Two great trades on the GBP/USD using volume price analysis

Two great trades on the GBP/USD using volume price analysis

At the start of the London forex trading session, the market was buying the US dollar across the complex, a fact confirmed by considering this in both the spot and futures markets along with the currency array indicator for NinjaTrader. The GBP/USD was one in particular with an excellent move lower, before reversing with a terrific volume signal as the buyers stepped in to reverse the trend with the BOE chairman helping to drive the sentiment.

Introduction and Dollar Index Overview

00:14

The speaker begins by ensuring audio clarity and shifts focus to analyzing the US dollar, emphasizing the significance of the dollar index at a critical point. They reference Wyckoff’s laws, highlighting the principle of cause and effect in market congestion, suggesting that prolonged congestion often leads to strong momentum once a trend emerges. The discussion includes the presence of key support and resistance levels, indicating an intriguing juncture for the dollar. Additionally, the speaker notes the impact of widespread market sentiment, forecasting an interesting period ahead for trading major currencies.

01:19

Using Currency Futures for Trading

01:19

The speaker explains currency futures, focusing on specific contracts like the Aussie dollar (6A), Cable (6B), and Canadian dollar (6C). They highlight that some futures are quoted inversely compared to spot rates, such as CAD/USD being presented as USD/CAD in futures, which affects chart interpretation. The speaker prefers trading short positions and uses futures to capitalize on downward trends. They also mention different futures like Euro dollar and Yen dollar, noting the inverse relationship in some cases to illustrate dollar strength or weakness from multiple perspectives. Additionally, the speaker references a market move at 8 o’clock that created a typical trap for traders, emphasizing the quick nature of such moves.

02:45

Volatility and Congestion Explained

02:45

The speaker discusses a rapid and volatile market movement occurring at eight o’clock London time, characterized by a strong downward move and high participation. They explain the current market phase as congestion following this volatility trigger, with two possible outcomes: continued congestion or a reversal. The advice given is to close out positions once volatility is triggered within your trading window to secure profits and avoid the stress of uncertain congestion phases. Alternatively, scaling out by reducing position size is recommended to manage risk.

04:06

The focus shifts to managing positions during congestion, especially if currently in profit or at a loss. For profitable trades, it’s advised to close out and secure gains to avoid the uncertainty of the congestion phase. For losing positions, the decision is more complex, requiring assessment of whether the market move will continue or reverse. The speaker emphasizes cautious decision-making during these volatile periods to minimize losses and protect profits.

04:29

Managing Positions During Congestion

04:29

The discussion focuses on analyzing currency futures and spot markets using charts and reversals. Examples include the Australian dollar, Canadian dollar, and others, highlighting key bearish engulfing patterns and two-bar reversals on 5- and 10-minute charts. The speaker explains how futures provide a slightly different perspective on volume compared to spot markets, although they generally align. A currency matrix showing major pairs like cable (GBP/USD), Aussie dollar, euro dollar, dollar Swiss, and New Zealand dollar is used to illustrate how traders can gain insight into multiple currency pairs simultaneously. The segment also notes the market open at 8 o’clock London time as a reference point for analysis.

06:05

Spot vs Futures Market Perspectives

06:05

The discussion begins by analyzing the New Zealand dollar showing a strong signal of weakness, contrasting with the Eurodollar chart, which shows indecision through a long-legged doji candle and falling volume in a rising market. Moving to the British pound (Cable), there is a clear signal of volume weakness and a continuing downward trend, illustrating the advantage of using a trend monitor to take profits and re-enter positions as the trend remains supportive.

07:02

The trend monitor remains consistent, indicating no change in market sentiment on a five-minute horizon, helping traders stay in profitable trends. It emphasizes the difficulty of holding onto winning positions despite small inevitable losses in trading, which are outweighed by fewer large gains. The challenge lies in maintaining positions through market congestion and volatility, which requires patience and discipline.

08:04

Examining the Eurodollar, there is heavy selling with high volume but little price movement, signaling a weak market searching for continuation. The trend monitor aids in maintaining positions during this period of uncertainty. The market is approaching a low volume area on the volume point of control histogram, suggesting price will move quickly through this zone due to minimal volume resistance.

08:57

The market’s movement through low volume zones is rapid because of lack of volume support on the VP histogram. Traders must assess the best current trades by analyzing momentum across different currencies and timeframes (3, 5, 10, 15 minutes). The U.S. dollar Canadian dollar pair is showing strong upward momentum, while the Eurodollar is lagging behind, prompting further investigation into why the Euro is not following the strong trend seen in other pairs.

10:00

Currency Strength Indicator Insights

10:00

The currency strength indicator reveals momentum and directional movement in currencies. It helps identify when currencies are overbought or oversold and highlights which currencies or pairs are moving strongly or in sync. This allows traders to avoid pairs with no momentum and focus on those with strong directional moves, as seen in examples like the dollar CAD and cable across various time frames.

10:52

The currency strength array visually shows the strength and trend of currency pairs by the steepness of their lines, indicating how strong a trend is. It also compares individual pair sentiment with the overall market sentiment to determine if the market is universally buying or selling a currency, which currently shows a strong buying sentiment for the dollar across faster time frames.

11:53

This indicator also signals when currency pairs approach oversold or overbought levels using color-coded alerts, such as bright red or blue. These visual cues help traders anticipate potential reversals. The tool provides multifaceted insights by displaying multiple time frames simultaneously, enabling traders to see consistent trends or divergences across short intervals.

12:52

The discussion highlights the importance of understanding time frames in trading, likening it to Russian dolls with nested layers. Strong selling pressure is noted on the British pound across multiple time frames, illustrating how trends at smaller intervals fit into larger market movements. This layered approach is crucial for interpreting complex market behavior.

13:25

Timeframes and Confirmation Bias

13:25

The speaker explains the importance of selecting an appropriate time frame when trading, noting that market behavior can vary drastically from very short cycles like one minute to longer periods such as 15 minutes. They highlight the common tendency for traders to shift to longer time frames seeking confirmation for their initial decisions, which is driven by confirmation bias—the psychological urge to validate one’s choices by finding supporting evidence.

14:18

Confirmation bias is described as an inherent part of human nature, making it difficult to avoid. Traders often look for signs that affirm their decisions, similar to how someone might seek reassurance after choosing a particular car model. The speaker emphasizes the need for discipline in trading, urging traders to clearly define their strategy and stick to their chosen time frame, whether it’s a quick in-and-out approach on shorter intervals or a longer-term perspective.

15:12

Market movements are analyzed with examples of currency behaviors: the Australian dollar is being bought, the pound may rise, the dollar might fall, and the yen is declining. From a scalping perspective, very short-term traders (using 15 to 60-second intervals) could capitalize on these minor oscillations to take quick profits on currencies like yen, Aussie, and pound.

15:41

Longer-term traders focusing on 15 to 30-minute charts are less concerned with short-term fluctuations and more interested in identifying secondary reversals against the primary trend, which remains bearish. Volume Price Analysis (VPA) is highlighted as a powerful tool to distinguish whether a reversal is merely secondary or represents a full change in the primary market trend.

16:14

Primary vs Secondary Trend Reversals

16:14

The discussion explains the concept of volume price analysis (VPA) in forex trading, emphasizing the importance of distinguishing between primary and secondary moves to avoid exiting trades prematurely. It highlights that current currency pairs like dollar yen, Swiss franc pairs, and others are moving in the same direction, offering no trade opportunities due to congestion. The speaker encourages continuous analysis of charts and major currency pairs to extract meaningful trading information.

17:37

A specific example of a currency pair’s price action is examined, noting a snap low move accompanied by high volume and subsequent volatility and congestion. The unusual volume pattern is analyzed across different market sessions, particularly the European session, pointing out that despite increased volume, price movement remains weak, suggesting a lack of strong momentum.

18:32

The focus shifts to how different currency pairs react during a sell-off in the euro dollar. It explains that selling pressure can rotate among currencies within a matrix, causing pauses in price moves. Observations from the currency strength index (CSI) are used to understand these dynamics and anticipate potential shifts or pauses in the market.

19:07

Currency Pair Rotation in Market Matrix

19:07

The speaker explains a shift in currency pairs, highlighting that the euro is moving sharply lower while the pound is oversold and may be pausing. The US dollar is strongly overbought but has continued its trend despite previous overbought conditions. This leads to rotations within currency pairs, where selling pressure softens in one pair and intensifies in another. The speaker emphasizes the importance of monitoring this matrix continuously and transitions to reviewing different time frames on the trading platform, including 15-second to 10-minute intervals.

20:17

Multiple Timeframes and Volatility Triggers

20:17

The presenter discusses using the 15-second chart for trading due to its high volatility and velocity triggers, emphasizing the importance of multiple time frames for better market perspective. They explain how volume indicates market maker participation, with high volume showing active involvement and low volume suggesting trap moves designed to mislead traders.

21:15

The analysis continues with the presenter noting a possible market reversal indicated by volatility and volume trends across different time frames. Observations on the one-minute and 15-second charts reveal pullbacks influenced by volatility, while the five-minute chart shows developing wicks that may signal significant price movements, with volume playing a crucial role in confirming these changes.

22:10

The focus shifts to the potential significance of a large wick forming on the lower body of a candle, with the presenter highlighting the importance of volume in validating this pattern. They mention managing multiple charts and demonstrate how to monitor real-time volume using chart settings, noting that the London session shows the highest volume, which could influence price action in the next few minutes.

23:12

The presenter highlights increased volatility and strong buying activity on shorter time frames, supported by significant volume. They suggest that the pound is heavily oversold on the five-minute chart, presenting a potential opportunity for an early reversal trade. The strategy involves setting a wider stop loss to accommodate market buffering, with the expectation of a favorable payoff from entering the trade early.

24:15

Early Entry vs Waiting for Confirmation

24:15

The speaker discusses the strategy of entering the ‘cable’ (GBP/USD) forex trade early during a potential reversal, accepting a larger stop loss to secure an advantageous position and maximize trend gains. They compare this approach to paying top dollar for the best concert seats, emphasizing the willingness to take more risk for higher reward. An example is given with the New Zealand dollar versus the yen, which is showing strong upward momentum from an oversold position, highlighting a promising trade opportunity.

25:13

Continuing the discussion, the speaker contrasts early entry with waiting for a clearer trend confirmation before trading the cable or New Zealand dollar against the yen. Waiting results in a smaller stop loss and lower risk, but also a reduced potential return since part of the move may have already occurred. The speaker stresses the importance of balancing risk and reward based on individual trading psychology. They recommend beginning with the psychology module in their forex program to understand personal strengths and weaknesses, which is essential for developing an effective trading strategy.

26:12

Psychology and Trading Style Adaptation

26:12

The speaker emphasizes the importance of recognizing personal weaknesses to tailor a trading approach that suits individual strengths and comfort levels. They caution against forcing oneself to trade in ways that feel uncomfortable, such as using very fast time frames like 15-second charts if one cannot handle the speed. Instead, traders should find the time frames and methods that work best for them, as there is no single correct way to trade.

27:12

The analysis identifies early signs of buying pressure indicated by volume and price action on shorter time frames, suggesting a potential upward trade opportunity. The trend monitor shows a positive transition, and the discussion explains how resistance at the volume point of control and price-based resistance levels can impact market movement. The speaker highlights that similar principles apply across different chart time frames, from seconds to daily charts.

28:07

Volume Point of Control and Resistance

28:07

The market is experiencing congestion at the volume point of control, where the heaviest trading volume is concentrated, causing a pause and volatility. There is resistance overhead at the 2740 level; if the price breaks through, the move up to 2744 should be easier due to decreasing volume. On shorter time frames like the one-minute chart, there is a low volume region with minimal price resistance, allowing for a wider trading range of about 15 pips before encountering volume resistance again.

29:06

The trading opportunity here is promising with rapid upward movement and a potential volatility trigger expected soon. The volume point of control shifts continuously, and current volatility on the 15-second chart indicates upward momentum. The speaker has entered the trade early, accepting a higher risk, and is now 30 pips in profit. This highlights the trade-off between risk and reward, where early entry can yield significant gains despite initial costs.

30:03

The speaker plans to take profits now that the volatility trigger is confirmed, securing 30 pips and opting to wait for the next move. The expectation is a further rise to around the 70 level, where volume again thins out, potentially offering another 10 to 14 pips. The longer-term trend has not yet established, as only two candles have formed, and the trend monitor remains unchanged. The momentum is currently driven by a combination of pound buying and dollar selling.

30:59

Momentum in the market is fueled by simultaneous buying and selling pressures within the currency pair, which is crucial for sustained movement. The New Zealand currency is also showing a strong upward trend, which is developing well. The speaker notes the importance of monitoring overbought and oversold conditions continuously and suggests that this movement might represent the start of a new trend, although it is still too early to confirm.

31:28

Trading Strategies and Patience in Congestion

31:28

The speaker discusses trading strategies, emphasizing the need to balance profits and losses while choosing between trading reversals, trends, breakaways, or congestion. They highlight the importance of patience, especially when observing the dollar’s price movements, as a strong trend could emerge influenced by political factors. The speaker explains their approach of taking profits early to avoid congestion or reversal risks and being ready to move focus elsewhere as market conditions change. The session concludes with apologies for running over time and a brief wrap-up.

33:20

Forex Trading Program and Resources Overview

33:20

The Complete Forex Trading Program is available at Quantum Trading Education and includes core modules such as a comprehensive psychology module recommended as a starting point, fundamental analysis covering market responses, relational analysis of related markets, and an in-depth technical analysis module focusing on Volume Price Analysis (VPA). The program offers over 200 hours of video content including chart examples, indicator usage, topic webinars, and a resource library. Daily live sessions are hosted by Anna and the speaker, supported by an active VPA chat room for students. Additionally, Anna’s site cooling.com provides access to books in both Kindle and paperback formats, while quantumtrading.com offers various trading tools and indicators compatible with multiple platforms, with Tradestation integration forthcoming.

34:40

Platform Updates and Future Webinars

34:40

The speaker discusses the significant effort involved in developing two trading platforms: TradeStation Global 9.5, integrated with Interactive Brokers for discounted trading, and TradeStation Securities TS10 and above with advanced features like RadarScreen. They highlight the power and appeal of these platforms and announce an upcoming separate webinar focused on TradeStation. After launching TradeStation, they plan to update TradingView by porting missing indicators now possible due to improved Pine Script functionalities. Customers with the full package will receive these new indicators free, as a token of appreciation for early investment. The speaker also mentions that prices will increase upon launch, similar to previous versions.

35:54

Session Wrap-up and Next Steps

35:54

The speaker concludes the session, thanking attendees for their participation and hoping they enjoyed the training. They mention a follow-up session focused on the U.S. dollar scheduled for the afternoon at 3:15. The speaker signs off with well wishes for safety and a farewell.

By Anna Coulling – creator of volume price analysis