The anatomy of a buying climax

The anatomy of a buying climax

In this portion from this morning’s London forex trading session, David explains the anatomy of the buying climax using the weekly timeframes. However, this could be in any timeframe from the 1minute to the 1 month as volume price analysis can be applied to all markets and timeframes.

00:14

Introduction to volume price analysis and buying climaxes

00:14

The speaker apologizes for a brief throat issue and introduces the topic of volume price analysis, specifically focusing on buying and selling climaxes. They mention displaying a daily chart and then switching to a weekly chart to illustrate their point, suggesting that similar patterns may be observed across related securities or markets.

00:57

Market collapse and volume spikes during COVID-19

00:57

The segment discusses a dramatic and cataclysmic price move observed on the Caddy, highlighting an extreme example of market volatility. This price action coincided with a significant collapse in risk-on sentiment during the COVID-19 crisis, causing markets to fall sharply. The discussion emphasizes the relationship between markets, particularly reflected in the yen, accompanied by volatility triggers and a massive spike in volume. It also underlines the importance of understanding the timeframe in which such reversals occur and how long it takes for sentiment to shift, noting that the chart referenced is a weekly one.

02:16

Weekly chart trends and volume distortions

02:16

The discussion highlights the progression of market volume and trends from March through June, noting a significant volume spike that distorts overall figures. The speaker emphasizes that while the market has not yet fully transitioned, there is a clear emerging trend, especially in risk currencies like the yen complex and others such as the Aussie and Swiss. The explanation underscores that although weekly charts show these developments, the underlying principles apply across shorter time frames, where volume initially surges and then diminishes, often accompanied by volatility.

03:15

Understanding market reversals and patience

03:15

The segment explains that market reversals after a collapse do not typically form sharp V-shaped recoveries but rather show congestion and require patience. This is because significant selling pressure must be absorbed gradually by market makers and large operators. The process of absorbing selling or buying pressure, termed ‘mopping up,’ ensures that the market stabilizes over time rather than instantly reversing direction.

04:18

Buying climax and market absorption explained

04:18

The segment explains the concept of a buying climax using the analogy of a sponge absorbing multiple spills, indicating that market moves often require several attempts to fully absorb momentum. It describes a classic example seen in the Aussie yen, where a dramatic plunge occurs with heavy volume, followed by continued selling pressure. This pattern is reflected broadly across markets including indices, bonds, bond yields, and commodities, showing widespread turmoil. After this intense selling phase, the market begins to flatten and then rally, with the trend monitor on the Aussie yen indicating a shift toward bullish sentiment.

05:14

Volume clusters and future price resistance levels

05:14

The speaker discusses holding long positions across a complex and other assets, initiated as volatility decreased. They analyze the market using volume and price-based perspectives, noting a transition from a low-volume region into a dense volume area between prices 74 and 76. This region contains significant price levels and accumulation distribution indicators, suggesting resistance clusters on the weekly timeframe. Weekly timeframe levels carry more significance and dominate shorter timeframes, influencing market behavior.

06:24

The analysis continues focusing on the resistance zone around 74 to 76, emphasizing the importance of volume over the next 2-3 weeks. If price breaks through 76, a move up to 78 is expected due to a low volume node facilitating easier price movement. Beyond 78, further volume levels are less dense but still relevant. The outlook depends heavily on broader market factors such as indices and risk sentiment, which will influence the potential for price breakthroughs and continued upward movement.

07:25

Impact of COVID-19 and geopolitical issues on markets

07:25

The market’s potential to continue rising heavily depends on developments related to COVID-19 and the pharmaceutical sector’s progress. Additionally, geopolitical tensions involving China are expected to cause significant market volatility and sharp reactions. The focus then shifts to the Australian dollar complex and the Chinese yuan (Panda), where the trend is less pronounced due to local political factors. Brexit is also re-emerging as a critical factor that could strongly influence the British pound and pound-yen exchange rates.

08:34

Currency strength analysis and trading strategies

08:34

The segment discusses a 10-minute trading timeframe starting at 8 o’clock London time, highlighting a clear example of market weakness with a strong downside reversal. There’s a notable volume decrease and a transition away from the volume point of control, consistent with expected market behavior. Volatility triggers are also mentioned as part of the ongoing trend development.

09:47

This part focuses on currency strength analysis, pointing out strong selling pressure on the British pound and strong buying in the Swiss franc. The dollar-Swiss pair shows no clear trend yet, but other pairs like CAD-Swiss and dollar-CAD are showing notable movements. The speaker emphasizes the importance of selecting pairs with strong directional trends.

10:40

Here, the presenter isolates the pound to analyze its relative strength against other currencies, noting New Zealand as the strongest and the pound weakening. This analysis is consistent across multiple timeframes, reinforcing the trend of pound selling and New Zealand dollar buying.

11:13

The discussion continues on the pound’s weakness, emphasizing the importance of observing lagging pairs like Euro-Pound and Pound-Aussie to confirm universal selling pressure on the pound. The Pound-Aussie pair is highlighted as an exception due to concurrent selling in both currencies. The speaker stresses the value of trading with market flow to minimize risk, noting that the pound is broadly being sold despite some exceptions.

12:54

The segment concludes with a brief apology for a late start due to technical issues and a quick overview of available trading indicators and platforms. The presenter directs viewers to Quantum Trading’s website for tools compatible with various trading systems such as MT45, Ninja Trader, and TradingView.

13:41

Overview of trading platforms and indicator availability

13:41

The discussion covers two versions of TradeStation: version 9.5, which integrates with Interactive Brokers allowing users to trade directly through the TradeStation screen, and version 10, offered by TradeStation Securities, which includes advanced features like the RadarScreen add-on. Both platforms are powerful, with 9.5 leveraging Interactive Brokers’ brokerage benefits and version 10 providing extensive tools and indicators. Future development will focus on MultiCharts.

14:41

Forex education program and trading psychology module

14:41

The forex education program at Quantum Trading Education is comprehensive, starting with a psychology of trading module to help students understand their strengths and weaknesses for better success. The program then covers the fundamentals and technical mechanics of trading, including principles, indicators, and practical examples like VP HR. It offers extensive resources such as webinars, a webinar library, over 200 hours of content, 13 PDF downloads supporting the material, and personalized support to enhance learning and application.

16:07

Trader community and support resources

16:07

The speaker describes the traders room and trading floor as a friendly, supportive community where students and experienced traders interact daily. The experienced traders willingly help those with less experience, making it a great learning environment. Additionally, Anna’s books are available on Amazon in both Kindle and paperback formats, with links to other resources and her analysis also provided. The session concludes with thanks to the audience, a mention of upcoming content on Thursday, and a personal note about taking a walk and having coffee.

17:03

Closing remarks and next session details

17:03

The speaker thanks the audience for joining and wishes them a great trading day and week. They mention seeing the viewers again at the same time next week for the London Forex session and say goodbye.

By Anna Coulling – creator of volume price analysis