Trading with the currency flows using a simple currency matrix for spot and currency futures

Trading with the currency flows using a simple currency matrix for spot and currency futures

00:11

Introduction and Aussie Dollar Overview

00:11

The speaker begins by discussing multiple currency strength index charts across different time frames (one, five, ten, and fifteen minutes), focusing on the Australian dollar which is continuing to rise. There is significant dollar selling activity visible across these time frames, contributing to the Aussie dollar’s climb. The speaker also mentions reviewing dollar futures and the dollar spot matrix to analyze these trends further.

01:14

The analysis continues with the Australian dollar’s upward momentum possibly extending across longer time frames depending on individual perspectives. Attention shifts to yen pairs, noting a reversal from buying to strong selling in currencies like the Australian yen and New Zealand yen, with dollar yen and Swiss yen moving similarly. Additionally, strong Canadian dollar buying has reversed and is now rising sharply, presenting various trading opportunities. The speaker transitions to examining different workspaces for a detailed market overview.

02:09

London Open and Volatility Candle Explained

02:09

The speaker discusses the strength of a trend visible on the 15-minute chart, noting a typical volatility spike at the London open. They explain how Ninja Trader software shows local time, highlighting a volatility trigger during the European session. The trend monitor remains steady, giving confidence to hold the position despite market congestion, illustrating the importance of patience during such periods.

03:09

Advice is given on managing trades during rapid market spikes and congestion. The speaker recommends closing positions to lock in profits when the market either congests or reverses, avoiding emotional stress. If holding multiple positions, partial exits are suggested, but for single trades, closing out is safer. The process involves re-entering trades after congestion by reassessing volume and indicators across multiple timeframes, with minimal loss mainly from spreads, emphasizing disciplined trade management.

04:33

Volatility and Market Maker Activity

04:33

The segment explains volatility as a compression of time in price action, where significant price movements happen much faster than usual. This rapid movement often traps traders into weak positions due to the fear of missing out. The instinct to jump into fast-moving markets is natural but can lead to regret as traders get caught in sudden squeezes.

06:05

This part discusses high trading volume during volatile moves, indicating market maker participation. After rapid price changes, a squeeze or reversal is expected, though not guaranteed. The speaker notes that trading outcomes vary, with some moves extending while others reverse quickly, causing potential pain for traders.

06:57

The focus shifts to the Australian dollar’s strong climb on a five-minute chart, noting it is overbought and likely to reverse eventually. Despite this, current trends remain positive with a falling US dollar. The trend monitor on even very short time frames shows consistent bullish signals during these price phases.

07:23

Trend Monitor and Volume Analysis

07:23

The segment discusses the behavior of market trends with a focus on volume and price action. The speaker explains that multiple time frames all showing positive indicators suggest an ongoing uptrend. However, there are early warning signs of a potential pause or reversal, primarily indicated by volume starting to fall away despite rising prices. This decline in buying volume signals that buyer participation may be waning, which could lead to a market pause or reversal. Volume Price Analysis (VPA) is highlighted as a useful tool to anticipate these changes with greater confidence, helping to reduce emotional reactions by providing early clues about market direction. The segment ends with an observation of recent candle patterns showing mixed volume and price spread, suggesting possible support and a continuation of the trend, while also noting discrepancies in volume across different time frames.

10:10

Currency Futures and Volume Point of Control

10:10

The segment discusses the relationship between candle spread and volume in currency trading, highlighting signs that a strong trend may be tiring despite continued higher volume. It focuses on the pound’s strong buying momentum around the London open, noting a reversal and a continuation of upward movement. The discussion touches on the differential behavior of the dollar compared to the pound across various currency pairs, emphasizing that much of the current move is driven by buying in the pound.

11:06

The focus shifts to currency futures, providing a perspective on the dollar’s strength through futures contracts for currencies like the Australian dollar, cable (British pound), and Canadian dollar. It explains the inversion of some pairs, such as CAD/USD versus USD/CAD, and highlights the unique behavior of the dollar yen pair. The segment explains how the futures market gives a direct view of dollar selling strength, complementing the spot market analysis.

12:16

Continuing with futures market analysis, the segment reviews trends in the euro, yen, and New Zealand dollar futures against the dollar. It confirms that the futures trends align closely with those seen in the spot market, particularly noting strong buying in the Australian and New Zealand dollars. The discussion includes brief observations on volatility triggers and pauses in price movement, suggesting ongoing upward momentum.

13:22

This part explains the concept of volume point of control and its role in forecasting market continuation. The speaker describes how low volume areas act as easier passage zones for price movement, similar to support and resistance levels. The volume point of control represents the highest concentration of orders, acting as a key pivot. Moving away from this zone toward lower volume areas signals potential for easier price penetration and continuation of a trend.

14:24

The analysis continues on volume distribution, emphasizing how dense order concentration in certain price areas can act as resistance. Traders are advised to use slower time frame charts to better understand volume point of control shifts and market perspective as prices move. The segment transitions back to spot markets, noting that the inversion of certain pairs in futures versus spot markets provides a useful mirror image for understanding volume and price action.

15:34

The final segment highlights the value of analyzing volume profiles alongside price action in the spot market to understand dollar selling dynamics across pairs like cable and dollar Swiss. It stresses the importance of identifying any anomalies or volatility triggers and assessing movement into low or high volume areas to inform trading decisions, especially for long positions.

16:07

Accumulation Distribution Indicator and Support Levels

16:07

The speaker explains the concept of price-based resistance and support levels using the accumulation distribution indicator. The thickness of lines on the chart indicates the strength of these levels, which are stronger when tested repeatedly. This is likened to Popeye eating spinach—the more an area is tested, the stronger it becomes. Clusters of these strong areas create even more significant support or resistance zones.

17:07

The discussion continues by highlighting how areas sandwiched between stronger regions become very robust support or resistance. Observations of recent selling volume suggest a potential reversal. The importance of volume and price agreement is emphasized, looking for anomalies across candles and timeframes to identify potential reversals. A specific 10-minute chart example is mentioned that signals possible market weakness.

18:03

The speaker analyzes the New Zealand dollar’s behavior across multiple timeframes, noting it is entering an overbought region on the one-minute chart and beginning a downward trend. Buying activity indicates scalpers are active. The Aussie and New Zealand dollars, though generally correlated as commodity currencies, can diverge, and this divergence is acknowledged as a normal market behavior.

18:57

Currency Divergence and Risk Management

18:57

The speaker discusses the behavior of risk currencies like the Australian dollar (Aussie) and Japanese yen, noting that these currencies often move in similar directions due to external commodity influences and market sentiment. They emphasize a strategy focused on identifying extremes to enter positions early, being patient, and using wider stop losses to manage the risk of a currency remaining at a high level before reversing. The example of the yen selling off strongly against the Canadian dollar (CAD/JPY) is given, illustrating how momentum in an established trend allows for tighter stop losses.

20:33

Further explanation is provided on stop loss placement depending on trade timing. Entering a trend early requires wider stop losses due to potential pullbacks and congestion, whereas entering during an established trend allows for tighter stops. The speaker highlights the importance of risk versus reward and adapting strategies to individual trading styles. They also illustrate the current pause in the Australian dollar’s upward momentum using volume analysis and price support/resistance levels, showing a potential topping pattern and signaling a likely upcoming sell-off.

22:23

The analysis continues with a close look at volume and price action on short timeframes, revealing signs of weakening buying strength and increasing selling pressure in the Aussie dollar. The market is entering a congestion phase, confirmed by trend monitor color changes from bright to darker blues and reds, which may indicate a developing downward trend. The speaker notes a lack of significant volume-based support in certain price areas, suggesting a potential for rapid price movement downward. Attention then shifts to the currency matrix tool showing real-time currency strength and weakness across multiple timeframes.

25:11

Updates on development plans for integrating new indicators into trading platforms like TradingView and TradeStation are shared, including features to highlight highs, lows, and averages in the currency matrix for better market context. The speaker reviews current currency strength data, showing the Australian dollar beginning to roll over while the US dollar remains strong, particularly against the CAD. The Japanese yen’s weakness is emphasized, with multiple pairs showing yen selling across timeframes. The importance of aligning trades with the overall market sentiment or ‘river of sentiment’ is stressed to avoid trading against dominant market flows.

28:04

Market Sentiment, Indices, and Betting Odds Overview

28:04

The discussion begins with an overview of currency and stock indices, highlighting New Zealand dollar’s lagging performance. The focus then shifts to U.S. primary indices—the Dow (YM), Nasdaq (NQ), and S&P E-mini (ES)—with charts showing strong current movements and notable volatility, especially a large volume spike and congestion on the Nasdaq’s five-minute chart, hinting at possible reversals.

29:04

The presenter examines multiple timeframes using Renko charts, which reduce noise and smooth price action, and discusses applying camarilla indicators available on NinjaTrader but not MT4. The segment emphasizes the importance of analyzing various permutations for the dollar’s behavior, setting up for a later detailed explanation.

30:32

A summary infographic from Twitter is introduced, outlining political scenarios affecting the U.S. dollar. A ‘blue wave’ scenario with Democratic control is expected to weaken the dollar due to stimulus spending. Conversely, a ‘red wave’ scenario implies uncertainty but also significant spending. The dollar remains the key currency to watch amid these political outcomes.

31:39

Attention returns to the indices, which continue to rise despite some congestion on the Nasdaq. The focus shifts to currency pairs, particularly the volatile Pound-Yen. The speaker highlights the value of monitoring betting odds on major events from sites like Sporting Index and Betfair, as these live odds can provide real-time market sentiment insights.

33:07

Betting companies’ odds are discussed as reliable indicators due to the large volume of money and balance of backing and laying bets they manage. The odds are very close, reflecting uncertainty. Viewers are encouraged to watch these live odds for clues about market direction during major events, though the presenters do not use them directly for trading.

34:37

Updates are given on the availability of trading indicators across platforms including MT4, NinjaTrader, and soon Tradestation and TradingView. The new TradingView indicators will be included free for full-package subscribers, making this a good time to invest. The indicators cover currency matrices, heat maps, volume, and VPOC, aimed at enhancing traders’ analytical tools.

36:00

The comprehensive Forex education program at quantumtradingeducation.com is detailed, highlighting its extensive content covering psychology, fundamentals, technical analysis, and trading mechanics. The program includes hundreds of lessons, videos, PDFs, and a supportive chat room hosted daily by the presenters, aimed at helping students from beginners to full-time traders.

37:27

The program’s success and positive feedback from students are emphasized, noting that it supports traders in achieving income goals or transitioning to full-time trading. The session concludes with a preview of a 3 PM U.S. market opening update focused on the presidential election’s market impact. A question about adding a particular feature to an indicator is addressed, clarifying it cannot be accommodated.

38:56

The session ends with a brief farewell and thanks to attendees, inviting them to join the next scheduled discussion.

By Anna Coulling – creator of volume price analysis