The forex market is one of mean reversion so it’s all about levels and flow

The forex market is one of mean reversion, so it’s all about levels and flow

The forex market is unique for many reasons, but one in particular is its tendency toward mean reversion: both currencies and currency pairs constantly move from overbought to oversold and back again. As a result, this creates the key levels of support and resistance that help define the next cycle. These, of course, appear in all timeframes from the 1-minute chart to the monthly.

00:00

Introduction to forex webinar and market interconnections

00:00

The webinar begins with a welcome and introduction to the forex market discussion. The speakers emphasize the interconnectedness of financial markets and the importance of understanding multiple market drivers rather than just reading charts. They highlight the skill required to combine various elements to confirm price action. A disclaimer is also presented, warning viewers about the risks of trading and advising not to use money they cannot afford to lose.

01:03

Volume price analysis and support resistance concepts

01:03

The segment explains the elements that drive price action in chart and technical analysis, focusing on volume price analysis (VPA), which combines price action, volume, candle patterns, and support and resistance. It emphasizes the significance of certain price levels on charts and how VPA helps confirm market reactions at these points, whether price will reverse or continue its trend.

02:13

This part expands on market drivers, particularly in forex, highlighting sentiment and risk appetite as key influences reflected in currency pairs. It introduces a schematic that integrates VPA as the foundational concept, supplemented by standard and proprietary indicators tailored for forex. The discussion underscores the importance of price levels in forex markets, which operate over-the-counter and are dominated by institutional banks that influence market movements through significant trades.

04:02

Institutional market makers and forex levels importance

04:02

The speaker explains how exchange rates can be agreed upon with large multinational clients, such as Honda or Siemens, for exchanging large sums of currency like dollars or yen. They mention that in addition to setting the rate, the market makers charge a markup and influence the price direction to profit. The discussion emphasizes the importance of price levels in the foreign exchange market, describing it as a market defined by levels and flows of currency pairs. The speaker introduces several proprietary indicators developed to analyze currency strength and relative weakness, including the currency strength indicator, currency pairs matrix, currency array, and currency heat map across multiple time frames. They also provide a brief introduction to their funded trading program, where traders can trade with the company’s capital rather than their own. The segment ends with a note about the recent CPI data and ongoing market analysis.

06:19

Market reaction to CPI and volatility triggers

06:19

The speaker discusses a recent market reaction indicated by a volatility trigger on a five-minute candle, marked by purple arrows signaling increased volatility around a market release. They emphasize the importance for traders to identify which releases will provoke market reactions and which are being ignored. Inflation-related releases are highlighted as particularly significant currently, with inflation potentially emerging sooner than central banks expect. The speaker also explains the setup of a trading profile on the MT4 platform, using a daily chart to analyze recent price movements of the cable currency pair, noting it has broken out of a congestion zone around the volume point of control.

08:01

Cable currency trend and congestion analysis

08:01

The speaker discusses a currency pair currently in an uptrend, noting a recent pullback signaled by a shooting star candle with significant volume. They emphasize the importance of identifying whether the market is in a congestion phase, as this affects price action and trading opportunities on faster time frames. Congestion here refers to periods of up and down movements within candles, indicating no clear direction on slower time frames.

09:01

The discussion continues about trend strength and reversals, highlighting that a small pullback with a wick but low volume does not signify a reversal. Traders on faster time frames are advised to look for opportunities to rejoin the dominant trend visible on slower charts. Various chart types are used, including hourly, 15-minute, 5-minute, and Renko charts, with Renko charts providing a clear geometric view of price action without wicks. The speaker also mentions overlaying Camarilla indicator levels, which provide six key levels on the chart to aid in trading decisions.

10:11

Using Renko charts and camarilla support resistance

10:11

The discussion focuses on key technical levels in trading, specifically the S3, S4, R3, and R4 levels, which act as important magnetic points where price often pauses or reverses. Attention is given to the CSI (Currency Strength Indicator) as a tool to analyze market movements, particularly on the hourly chart. The speaker highlights how these lines indicate the flow of money into different currencies and begins a review of recent market data starting from Friday through Monday.

11:23

The speaker examines the market conditions leading into the Monday session, noting that by Friday evening all currencies were in strongly overbought or oversold states according to the hourly CSI. The British pound is highlighted as having had a strong run, remaining at the top of the hourly CSI, exemplifying how a currency can stay overbought for extended periods. This sets the stage for understanding market momentum and positioning at the start of the new trading week.

12:04

Currency strength indicator and overbought/oversold

12:04

The discussion begins by emphasizing the challenge of identifying overbought and oversold conditions in currency markets, noting that these states can persist longer than expected. The speaker references John Maynard Keynes’ famous quote about market behaviors and highlights the use of technical indicators like the CSI to detect such conditions. The Japanese yen is identified as a key currency reflecting market sentiment, alongside the Swiss franc and the dollar. Examples of technical reversals and pullbacks in the yen are given, stressing the importance of considering broader market factors beyond just technical signals.

13:46

The focus shifts to the dominance of the yen’s downtrend and its connection to broader economic factors, such as the Nikkei index reaching a significant historical level. The speaker advises patience when waiting for reversals and warns against congestion in hourly charts, which can frustrate traders due to narrow trading ranges. Attention then turns to the British pound, showing examples of divergences on the hourly chart and daily pullbacks, highlighting the importance of identifying key levels like R3 and observing volume-based support and resistance.

15:28

The segment explains the concept of volume-based support and resistance using the volume point of control (VPOC), represented by a yellow line indicating market balance. It discusses how congestion phases precede significant market moves, referencing Wyckoff’s second law that longer congestion phases lead to stronger breaks. The speaker illustrates this with recent market volatility and a shooting star candle at volume resistance, indicating a lack of follow-through volume and a subsequent bearish reversal. The importance of volume, not just price, in triggering moves is emphasized.

17:10

Further analysis of price action shows a bearish engulfing candle leading to downward movement, with price hitting lower support levels and moving sideways, suggesting the need for patience. Renko charts are introduced as a tool to smooth out noise and better identify trends. The speaker points out key target levels like S4 and notes that hourly chart levels remain valid for the week, providing context for ongoing trade management decisions. The current market is described as building into congestion, with the dollar and pound showing potential turning points but requiring further observation.

19:23

The speaker advises holding current trades for longer, using Renko charts in combination with trend indicators such as trend dots and trend monitor. The CSI lines are monitored for parallel movement, which indicates congestion. Potential minor reversals in the dollar and pound are mentioned, but the overall message is to remain patient. Key support levels, specifically 138.60, are highlighted as important for watching future price action and determining trade direction.

20:41

The final segment introduces the topic of support and resistance beyond chart-based methods, including levels derived from option expiries. The speaker references a question from a student and plans to explain these concepts in more detail, offering additional resources such as a webinar link. The video concludes with a brief greeting and transitions to a discussion about multiple trading platforms in use, including TradingView, NinjaTrader, and futures platforms.

21:48

Aussie Swiss volume and trap move explanation

21:48

The speaker demonstrates the power of combining volume and indicators using the Aussie Swiss currency pair on a 15-minute timeframe around UK market open times. They observe that despite high volume at the London open, the market shows weak movement, illustrating the principle that high effort (volume) should produce significant price action. The lack of price movement despite high volume signals a warning sign in the market.

22:43

An analogy is used comparing the market to a car struggling on an icy mountain where increased effort (volume) fails to produce forward movement (price action). This highlights an anomaly where heavy volume does not lead to expected price gains, serving as a red flag for traders. Subsequent candles show attempts to rally with lower volume, but the classic trap move becomes evident.

23:38

The segment explains a classic trap move characterized by rapid price volatility triggered when price moves beyond the average true range. Despite the fast upward price movement, the volume is insufficient relative to the effort required, indicating market makers are manipulating price without genuine participation. This deceptive volatility and volume mismatch warn traders of a potential trap.

24:33

Further explanation of the trap move emphasizes that the volume signals a lack of genuine market participation, with price being artificially pushed up to trap traders. The volatility trigger represents a compression of time, where price moves happen faster than usual, akin to forcing water through a restricted hose pipe. This analogy clarifies that volatility compresses price action into a shorter timeframe but does not indicate strength.

25:27

Following the trap move, weakness appears, and price moves lower, triggering a volatility signal to the downside. The speaker advises closing positions after taking profits due to the likelihood of congestion or reversal ahead. This approach is framed as a low-risk trading strategy, confirmed by earlier volume and volatility signals. The discussion concludes by referencing a currency strength indicator as an additional tool.

26:23

Trading psychology and matching strategies to strengths

26:23

The speaker discusses focusing on reversal trading opportunities rather than jumping into ongoing trends, emphasizing the importance of entering early despite the need for wider stop losses to accommodate market fluctuations. A recent example shows a strong momentum trade where the Swiss franc strengthened while the Australian dollar weakened, illustrating a clear reversal pattern on short time frames.

27:18

Traders are encouraged to start their learning journey with the psychology of trading module, as self-awareness is crucial for success. Understanding personal strengths and weaknesses helps traders choose styles that suit them, whether fast-paced scalping or longer-term trading. The emphasis is on tailoring trading approaches to individual comfort and risk tolerance.

28:20

The speaker advises playing to one’s strengths and managing weaknesses by selecting appropriate trade entry points and risk levels. Observing current market conditions, there is a noted weakening and simultaneous selling of both the Swiss franc and Australian dollar, signaling a potential reversal. The discussion includes using multiple currency strength indicators (CSIs) to identify such movements and prepare for trading opportunities.

29:15

Using multi-timeframe CSI analysis, the speaker notes that while some currencies like the Swiss franc and Australian dollar show extremes, others like the euro and pound do not yet present clear signals. Patience is required to identify strong opposing currency movements. The key is to find pairs exhibiting strong directional divergence to capitalize on reversal trades.

30:07

The speaker looks for basket trading strategies where commodity currencies align against risk-sensitive currencies like the dollar, yen, and Swiss franc, reflecting broader global risk sentiment. He also references U.S. futures markets showing price action patterns indicative of market weakness, reinforcing the theme of cautious, informed trading based on both currency strength and broader market trends.

31:01

US futures market weakness and risk sentiment

31:01

The market is currently experiencing congestion and a flattening phase in price action during intraday trading around 8 o’clock London time. Despite a surge in volume typical of electronic U.S. market openings, the market remains weak and sideways, trading near the volume point of control with significant resistance. This weakness is reflected on the daily chart, showing failed rally attempts and overall cautious risk sentiment, although intraday trading is still possible.

31:53

Positions have been held long-term on a basket of yen pairs, maintaining a generally bullish outlook despite some reversals and fluctuations. The speaker notes confidence in these positions due to ongoing developments like the new U.S. presidency and expected legislation, indicating a sustained bullish trend over several months.

32:27

A demonstration is given using expanded charts from the cable profile to illustrate how support and resistance levels function across multiple time frames. The example highlights how key levels on slower time frames, such as hourly charts, influence price movements on faster time frames, like the 15-minute chart, emphasizing the importance of multi-timeframe analysis in trading.

33:02

Support resistance on multiple time frames example

33:02

The speaker analyzes candlestick patterns on different chart timeframes, noting a seemingly abrupt reversal on the 15-minute chart without clear price-based support or resistance. They explain the concept of resistance levels indicated by hatched lines versus solid lines, with solid lines representing stronger resistance. By shifting to the hourly chart and using the Camarilla levels, they highlight that the observed reversal aligns with hitting the R3 resistance level, which explains the pause or reversal in price movement.

34:01

The discussion continues on price behavior around key resistance levels, emphasizing that the Camarilla levels on the hourly chart remain valid throughout the week. The speaker examines a congestion period near volume support and considers the possibility of a breakthrough or retest, while adjusting charts to better interpret the data. They also reference the Renko chart, noting that it suggests no imminent reversal is expected yet, as price needs to retest the volume support area indicated by the volume point of control histogram.

35:23

The speaker anticipates a retest of a congestion phase around a key price level (approximately 30,3860). They highlight the importance of observing if the price will reverse at this level, stressing the significance of price approaching round numbers like zeros or fives in forex trading, which tend to act as stronger psychological and technical levels. The segment ends with the notion that patience is needed to see how the price reacts to this retest opportunity.

36:25

Institutional order flow and importance of zeros/fives

36:25

The speaker explains the significance of zeros and fives in placing stop losses, emphasizing that institutions often place standing orders around these price levels. They highlight the importance of avoiding stop losses ending in zeros or fives due to the high likelihood of big moves and reversals at these points. The discussion touches on congestion phases possibly representing accumulation after a price fall, and the role of level two data in identifying resting orders. The volume support near eighty and the use of Renko charts are mentioned as tools to help hold price levels and target key support or resistance points such as the S4 level.

38:13

Key support and resistance levels are discussed, with a focus on how traders identify and differentiate important levels from less significant ones using various methodologies and indicators. The speaker notes that many traders watch the same levels, and that the choice of tools—such as horizontal lines or other charting techniques—affects how these levels are drawn and interpreted.

38:53

Option expiries impact on forex volatility

38:53

The speaker explains the concept of option expiries in the forex market, which are contracts made between institutions rather than retail traders. These options, such as digital options, have specific strike levels and expire simultaneously at the New York cut around 10 a.m. When the market price is near these levels, there can be increased volatility as institutions might drive or defend prices to benefit from these contracts. Although the amounts involved may seem large, only option expiries valued in the billions tend to significantly impact volatility. Traders should be aware that key times in the trading day, including session crossovers, the London fix, rollovers, and option expiries, often lead to price gyrations.

42:26

Overview of forex education program and funded trading

42:26

The program includes nearly 250 to 300 hours of content with over 400 lessons, designed to be comprehensive yet comfortable for learners. The instructional videos are animated rather than voiced over, accompanied by soft, relaxing music intended to help learners stay in a relaxed alpha state for better absorption. Learners are encouraged to watch and let the material wash over them, though the music can be turned off if preferred.

44:25

The VPA methodology taught in the program, while focused on forex trading, is highly transferable to other markets such as futures and stocks. Many students start with forex and then apply the core principles to other interconnected markets. The program aims to provide all necessary knowledge to become a consistent forex trader.

44:57

The speaker reviews the current state of the GBP/USD (cable) market, noting it is testing key levels and pushing lower. This movement appears influenced by increased dollar buying. The speaker monitors the dollar index to understand these shifts and emphasizes the interconnected nature of various financial markets.

45:31

Using Renko charts and other indices, the speaker anticipates a pause and potential profit-taking as the market approaches a significant support level (S4). Technical analysis tools like the dollar and pound indices help monitor market behavior, and the speaker ensures the audience can hear and see the shared screen during the explanation.

46:14

Futures platforms and volatility/trend monitoring

46:14

The speaker introduces multiple trading platforms focusing on futures, specifically currency futures such as the Aussie dollar, pound, Canadian dollar, euro dollar, New Zealand dollar, and Swiss dollar. They highlight the use of TradeStation with Interactive Brokers feed, showing various currency pairs displayed on a radar screen with features like trend monitoring, volatility detection, and multiple time frames ranging from one minute to 15 minutes. The setup allows quick navigation through charts and time intervals, providing instant alerts when volatility triggers occur.

47:09

The speaker explains how volatility triggers appear on different time frames, signaling potential short-term pauses in price movement. The trend monitor indicates that the Aussie dollar is bearish across multiple time horizons, reflecting strong dollar buying. The pound (cable) shows mixed trends, and the Canadian dollar displays a choppy and unclear trend. The discussion emphasizes how these trends correlate with currency pair movements and congestion areas on specified time horizons.

48:06

Further analysis shows the Canadian dollar trend is unstable compared to other major currencies, while the euro dollar trend monitor hints at weakening dollar buying on slower time frames. Conversely, the New Zealand dollar is beginning to pause on slower time frames. The speaker stresses how these trend signals provide a clear market picture, demonstrated by a 10-minute chart example of the pound, highlighting the trend monitor’s bright red indication and its relation to volume points and congestion.

49:03

The speaker discusses price action around volume nodes, explaining that low volume areas typically don’t act as support or resistance, so prices move quickly through them. High volume areas create congestion zones where price tends to slow or reverse. This understanding helps anticipate market behavior as prices break away from volume points, supported by good trading volume.

49:54

The overview concludes by highlighting additional volatility triggers appearing on the Aussie dollar one-minute chart. The speaker praises the visualization and functionality of the TradeStation platform connected to Interactive Brokers, emphasizing its suitability for trading currency futures. The platform offers advanced charting tools, deep discount brokerage advantages, and access to multiple markets beyond currency futures, reinforcing its value for traders using Interactive Brokers accounts.

50:56

Currency array and matrix indicators for market sentiment

50:56

The speaker introduces the currency array tool on a five-minute timeframe, explaining how it visually displays the strength of various currency trends. They highlight that not all currency pairs show equally strong trends, pointing out that the USD/CAD is choppy and weak, while the USD/CHF shows stronger dollar buying due to Swiss franc selling. At the other end, currencies like the Australian dollar, British pound, and New Zealand dollar are currently strong over the five-minute horizon.

52:12

The currency array and currency matrix features are part of a full package offered by the speaker’s platform, including future indicators free of charge for full package users. The tools have recently become available on TradingView thanks to new Pine Script capabilities and are still in beta testing. The currency matrix provides a detailed view of currency pair movements and sentiment, complementing the currency array by showing which currencies are moving most strongly and the overall market sentiment.

53:05

The speaker explains the concept of ‘universal flow of sentiment’ using dollar pairs as an example. Ideally, all dollar pairs like USD/CAD, USD/JPY, and USD/CHF should move in the same direction, confirming a strong trend. Trading with this universal sentiment is lower risk compared to trading against it, which might occur only during local political or fundamental events. The currency matrix helps traders identify when they are aligned with this broad market sentiment.

54:00

Additional features on the currency matrix include indicators for all-time highs and averages, providing context on whether a currency pair is overbought or oversold. Current readings show there is still room for price movement without hitting extreme levels. This benchmarking helps traders assess risk and potential movement, similar to how currency strength indicators highlight overbought or oversold regions.

55:01

The segment closes with a brief mention of checking the currency strength indicator (CSI) across multiple timeframes and a quick wrap-up, referencing the broader quantum trading education and tools offered by the speaker’s platform.

55:36

Quantum trading education modules and trader support

55:36

The program includes a wide range of modules such as the psychology module, fundamental, relational, and technical mechanics of trading, supported by hundreds of video lessons and 13 PDF downloads. Additionally, there is a VPA traders room hosted by Anna and the speaker, providing a continuous live chat space for students to share analysis and receive support. Recently, a funded forex program was introduced, allowing students to trade the program’s money with no personal risk.

56:30

In the funded forex program, students start with an evaluation account of $5,000, $10,000, or $15,000, aiming to meet achievable trading targets within given timeframes. They can trade any style but only on 28 currency pairs while following money management rules. Successful traders then progress to a portfolio manager level where their trading capital is quadrupled, and profits begin to be paid out monthly. Initial evaluation profits are paid as a lump sum at the end of the evaluation period.

57:24

At the portfolio manager stage, profits are paid monthly, providing traders a sustainable income based on their efforts. The account size doubles progressively from $60,000 to $1 million, with profit splits starting at 50% and increasing to 60% at the highest level. The program carries no risk to the trader but requires a one-off joining fee.

57:54

Funded forex program details and scaling capital

57:54

The program offers a unique opportunity exclusively for students to apply their trading knowledge with real funds. After completing the course and developing a consistent trading approach, students can trade using the program’s capital, allowing for low-risk practice without risking their own money. The package includes various trading indicators available on platforms like QuantumTrading.com, MT4/5, Ninja Trader, and TradingView. Currently, the TradingView package is priced at $677 but will increase to $894 once all indicators are released, making it a good time to invest.

58:50

Platform options, indicator packages, and resources

58:50

The speaker discusses the recent launch of TradeStation platforms, including version 9.5 linked to Interactive Brokers and TradeStation 10 using their own feed, highlighting the excellent radar screen feature. Customers can purchase individual indicators or full packages, with future indicators provided free of charge. Credits are offered for previous purchases when upgrading to packages or education programs, ensuring no loss for customers. The speaker also mentions their website cooling.com, which hosts books and analysis, and shares enthusiasm for Harley Davidson stock, referencing an analysis and a favorite image. The session concludes with thanks and a reminder of a follow-up session at 2:15 PM.

 

By Anna Coulling – creator of volume price analysis