishing between a correction and a reversal during a trend, suggesting entry points after price breaks key highs. Traders should be aware that slower time frames may limit upward movement, and decisions should be made with consideration of these dynamics.

38:35

The final segment discusses using multiple tools like price action levels, camarilla pivots, accumulation/distribution indicators, and dynamic support and resistance to determine where the price might head next. The speaker advises that reaching certain levels, such as the camarilla R4, often signals a pause or potential reversal point, providing traders with cues on when to expect market reactions or to consider exiting positions.

39:05

Focusing on key currency pairs and CSI use

39:05

The speaker explains their approach to focusing on specific currency pairs by removing other pairs to avoid distraction. They discuss observing the Currency Strength Indicator (CSI) and note a potential reversal where the pound was expected to fall against the rising dollar, but the pound held steady. The dollar’s buying pressure appeared in other pairs and did not significantly affect the cable pair, which might be entering a congestion phase before a clear direction emerges.

40:54

The discussion shifts to the ‘array’ indicator and its settings, which are similar to the CSI but used differently. The speaker advises using the array on faster time frames to align its signals more closely with the CSI. They caution that the indicators provide different types of information and cannot be perfectly matched, but adjusting time frames can help achieve a degree of consistency.

42:03

Using multiple indicators across different time frames, such as hourly CSI, hourly matrix, and 15-minute array, provides a more comprehensive view of market trends. The array functions somewhat like a trend monitor and can be set to faster time frames to behave more like market-close indicators. The speaker emphasizes experimenting with time frame settings to find what works best for the trader’s style.

44:08

The speaker mentions that order flow analysis on the NinjaTrader platform is currently unavailable and will resume with the launch of the TradeStation platform later in the month. They briefly show a similar approach being applied to currency futures before wrapping up the session.

44:50

Futures market and dollar matrix differences

44:50

The speaker explains the dollar matrix on futures, highlighting several currency pairs such as the Aussie (6A), Pound (6B), Canadian Dollar (6C), Euro (6E), Yen (6J), and New Zealand Dollar (6N). The focus is on viewing these pairs from a dollar perspective and observing trends across related markets within the same sector.

45:25

The discussion continues on how futures show related pairs in the same direction due to quoting conventions, such as yen dollar instead of dollar yen. The speaker emphasizes the complexity of trading the dollar yen (or yen dollar) pair, noting it behaves differently from other yen pairs and requires detailed understanding covered in a forex program.

46:00

The speaker highlights recent price action in the dollar yen pair, describing a phase where yen selling and dollar buying occur, which contrasts with broader dollar sell-offs elsewhere. The complexity of this pair’s behavior is noted, reinforcing the importance of understanding its unique dynamics when trading.

46:28

An example of volume dynamics is given, showing volume falling as prices move downwards, indicating weakening selling pressure. The speaker explains that rising volume is expected to confirm both rising and falling markets, and the current volume pattern suggests a decline in downward momentum.

46:54

The speaker points out trading activity around congestion areas, noting strong selling in the dollar Swiss franc and an uptick in the yen. This movement is linked to a significant spike in the VIX and trading volume, reflecting market reactions and increased volatility on the previous day.

47:23

VIX impact and risk sentiment

47:23

The VIX index remains stable in the high 20s, just below 30, trading within a narrow range for an extended period. This stagnant volatility suggests weak risk sentiment. A sharp rise in the VIX would likely trigger a strong equity sell-off, as observed recently. Additionally, increased yen buying is noticeable on shorter time frames, reflecting market reactions to rising volatility.

47:54

The speaker highlights the availability of various trading indicators on platforms like quantumtrading.com, MT4/5, NinjaTrader 7 and 8, and TradingView. They announce that TradeStation support is expected to launch within the month, acknowledging the significant effort involved. Two main versions are noted: TradeStation Global with Interactive Brokers feed and TradeStation Securities version 10 and above.

48:20

TradeStation is praised as an advanced trading platform with comprehensive features. A dedicated webinar will be held focusing on TradeStation and order flow trading, benefiting from its extensive stock offerings. Users are encouraged to visit labs.quantumtrading.com for the latest platform updates and developments.

48:49

Trading education and upcoming platform updates

48:49

The speaker highlights the success of their books available on Kindle and in paperback, including an upcoming Vietnamese version and ongoing discussions for translations in other countries. The books have achieved significant sales in Japan, mainland China, and Taiwan. They then describe their comprehensive forex trading course offered through Quantum Trading Education, which covers psychology, fundamentals, relational analysis, technical analysis, and trading mechanics with over 200 hours of video and podcast content. The course is supported by a daily VPA chat room hosted by Anna and the speaker, providing a supportive community for students.

50:13

The speaker updates on the VIX index rising to 29.6 and mentions a follow-up session scheduled for 3:00 PM UK time. They apologize for a scheduling change due to a personal matter but confirm that future sessions will return to Tuesdays for the rest of the year. Notifications will be sent if there are any changes, and they thank viewers for their participation and patience as the session ran over time.

By Anna Coulling – creator of volume price analysis