Using volume price analysis to trade stocks on the Tradestation and NinjaTrader platforms

Using volume price analysis to trade stocks on the Tradestation and NinjaTrader platforms, and using Radarscreen on Tradestation

00:00

Introduction to day trading stocks

00:00

The session welcomes both returning and new viewers to a discussion on day trading stocks. It explains that stock trading content has been separated from previous combined sessions to focus more closely on it. The presenter highlights the use of the Radar Screen Scanner from TradeStation, a tool that helps sift through stocks efficiently. The session aims to gradually introduce key elements of selecting potential stocks for day trading, acknowledging this as a complex topic. A disclaimer is also mentioned before proceeding.

01:08

Volume price analysis methodology

01:08

The speaker emphasizes the risks of trading and advises against using money one cannot afford to lose. They introduce the session’s focus on volume price analysis, a method that examines the relationship between price action and volume to validate chart patterns. This methodology helps traders confirm whether a price movement will continue or if a reversal is likely, aiming to provide clarity in stock selection.

02:10

The methodology is supported by a companion resource with 200 worked examples, demonstrating how price action cycles repeat across different time frames in a fractal manner. The approach uses candlestick charts, which aid pattern recognition, combined with support and resistance levels, considered the most critical elements. Additional proprietary indicators supplement this base methodology, enabling traders to analyze charts effectively and predict the next phase in the price cycle.

04:04

Market sentiment and earnings overview

04:04

The segment begins with an overview of current market sentiment on the day of President Biden’s inauguration, highlighting positive reactions such as rising Dow, S&P, and Nasdaq futures. It mentions an interesting fact about the Nasdaq: the percentage of stocks above their 200-day moving average is at its highest since 2004, suggesting a potential market reversal. However, there are unusual market factors at play, contributing to mixed sentiment.

05:24

The discussion shifts to fundamental news, noting no significant market-moving data like employment or retail sales releases. Attention is drawn to Janet Yellen, former Federal Reserve Chair and current Treasury Secretary, who is expected to influence markets in the coming months. The speaker emphasizes the importance of the current earnings season, a critical time for stocks with scheduled earnings reports that traders must monitor closely.

06:37

The speaker highlights the value of earnings calendars, recommending the Bar Chart website for tracking upcoming earnings announcements. These reports can cause stock price volatility with gap ups and downs, impacting day traders significantly. Understanding Volume Price Analysis (VPA) is suggested as a way to navigate earnings season volatility. The speaker also introduces the topic of the options market, promising to explore it in future sessions, noting its growing accessibility and influence on stock price movements.

08:17

The segment concludes by emphasizing the close relationship between options market activity and stock price behavior. With the rise of retail traders using easy-to-access apps, options trading has become more prevalent. Traders seeking opportunities should consider monitoring options market trends as part of their strategy.

08:51

Stock selection frameworks and tools

08:51

The speaker discusses the process of selecting stocks using a checklist or framework, highlighting the use of free tools like Bar Chart and Finviz, as well as paid services used previously. They describe their method of manual stock review based on volume price analysis (VPA), focusing on chart patterns and price action phases such as trends and congestion. This approach allows them to efficiently filter hundreds of stocks by identifying which ones to watch.

10:43

The speaker explains how they filter stocks on Finviz by market capitalization to avoid overwhelming results. They mention considering heavily shorted stocks as a metric since these can be prone to short squeezes, using Tesla as an example. The discussion introduces the concept of float, the number of shares available for trading, which is important in understanding stock price volatility and liquidity.

11:47

The concept of float is elaborated on, explaining the role of market makers (or specialists) who manage share availability and pricing. Stocks with a large float are harder to move because more shares are available, leading to less volatility, while stocks with a smaller float are more illiquid and volatile, offering bigger price moves but with higher risk. The speaker notes that these topics will be explored in more detail later.

14:14

The speaker highlights Finviz’s filtering capabilities, specifically for U.S. stocks, and introduces Stock Beep, a tool that helps identify stocks with significant volume and price movements such as new highs, new lows, or breakouts. These criteria help traders decide if a stock might reverse or continue its trend, emphasizing the importance of matching stock selection with preferred chart patterns and setups.

15:28

The speaker discusses how volume price analysis aids in assessing stocks identified by scanning tools, helping traders decide on reversals or continuation patterns. They plan to elaborate on specific elements of this methodology in future sessions and encourage viewers to ask questions for live discussion. The segment concludes by explaining the motivation to treat stock trading as a separate topic for focused teaching.

16:45

Tradestation radar screen setup

16:45

The speakers introduce their indicators programmed for the TradeStation platform, which they have used regularly in the past. They discuss the latest version, TradeStation 10, highlighting its powerful feature called the radar screen. One speaker attempts to display the radar screen but mentions issues with screen resolution and visibility.

18:06

The radar screen setup is demonstrated using a limited selection of stocks related to previous analyses on the speaker’s blog. The radar screen allows users to add both standard and proprietary indicators. The speaker emphasizes the importance of the first indicator they programmed—the volatility indicator based on the Average True Range (ATR)—which operates in real time and is particularly valuable for trading stocks.

19:16

Volatility indicator and trading signals

19:16

The speaker explains the use of a volatility indicator that triggers when price action moves outside the average true range, signaling a high probability of reversal or congestion. This indicator is effective across multiple time frames, particularly on slower charts like hourly, and often precedes a market reversal. The volatility trigger is described as a tool that helps identify potential setups and warns traders against jumping into a trend prematurely, as market makers may cause sudden reversals. The discussion then shifts to analyzing the Kellogg’s chart, highlighting the occurrence of a volatility trigger alongside trend dots, trend monitors, volume points of control, and support/resistance lines. The focus remains on understanding volatility signals before moving on to further analysis.

22:05

Kellogg’s chart volatility example

22:05

The segment discusses Kellogg’s stock price action analyzed through Volume Price Analysis (VPA). It highlights a volatility candle from the previous day that caused price movement into the volume point of control (VPOC), a key level where the most volume has traded. This area acts as a strong support zone, trapping some traders. The price’s behavior around the VPOC demonstrates congestion and volume-based support, with price reversing within the candle’s spread but continuing the downtrend.

23:53

Towards the end of the trading session, another volatility candle appears with an unusual buying volume that doesn’t push prices higher, signaling an anomaly. This leads to a sharp price drop when the market opens the next day, confirming the bearish momentum. The segment explains how volatility candles can indicate support and resistance levels, and advises exiting trades after such volatility triggers as price often retraces within the candle’s range before continuing the trend.

25:02

The discussion continues on volatility candles and their significance in marking support and resistance. The segment emphasizes waiting for a clear break below the low of the volatility candle to confirm continuation of the move, which in this case leads to further price decline. It also explains the importance of volume point of control as a support level where price often reverses. Weak reversal candles with low volume suggest limited upside potential, reinforcing bearish conditions.

26:17

This part explains the characteristics of two-bar reversals and hammer-like candles, noting that strong volume is needed to validate bullish reversals. In this case, low volume and weak candle formations indicate the reversal is unlikely to hold. The segment stresses the importance of recognizing support and resistance using multiple methods, including price levels, volume, and camarilla pivot points, to improve stock selection and trade decisions.

27:18

The final segment covers the use of radar screen indicators and trend monitors that confirm a bearish trend despite price retracements, highlighting the approach to the S4 support level. It stresses the need for significant volume for price to break key levels, referencing Richard Wyckoff’s principle of ‘effort versus result.’ The speaker pauses to pass control to a colleague for further discussion, briefly mentioning technical issues with zooming on an iPad and switching to the NinjaTrader platform.

29:20

Wide candle and wick analysis

29:20

The speaker compares a scanner platform unfavorably to TradeStation, praising the latter’s capabilities. He explains how to measure a wide candle, emphasizing the importance of wicks as indicators of buying and selling pressure. Candle analysis is comparative, depending on the trading session and instrument. Using Procter & Gamble intraday scalping as an example, he describes widespread candles with big wicks and narrow bodies, noting there is no strict rulebook; classification depends on the context of the current chart and market conditions.

31:20

The methodology is intuitive and chart-specific, varying across different stocks or markets. Volume price analysis involves benchmarking candles to identify anomalies. A benchmark candle sets a reference for candle size and volume, allowing traders to spot unusual volume or price action within the same session, which may signal potential market changes or red flags. This comparative approach helps assess the significance of volume spikes and candle spreads in real-time trading.

32:48

Analyzing volume spikes, the speaker highlights how a candle with similar spread but significantly higher volume than the benchmark signals an anomaly. He demonstrates this with a one-minute chart, removing distortions caused by spikes to better identify anomalous candles. A candle with a large upper wick and high volume indicates market weakness rather than strength. Resistance levels, identified via the accumulation distribution indicator, show areas of price strength where the market struggles to break through, confirming trend weakness as volume patterns correspond with price declines.

35:07

The speaker revisits the classification of widespread candles using volume benchmarks. He notes a candle with similar volume but a large upper wick indicates significant selling pressure. Small rallies within a downtrend suggest minor buying but are insufficient to reverse the trend. The volume point of control, marked by a yellow line, is crucial for identifying where heavy volume accumulates and where price levels may act as strong support or resistance. Current price action shows resistance above and support below, with the support line appearing breached, indicating pressure on the stock. The speaker prepares to provide a broader analysis of this particular stock.

36:59

Trading short and options market basics

36:59

The speaker discusses their preference for trading short in various markets, noting that markets tend to fall faster than they rise. Using Kellogg’s as an example, they explain how price rallies and pullbacks interact with volume points of control on daily charts. The presence of upper body volume during rally attempts signals market fragility, and a recent big move followed by a failed rally confirms a downtrend with the trend monitor turning red.

38:19

The concept of volume-based support and resistance is explained, emphasizing that low volume areas offer little support or resistance, making price movements faster through these zones. This principle applies across timeframes, whether daily or five-minute charts. Returning to Kellogg’s, the speaker highlights the significance of breaking below the volume point of control, which leads to rapid declines due to the lack of volume support.

39:22

Once Kellogg’s breaks below key volume support levels, the stock experiences accelerated declines as it moves through low volume areas. Minor pauses occur at regions of higher volume, but momentum increases to the downside, reflected by a consistently red trend monitor. The speaker notes that this setup creates a favorable opportunity for short trading, describing the stock’s drop from around 62 as an attractive short trade.

40:18

Short selling mechanics are outlined, explaining that brokers lend stocks to traders who wish to short sell, but traders must be aware they are responsible for paying any dividends during the short position. A more straightforward and lower-risk method to profit from falling stocks is through options, specifically buying put options, which increase in value as the stock price declines. The speaker cautions against selling naked options due to high risk.

41:25

The speaker contrasts the use of puts and calls in options trading, with puts benefiting from falling stock prices and calls benefiting from rising prices. They reflect on how the options market has evolved over 21 years, becoming more accessible and varied, including multiple timeframes like weekly options. This expansion has made options a popular and flexible tool for traders, especially in markets like the UK and US, where coverage requirements differ.

42:30

Market rally attempts and resistance

42:30

The speaker analyzes a 15-minute market chart, noting a volatility trigger and attempts by the market to rally that are weak and short-lived, with volume and price in agreement but insufficient strength to sustain upward movement. The market appears to struggle to rally off the floor and is expected to move downward.

43:30

The session introduces the plan to populate TradeStation platforms, focusing on currency futures with TradeStation 9.5, while this session uses TradeStation 10 and above, highlighting its advanced features and capabilities.

44:01

The speaker discusses a breakdown in price despite attempts to rally, referencing clusters on the accumulation and distribution indicator that form strong resistance levels. These combined indicators suggest a powerful ceiling, with multiple tests of certain levels and signs of potential reversal or congestion before a possible further drop.

44:57

The principles of volume price analysis and indicator application are emphasized as universal across various markets including stocks, commodities, and currency futures. The speaker then prepares to address audience questions, explaining the closed chat box is to maintain focus on chart analysis.

45:35

In response to a question, the speaker notes that stocks are generally traded long due to an inherent market bias towards upward movement. This perception is influenced by long-term investment mindsets and the expectation that markets rise over time, although the market itself remains two-way.

46:39

The speaker agrees that while the stock market tends to trend upwards, short positions are also considered. The importance of pre- and post-market trading sessions is discussed, especially for setting pivot points and key levels. Pre-market volumes are lower but critical for identifying resistance and support levels used by day traders to inform their intraday strategies. This focus on pre-market analysis is a relatively recent development compared to 21 years ago.

48:09

Pre-market importance and trading logic

48:09

The discussion highlights the evolution of market trading with the introduction of pre-market sessions, which now add a new dimension to trading beyond the traditional cash markets. Pre-market trading can handle significant volume, influencing overall market activity and drawing volume from cash markets. The speaker emphasizes the importance of understanding this dynamic. The segment also covers a recent market rally leading into a congestion phase, illustrating how volume price analysis (VPA) provides advanced insights that help traders avoid emotional, impulsive decisions and instead make rational, common-sense trading choices.

49:10

Indicators and platforms overview

49:10

The speaker discusses applying logic rather than emotional reactions to trading charts and introduces various resources available on anacooling.com, including books and forex trading programs. They explain the availability of indicators for platforms such as MT4/5, NinjaTrader 7/8, TradingView, and TradeStation, highlighting the differences between TradeStation versions 9.5 and 10, especially in the number of radar screen cells for stock trading. The speaker also mentions ongoing work to port currency trading indicators like the currency array, matrix, dashboard, VPOC, and support resistance to TradingView, aiming to offer a complete package there soon. They express appreciation for TradingView as a platform, noting its versatility for both stocks and forex trading.

50:41

The speaker highlights their comfort with TradingView, mentioning its usefulness for a small FXCM account and the availability of all indicators across platforms. They briefly introduce the Quantum Trading Education forex trading program, which includes a funded program allowing traders to trade with up to two million dollars of the company’s money. The speaker thanks attendees for participating in the webinars, acknowledges their dedication, and informs them about weekly updates and scheduling flexibility for future sessions to accommodate different participants.

51:39

The speaker concludes by discussing current market volatility influenced by the presidential election, noting fluctuations in the dollar, yen pairs, and Canadian dollar. They advise that the trading session ahead will be challenging but filled with volatile opportunities. They thank viewers for attending, express hope that the session was useful, and sign off with well wishes until the next meeting

 

By Anna Coulling – creator of volume price analysis