Trading forex in the London session using volume analysis

Trading forex in the London session using volume analysis

00:06

Webinar introduction and Forex overview

00:06

The webinar begins with a welcome and introduction by the host and her husband David. They explain that the session will focus on the Forex market and related markets. To succeed in Forex trading, it’s important not only to analyze price charts, price action, and volume but also to understand broader market conditions, as these provide insights into currency movements. The host also emphasizes the trading disclaimer, reminding viewers that trading is risky and they should never invest money they can’t afford to lose.

01:08

UK economic data impact on British pound

01:08

The speaker discusses recent UK market data that has impacted the British pound, highlighting the importance of understanding the timing of economic releases. They mention that UK economic data, including GDP and trade balance figures, are now released at 7:00 AM, earlier than the previous typical release time of around 9:30 AM. Traders dealing with the British pound and related currency pairs need to be aware of this change to avoid timing errors.

02:19

The speaker emphasizes the importance of verifying the exact timing of economic data releases to avoid mistakes, noting that time zone errors or incorrect calendar settings are common. They mention using multiple economic calendars and reference Financial Juice as a reliable source for up-to-date news and data on financial markets.

02:52

Using Financial Juice economic calendar

02:52

The speaker discusses the usefulness of a financial calendar that highlights different markets such as bonds, commodities, crypto, indices, and macroeconomic events. This calendar helps filter and organize the overwhelming flow of news and data traders face, making it easier to focus on relevant information. They emphasize that understanding what to prioritize takes time, and mention a specific economic calendar called Financial Juice, which offers both free and paid versions, with the paid one providing more timely data.

04:05

Market holidays and bond market update

04:05

The speaker discusses the significance of the bank holiday on November 11th, which is Veterans Day in the US and Canada, as well as Armistice Day in parts of Europe like France and Italy. This holiday affects the financial markets, with the stock market remaining open while the bond market is closed. The speaker notes recent volatility in the bond market following the latest Consumer Price Index (CPI) report and ongoing concerns about inflation, a topic they and a colleague have been tracking since mid-year.

05:11

Inflation concerns and central bank response

05:11

The speaker discusses the current economic situation, noting that central banks are recognizing inflation may not be transitory due to record-high figures influenced by energy costs and supply chain issues from the pandemic. They highlight the use of economic calendars, particularly Forex Factory, which provides context and charts that help interpret fundamental news releases and their market impact.

06:56

The discussion turns to market reactions following recent US economic data, which was worse than expected, triggering a selloff. Despite this, markets are attempting to stay positive, aided by seasonal trends that typically favor a year-end rally. The speaker references the 2018 market downturn due to Federal Reserve actions as an exception to this seasonal optimism.

08:40

The speaker elaborates on the concept of the ‘Santa rally’ and notes the importance of the VIX index as a volatility benchmark, with values below 20 indicating market stability. They also discuss the CBY index, a sentiment indicator tied to the Forex market, noting its volatility but relevance. Market indices like the Russell and NASDAQ are mentioned, showing some recovery and positive movement.

10:21

The speaker emphasizes the overwhelming flow of news and data, cautioning that while earnings and seasonality support market optimism, underlying economic challenges remain. They highlight the discrepancy between inflation metrics used by central banks versus personal experiences of rising costs. The segment concludes with a focus on currency markets, specifically the recent reaction in the British pound influenced by dollar strength.

11:31

Personal trading strategies and heat map use

11:31

The speaker explains their use of a heat map in personal trading to track currency pairs and describes a trading scenario where two traders took opposite positions based on differing sentiment interpretations, yet both profited. This illustrates how timing and understanding fundamental economic releases impact trading decisions and outcomes.

13:27

Discussion focuses on the importance of economic data releases, particularly employment (NFP) and inflation figures, in influencing market reactions. The speaker notes that while these releases were once less impactful, recent changes in economic conditions have increased their significance. Understanding the timing and cycle of these releases is crucial for effective trading strategy.

15:50

The speaker shares their strategy of using a heat map to monitor multiple currency pairs simultaneously, closing positions ahead of key inflation data (CPI) to mitigate risk. They highlight how incorporating fundamental data into exit strategies is subtle but important and discuss technical tools and platform optimizations used to manage multiple charts effectively.

18:11

An analysis of the heat map rankings shows the dollar strengthening across multiple pairs, with the dollar index breaking above key technical levels indicating potential further upward movement. The speaker explains the significance of camarilla pivot levels and how volume and price action on different time frames can signal potential corrections or continuations.

20:58

The speaker examines currency flows and notes that forex flows can often lead broader market sentiment, serving as a predictive indicator. They observe a recent uptick in yen buying, while other pairs like cable show subdued movement. This highlights the importance of monitoring currency-specific flows alongside broader indices for a more nuanced market view.

22:14

The segment covers a review of recent price action across various pairs, noting subdued volatility and the crossing of key lines in the pound crosses, which may signal trading opportunities. The speaker emphasizes that there is no one-size-fits-all approach to trading pullbacks or entries, encouraging traders to develop their own tactics based on market behavior.

24:32

Discussion of tactical trading approaches during market moves, especially around pullbacks and levels. The speaker highlights the importance of volume and pivot levels like S6 for breakout confirmation. They then transition to David, who begins discussing his trading observations and performance.

26:09

David shares his positive trading results on cable and the dollar across multiple time frames, describing the trading day as a ‘game of two halves.’ He highlights low volatility during the London open, which is unusual, and notes the strength of selling on the pound and buying on the dollar, with yen showing sideways movement but some buying interest.

28:02

David reviews his fxm trading account, which started with around $820 and has grown to over $1,400 through low-risk, basket trading strategies. He emphasizes his goal to double the account by year-end using consistent, scalable positions and highlights the importance of low-risk methods that suit individual trader preferences.

29:41

David elaborates on his trading approach of scaling into positions based on currency baskets, which allows flexibility in managing trades. He stresses that achieving consistent profits over time can open significant opportunities for traders, illustrating how small accounts can grow substantially with disciplined, consistent strategies.

30:46

Funded Forex program and trading education

30:46

The funded Forex program was introduced about a year ago to provide students with a comprehensive education in Forex trading, covering psychology, fundamental and technical analysis, and trading mechanics. The program includes extensive resources such as webinars, indicator tutorials, and around 250 to 300 hours of video content across approximately 450 lessons. It aims to offer students the chance to trade large live accounts risk-free, using the program’s capital, while developing consistency and leveraging their knowledge. There are three starting account levels ($5,000, $10,000, and $15,000), referred to as evaluation accounts, designed to assess trader performance while enforcing strict risk and money management rules.

32:24

Students choose their starting evaluation account and pay a one-time entry fee, which is the maximum amount they can lose since they trade with the program’s money. Trading is confined to 28 currency pairs, and upon meeting profit targets, the account size is multiplied by four, progressing through higher levels. The program includes risk and money management rules, and traders earn a 35% profit kickback during evaluation. When advancing to portfolio manager levels, profit shares increase to 50%, with flexible withdrawal options. Additionally, traders gain access to other markets like indices and gold as they progress.

33:51

The program is highly comprehensive, scaling up to $2 million managed accounts for advanced traders, with some currently active portfolio managers. The discussion then shifts to TradeStation, a powerful trading platform offering tools like a radar panel to quickly scan markets, primarily focusing on 28 Forex pairs. TradeStation’s features facilitate efficient market monitoring, and the presenter highlights its advantages, including filtering vast numbers of stocks and Forex pairs.

34:47

TradeStation’s radar panel allows quick navigation through currency pairs to monitor market conditions. The presenter shows tools like the trend monitor and volatility indicators that provide real-time insights into market buying or selling pressure. An example is given where a volatility trigger occurred on the Aussie CAD pair on a 5-minute chart, which passed without issue. The accumulation distribution indicator and volume profile levels are also used to identify key support and resistance zones, giving traders a clearer picture of price agreement between bulls and bears.

35:59

The presenter reviews a volatility trigger on the Euro Dollar pair and uses multiple tools, including NinjaTrader and CSI data, to analyze currency strength and potential trades. They emphasize looking for divergences in strength between currency pairs to identify trading opportunities. For example, pairs where both currencies move in the same direction are avoided, while pairs showing opposing strength, like Cable (GBP/USD), stand out as strong trade candidates.

38:28

Analyzing the dollar’s strength across multiple currencies, the presenter notes that the New Zealand dollar is currently the weakest against the dollar, followed by the pound, Aussie, euro, yen, Swiss franc, and Canadian dollar. The overall market trend on the 5-minute timeframe shows broad dollar buying, which guides trade decisions. The focus remains on identifying pairs that offer clear strength and weakness contrasts to maximize trading opportunities.

38:57

Currency strength analysis and market sentiment

38:57

The speaker explains the importance of trading with the universal market sentiment for a currency, though there are occasions to trade against it due to local events like interest rate decisions or political news. Generally, aligning with the broader market flow provides confidence. The discussion highlights the need to see consistent moves across related currency pairs, such as the dollar-yen rising while euro-dollar falls, but notes that the dollar-yen behaves unusually compared to other pairs and requires special understanding.

40:30

Further analysis focuses on the pound and its cross-currency pairs, noting that while the pound may be weakening against the dollar and yen, it can behave differently in crosses like pound-aussie or pound-new zealand. This discrepancy arises because sentiment varies across pairs and time frames. The speaker emphasizes the importance of isolating pairs to understand true market positioning and highlights that the New Zealand dollar’s weakness is influencing the pound-new zealand pair’s behavior.

42:28

After a brief microphone check, the speaker shifts to reviewing market sentiment on the three major U.S. stock indices (Dow, Nasdaq, and S&P) during the electronic Globex trading session. Despite a down day previously, markets are attempting to stabilize with sideways price movements and lower volatility compared to cash market hours. The speaker disagrees with the notion that Globex trading alone is untradable, explaining that while volume and price action differ, it remains a viable trading environment.

44:08

The focus moves to currency futures, explaining the differences in notation and pricing compared to spot forex, particularly how the dollar is often the counter currency in futures, leading to inverse price relationships. The speaker reviews various futures contracts including the Aussie dollar, pound-dollar, Canadian dollar, euro-dollar, and dollar-yen, noting that volume and price action principles remain consistent despite notation differences.

45:47

The speaker emphasizes the importance of patience in trading, particularly when waiting for breakout opportunities after periods of market congestion. Using the analogy of a salmon river, they describe how trends form gradually, and traders must be patient to capitalize on these movements when they emerge. This underscores a tactical approach to trading that values timing and discipline.

46:17

Volume point of control and breakout trading

46:17

The speaker explains the concept of strong levels in volume point of control (VPO), which represent areas of repeated price and volume testing, indicating strong resistance. These levels constantly change as they are recalculated based on accumulation and distribution data. The thicker the line, the stronger the resistance region. Both price resistance and volume resistance play key roles, with the market requiring significant effort to break through these large volume areas.

47:12

When trading breakaways, strong volume regions provide a safety net during pullbacks. An example with the currency pair ‘cable on 6B’ shows significant buying volume and a deep wick, indicating large operators entering the market. The price is at the volume point of control, suggesting a congestion phase might develop before any recovery. Despite current bearish conditions, the presence of buying volume signals potential market stabilization.

48:03

The analysis shifts to various major currency indices. The pound shows some buying but remains bearish, while the yen is stagnant. The dollar is pausing with slight upper wicks, indicating some hesitation. The euro, however, displays strong buying since the London market opened at 8:00. The speaker compares different currency pairs, noting that some like Euro Swiss move sideways due to both currencies rising, while others like Euro Aussie exhibit clearer trends due to opposing movements.

49:07

The speaker examines trending pairs such as Euro Aussie and Euro CAD, which show developing directional moves. Using a trend monitor on various timeframes, the discussion highlights slow but solid trends forming. The accumulation distribution indicator reveals strong levels when multiple minor levels cluster together, signaling significant resistance or support zones. This clustering effect adds strength to price levels.

50:03

Focusing on intraday trading, the speaker notes a solid upward move through strong accumulation distribution levels. Weak individual levels gain importance when clustered. Observing the dollar at the top and the pound at the bottom suggests a possible reversal opportunity. A small hammer candle indicates some buying, but the market’s heavy fundamental pressures cast doubt on a strong reversal yet. Caution is advised when interpreting early reversal signals.

51:01

Further analysis of volume and price action shows moderate buying volume with some uncertainty about the strength of the reversal. The speaker highlights the importance of rising price accompanied by rising volume for a sustainable move. Early stages of a reversal require careful observation of volume trends, as rising prices with falling volume are unlikely to continue strongly. The scenario offers potential for scalpers due to limited resistance levels ahead.

52:08

Resistance zones near the volume point of control are identified as significant barriers that may limit upward price movement to approximately 20 pips. This segment emphasizes understanding technical chart signals to estimate trade targets and potential exhaustion points, rather than relying on traditional risk-reward ratios. The market’s behavior is dictated by chart realities rather than fixed reward expectations.

53:06

The speaker discusses the utility of various charting tools and setups for quick market navigation, such as the Yen Matrix and currency major matrices. These tools provide instant snapshots of market conditions across multiple timeframes, allowing traders to identify opportunities rapidly. The example shows how these setups can help monitor major currencies and gauge overall market sentiment efficiently.

54:14

Using monthly charts of major currency pairs involving the dollar, the speaker reviews recent market moves, including a potential dollar rally and a pause in the cable (GBP/USD) pair. The commentary stresses that while technical analysis can guide decisions, outcomes remain uncertain. Trading reversals requires wider stop losses and accepting increased risk, as these moves are less predictable than established trends.

55:21

The final segment emphasizes that currency markets are fundamentally mean-reverting, with prices oscillating between overbought and oversold conditions. Traders must allow for buffering effects, as overbought or oversold states can persist before reversing. Successful trading involves understanding that markets do not conform to fixed risk-reward ratios but follow natural cycles of reversal, making flexibility and caution essential.

55:53

Reversal trading and chart pattern insights

55:53

The discussion opens with the concept that currency markets are ideal for tactical trading based on mean reversion, as currencies do not go to zero like stocks. The presenter notes similar price movements between Cable (GBP/USD) and Euro Dollar pairs, with Euro Dollar showing slightly stronger momentum. Technical patterns such as bullish engulfing candles are identified on short timeframes, suggesting possible reversals or continuations in these currency pairs.

57:12

Attention is drawn to key daily and hourly levels in the Euro Dollar and Cable pairs, highlighting the importance of certain resistance and support points like R6, volume point of control, and major index components. The Euro Dollar is particularly influential given its weight in the currency index, and recent news comments may be affecting its movement. The presenter emphasizes monitoring minute-by-minute developments and considering alternative majors for reversal trades if one misses an opportunity.

59:06

The segment covers the distinction between true reversals and counter-trend trades, noting that counter-trend trades carry higher risk and require careful level analysis. Tools like Renko charts and trend monitors are introduced to help identify momentum and transitions in trends, particularly in Cable, which is currently in a downtrend. The presenter advises weighing faster chart signals against the prevailing dominant trend and cautions about the risks of counter-trend trading.

01:01:01

The speaker discusses various trading approaches, emphasizing that there is no single correct method—traders must find what suits their temperament, whether reversals or breakaways. Reversal trading requires patience and wider stops, while breakaways can be aided by volume analysis to reduce fakeouts. Examples of breakaway failures and successes are given, underscoring the importance of volume confirmation and the use of key levels such as Fibonacci or volume point of control for placing tighter stops to control risk.

01:03:16

The presentation explains how markets often spend long periods in congestion phases, requiring patience and appropriate tactics. Candle patterns like bearish engulfing and hammer candles are highlighted as easier reversal signals. The challenge of placing stop losses around these patterns is discussed, with emphasis on comparing multiple timeframes and volume support to choose appropriate stop levels. The inherent risk of fakeouts in breakaway trades is acknowledged, but proper stop placement helps manage losses.

Understanding Congestion

01:06:01

Understanding congestion and the timing of reversals is stressed, with advice to study chart patterns and key levels to identify potential reversal points. The use of Renko charts combined with five-minute charts is recommended for more conservative entries. The segment references a previous analysis of Tesla stock, explaining that single candle signals can predict weakness but require confirmation and patience. The importance of corrections in markets, even popular stocks, is also noted.

01:08:04

The presenter elaborates on the slower timeframes for reversal signals and the need for confirmation from volume and trend indicators before acting. They reference specific examples where initial weakness was spotted and later confirmed. The Euro Dollar’s movement into its volume point of control is compared to Cable’s, suggesting possible similar outcomes. The choice between being bullish or bearish on the dollar affects trade decisions, emphasizing the importance of aligning tactics with prevailing trends and price action.

01:11:07

Traders are encouraged to experiment with different tactics—reversals, breakaways, or letting the chart dictate the approach—based on their comfort levels and market conditions. The use of tight stops with breakaway trading and the smoothing effect of Renko charts on choppy markets are discussed. The presenter notes recent price attempts to reverse and the significance of volume and price levels in validating these moves. Scalpers are advised to start small with micro lots to build confidence before scaling up.

01:14:09

The final segment highlights caution when trading aggressively on signals like hammer candles, noting anomalous volume and weak price action in Cable. The importance of micro lots for beginners is emphasized to manage risk and build confidence. The presenter concludes by reaffirming that different traders will prefer different tactics—reversals or breakouts—and that understanding market phases such as congestion can guide the choice of strategy. The session closes with a handover to the co-presenter.

01:16:21

Closing remarks and further resources

01:16:21

The speaker provides information on where to find analysis and educational content related to stocks, commodities, and Forex trading. They mention their website anacooling.com for stock and commodity analysis and a Facebook page called Learn Forex Trading for Forex content. Additionally, a new Twitter feed dedicated to Forex has been started but is not yet active. The Quantum Trading Education program and its indicators are also referenced as resources.

01:17:38

There were technical difficulties during the webinar, with one participant experiencing no picture and another no sound. The speaker apologizes for these issues, noting that managing technology can be more stressful than chart analysis. They remind viewers that although it is a holiday in some North American markets, Forex and stock markets remain open with potentially reduced liquidity. The session concludes with well wishes for a safe trading week and a note that the program will resume next week.

By Anna Coulling – creator of volume price analysis