Stock trading using volume price analysis in the US markets on NinjaTrader

Stock trading using volume price analysis in the US markets on NinjaTrader

00:00

Introduction and disclaimer

00:00

The session begins with an introduction where the hosts, including David, outline the focus on markets, specifically stocks, indices, and some commodities. They emphasize the risks involved in trading and advise viewers not to invest money they cannot afford to lose. The hosts also briefly introduce the concept of volume price analysis, a methodology they use to examine charts and market behavior.

01:00

Volume Price Analysis methodology overview

01:00

The methodology discussed is based on concepts from the book ‘A Complete Guide to Volume Price Analysis,’ which applies across various markets including cryptocurrencies, binary options, and forex. While the core principles remain the same, each market has specialized details. The basic book is available on Amazon, and there is a companion digital box set with examples. Volume Price Analysis (VPA) reveals recurring chart patterns that traders can learn to recognize and apply effectively.

02:08

The speaker highlights the practical success of traders using VPA concepts, as seen on social media. They emphasize the importance of recognizing repeating patterns on charts, primarily using candlesticks, which they find more informative than price bars. The companion book supports this learning. The discussion suggests ongoing engagement with the methodology and adaptation by traders to improve their investing and trading strategies.

03:20

Applicability of VPA to different timeframes

03:20

The speaker explains that the trading concepts discussed apply across all time frames, including faster ones, emphasizing the importance of understanding the price cycle—whether it is trending or congested, volatile or smooth. They highlight five key elements of their methodology: volume, price, patterns, support and resistance zones, and time. The speaker also notes the use of specific indicators developed to aid analysis, though traders can choose their own tools such as EMAs or Fibonacci.

04:48

The discussion shifts to the significance of multiple time frame analysis in trading. The speaker stresses that many traders focus on a single time frame, but it is crucial to view price action in the context of higher or lower time frames. This helps determine whether a trade is with or against the dominant trend and assesses the associated risk accordingly.

05:52

The speaker elaborates on the risk differences when trading in line or counter to trends across various time frames. They explain that proximity to the dominant trend influences trade risk, and that corrections on shorter time frames may still be tradable despite opposing longer-term trends. The speaker acknowledges the variability and lack of strict rules in trading setups.

06:59

Addressing questions about finding a perfect trade entry, the speaker emphasizes that trading is inherently discretionary and messy, with many factors potentially invalidating ideal conditions. They suggest that traders struggling with discretion might consider systematic trading with fixed rules, like quantitative approaches. Volume Price Analysis (VPA) is described as a system applied in a discretionary manner, balancing structure with flexibility.

08:00

Current market conditions and inflation concerns

08:07

The markets are showing a fragile and mixed performance with the Dow and S&P down, while the Nasdaq looks somewhat positive. Market sentiment remains weak and uncertain, with rallies lacking strength. This fragility reflects broader concerns about the direction of economic factors influencing the markets.

09:18

Inflation is currently a major focus for markets, with numerous upcoming economic reports, including PMIs and the US PCE index, which the Federal Reserve closely monitors. Inflation metrics have been elevated, signaling pressures that could influence Fed decisions. Various inflation-related data, such as the Producer Price Index, underline the persistent inflationary environment affecting market outlooks.

11:16

The discussion highlights different economic conditions: inflation, deflation, and stagflation. While moderate inflation can be positive by indicating economic activity, excessive inflation risks destabilizing markets. There is concern about reaching a tipping point where inflation becomes problematic, impacting growth and market stability.

12:17

The Federal Reserve faces challenges in timing its response to inflation, risking overtightening that could stifle growth and recovery. Rising energy prices and global economic issues exacerbate inflation concerns. This situation suggests difficult economic times ahead, with the potential for policy missteps that could hurt market and economic recovery.

13:30

From a trading perspective, recent market volatility provides more opportunities compared to earlier periods of narrow ranges and slow movement. Since late September, market instability has increased, influenced by global issues such as problems in China. The Nasdaq has experienced some volatility but remains somewhat resilient, offering traders chances to engage with clearer trends and momentum shifts.

14:54

Although the markets remain unstable and volatile, this environment is favorable for traders seeking trends and price movements. Investors, however, face anxious times with uncertain prospects. While a major market correction is not anticipated imminently, the outlook for the coming weeks and months is expected to be unsettled and challenging.

15:00

Sector analysis: energy and inflation hedges

15:27

The discussion begins by addressing how inflation concerns influence stock market behavior, particularly which sectors tend to perform better during inflationary periods. Energy stocks, for example, have been gaining momentum since mid-year, evidenced by increased volume and price movement after a period of consolidation. The speaker emphasizes the value of using filtering tools like Finviz to identify sectors attracting capital early, even before widespread market attention turns to inflation.

17:09

The speaker advises being contrarian and cautious about jumping into stocks at their peak, recommending the use of volume-based filters on Finviz to identify potential trading candidates. Simple filters include average volume over one million and relative volume above 1.5, which help manage the vast amount of market data and highlight stocks with increasing activity worth further investigation.

18:20

By applying volume filters, one can quickly identify sectors with rising activity, such as energy stocks currently experiencing substantial volume inflows. The speaker mentions a specific stock (CA CEI) as an example of a rising energy stock detected through this method. The use of broad exchange filters is suggested to avoid repeatedly narrowing down the stock list.

19:37

The focus shifts to real estate, noting that rising interest rates negatively impact mortgage-related sectors, while commercial real estate may benefit as rental costs contribute to inflation. The speaker highlights the importance of identifying stocks that stand to gain from inflation and interest rate changes. They also introduce AMD as an example of a stock in consolidation that could be poised for a breakout, demonstrating how volume and price history can inform watchlist decisions.

20:55

Continuing with the AMD example, the speaker notes its previous price spikes followed by declines, suggesting the possibility of another breakout. They recommend adding such stocks to a watchlist and conducting further research using tools like MarketBeat. The segment concludes with a reminder that traders should be prepared to trade both upward and downward moves, including through options or direct platform trades, emphasizing flexibility in trading strategies.

22:00

Volatility indicators and trading traps

22:30

The speaker discusses explosive price moves in trading, highlighting how fear of missing out (FOMO) causes many traders to enter at the wrong time and then suffer reversals. Using Volume Price Analysis (VPA) combined with a volatility indicator can help avoid these pitfalls. An example candle with reasonable volume but a large wick signals volatility and potential traps for traders who jump in prematurely, as the price often reverses sharply afterwards.

24:08

The discussion shifts to specific stocks, focusing on energy sector examples like CNX and COG, which demonstrated steady moves and good VPA patterns. The importance of patience is emphasized, even for day traders, as setups need time to develop and evolve. The speaker also mentions a notable trap pattern on SWN, indicating the value of careful analysis before entering trades.

25:18

The speaker explains how to use tools like Finviz to analyze individual stocks, focusing on metrics such as beta to gauge volatility relative to the market. High beta indicates more volatile stocks, while low beta stocks move more slowly, especially on shorter timeframes. Several stocks including CRBS and GEVO are highlighted for their strong VPA setups and trading within volatility candles. The concept of swing trading is clarified as holding positions over multiple time points, not necessarily days, and using consolidation ranges to plan trades effectively.

27:00

Using insider trading and beta data for stocks

27:10

The speaker discusses identifying trade positions using swing points and highlights a beta of 3.29 for a specific stock. They introduce MarketBeat as a valuable source for insider trading information and analyze a breakout triggered by a large volatility candle accompanied by significant volume. The momentum from this candle may continue, but often leads to price reversal or congestion, signaling a potential volatility trap.

28:32

A volatility trap is explained where price tends to reverse within the range of a volatility candle, creating a new trading range defined by the candle’s high and low. Over 90% of these triggers result in traps. The importance of volume and volume point of control is emphasized, with an example showing that the stock could move in either direction, requiring traders to assess based on their timeframe.

30:23

Another stock example, CNX, illustrates a less dramatic volatility event with steady price action. The price interacts with volume point of control, showing support and resistance levels. Volume point of control represents a market balance zone or value area, which often sees congestion and no clear direction, highlighting the need to monitor volume and price behavior closely.

31:36

The accumulation-distribution indicator is introduced to measure the strength of support and resistance levels by showing how often these levels are tested. This provides a clearer picture than simple price lines. A channel is defined by these volume-based levels, within which price tends to move until a breakout occurs. Traders can use this channel to inform trades on faster timeframes, aware that price often reverts within the channel.

33:13

The discussion focuses on a significant volatility candle that triggered a move but then price reverted inside the candle’s range. Benchmarking is used to compare volume and price action across candles, revealing signs of underlying buying despite a red candle. This suggests potential strength and that the volatility trap may not be a bearish signal, with the price closing above previous resistance, now acting as support.

34:14

The energy sector’s potential is discussed as a hedge against inflation, with insider trading and sector rankings mentioned as tools for further analysis. The speaker hints at another site for comparing stock performance within sectors before shifting focus to a pharmaceutical stock exhibiting a long consolidation and volume patterns indicative of a volatility trap. This example illustrates how volume and candle spreads can mislead traders into traps.

36:37

The pharmaceutical stock example continues, showing massive volume under candles that lure buyers into a trap where price reverses back within the candle spread. The volume point of control is revisited as a key level. The speaker transitions to insider trading research from Wharton, revealing rampant illegal insider trading by company executives who sell stock before bad news, illustrating how markets can be rigged against retail traders.

38:21

Research highlights the prevalence of insider trading by executives, who sell shares before negative announcements, causing retail investors to suffer losses. Despite strict rules, the practice is common. The speaker uses MarketBeat to show large insider sales in a stock amid institutional buying, cautioning that institutional ownership doesn’t guarantee stock strength since institutions must invest large sums continuously, often becoming trapped like retail traders.

40:48

Institutional investors face similar challenges as retail traders in managing large capital inflows that require deployment. Ownership metrics and sale timing relative to price movements are critical to evaluate. An example from Walmart is cited where significant insider sales coincided with poor price performance, emphasizing the need to analyze insider activity alongside price action for better trading decisions.

41:52

The speaker examines Gevo (GVU), a basic materials stock with notable beta and volume patterns signaling trading within a volatility candle. The price currently moves sideways within a channel, bounded by volatility candle highs and lows. Camarilla levels, enhanced with Fibonacci and other technical elements, provide powerful support and resistance indicators. Traders are advised to consider these levels and volume context when trading within such volatile ranges.

44:23

The discussion concludes by emphasizing the importance of trading awareness within large volatility candles, acknowledging the additional complexity they bring. The speaker mentions transitioning to a colleague and briefly references using forex web tools, signaling readiness to move on while inviting questions for further clarification.

45:00

Market sentiment: dollar, VIX, and indices update

45:04

The speaker reviews their live MT4 trading account, highlighting the importance of key indicators like the VIX as a market sentiment barometer and the dollar index, which has surged recently due to rising bond yields. They explain that the dollar remains the ultimate safe-haven currency, especially under a Democratic administration, where bond yields tend to rise. The Federal Reserve’s hawkish stance on tapering and interest rate hikes also supports dollar strength. The discussion touches on bond yield spreads, particularly between German bunds and US treasuries, which influence investor flows.

47:11

The speaker continues discussing stock selection and trading strategies, emphasizing the complexity and continuous learning involved. They note that while some traders follow popular stocks discussed on forums like Reddit and Wall Street Bets, the fundamental lessons and considerations apply broadly across all stocks. The segment ends with a transition as the speaker checks technical setup and prepares to continue the narrative.

48:46

A quick market update focuses on the three major indices: YM, NQ, and ES. All are described as extremely fragile, with the YM and ES down and the NQ struggling to rally. The speaker highlights weakening risk-on sentiment and examines the five-minute chart for the YM, noting the fragile market condition and the need for caution.

49:50

The YM index shows a solid move lower on short-term charts with rapid price movement through low volume areas, supported by strong volume and red trend indicators. The speaker advises waiting for the market to pause and develop momentum before entering trades to avoid premature losses. The volatility at the market open is typical, and patience is key to finding a stable entry point.

51:13

The speaker reviews multiple indices and currency movements, noting the yen’s strong upward move, which will significantly impact indices. The dollar and euro are also highlighted, with the euro selling off. The VIX volatility index has been gradually rising, currently around 22.55, indicating increased market uncertainty. The speaker recommends monitoring the VIX closely, especially if it is not available on one’s trading platform, suggesting alternative sources like investing.com.

52:00

Gold and copper market technical analysis

52:02

The market is showing downside momentum, negatively affecting sentiment. Gold, however, is moving higher amid inflation concerns. While gold’s rise isn’t guaranteed, it tends to benefit from inflation due to its status as a precious metal with limited supply. Inflation is evident globally, with rising commodity and energy prices. Gold has been moving up but struggles to break the strong resistance level around $1840 per ounce, which is a critical price point on the daily chart.

54:10

For gold to advance, it must overcome multiple price-based support and resistance levels, particularly around $1840 and then near $1808, the volume point of control. Volume levels act as strong indicators of support and resistance, with thicker volume zones representing more significant levels. If gold breaks through these barriers, it could rally towards $1900 and potentially $1920. Monitoring volume is key to assessing the strength of this movement, and the current volume profile suggests significant resistance at these levels.

56:06

Intraday price action shows a strong rally in gold with some signs of weakening. Volume initially increased during the rally but is now falling off, indicating potential exhaustion. A doji candle further suggests hesitation in the upward movement. Although the rally has been substantial over a couple of hours, these signals warn of a possible slowdown or reversal, highlighting the importance of cautious entry points for traders.

57:32

Copper has experienced a sharp downward move, presenting a potential breakaway trade opportunity. Key support and resistance levels are indicated by volume-based price lines, with breached support turning into resistance. Traders look for signs of weakness such as doji candles and rallies failing to gain traction, which could signal entry points. A recent volatility candle with high volume suggests big players are active, and the market may congest before the next move. Volume point of control analysis across multiple timeframes indicates the trade’s potential direction, emphasizing the need to monitor these levels closely. Finally, attention shifts to oil, noted to be bullish.

01:00:00

Oil market update and trade management

01:00:01

The speaker discusses a quick rally following Thursday’s oil inventories report, noting a velocity trigger on the 1-second timeframe but emphasizing that slower timeframes like 5, 10, 15, or 30 seconds carry more significance for volatility triggers. Looking at the 15-second chart, the move approaches strong resistance levels with significant volume, indicating the rally is likely to slow down. The price is moving quickly through low volume areas but encountering substantial volume resistance, suggesting congestion or a potential reversal.

01:01:03

The volatility trigger on the 1-second chart confirms the expected slowdown in the rally, with heavy volume indicating congestion or reversal. The speaker advises traders who entered late to take profits and wait, as the move may stall or reverse. A volatility trigger on the 5-second chart adds further strength to this analysis, with resistance and volume levels confirming participation by major market players. If the price continues higher, traders can re-enter, but losses from early entry are minimal.

01:02:00

Market makers and big operators are actively involved in the move, as confirmed by high volume accompanying volatility triggers. The rally looks likely to continue higher, and traders can consider re-entering if it holds above resistance. The 15-second chart shows the price breaking through resistance, with low volume nodes ahead suggesting an easier path to higher levels. The speaker notes a recent weakening in the YM index, describing the price action as fragile, and decides to conclude the analysis.

01:03:00

Trading platforms, indicators, and education programs

01:03:19

The speaker thanks the audience for attending despite running over time and shares contact emails for further questions. They then demonstrate where to find various trading indicators on quantumtrading.com, covering platforms like MT4/5, NinjaTrader 7/8, TradingView, and TradeStation. They highlight TradeStation’s integration with Interactive Brokers, praising it as a powerful combination for trading due to its deep discount brokerage benefits.

01:04:18

The speaker explains their setup on TradeStation 9.5, showing how they monitor currency futures and use a time and sales window to track significant large block trades. They emphasize focusing on large orders (over 50 contracts) to gauge market reactions, which helps in understanding how orders are absorbed and influence price action.

01:05:16

The discussion turns to TradeStation version 10, which uses the traditional TradeStation securities data feed. The speaker mentions that customers who have previously purchased indicators receive full credit toward upgrades or new packages. Purchasing the full package on any platform grants free access to all indicators, including newly added ones like the radar panel and cryptocurrency strength indicator on TradingView.

01:06:16

The speaker outlines ongoing developments, such as adding indicators to NinjaTrader’s Market Analyzer, which will be provided free of charge to full package users. They direct listeners to quantumtrading.com for all indicators and to annakooling.com for books and educational resources. The education program details are introduced, highlighting the availability of a comprehensive forex trading course.

01:07:08

The speaker describes the funded trading program linked to the education course, where participants trade the company’s money with no personal capital risk, aside from an entry fee. Starting with accounts of $5,000, $10,000, or $15,000, traders can increase their funded amounts up to $2 million by meeting profit targets. The program initially focuses on forex, with higher levels adding indices and gold trading.

01:08:11

The speaker wraps up by inviting further questions via email and thanks the audience for joining. They wish everyone a good trading session, a great week, and a pleasant weekend before signing off.

By Anna Coulling – creator of volume price analysis