Watch out for big moves ahead of the London open for forex markets

Watch out for big moves ahead of the London open for forex markets

00:01

Introduction and disclaimer

00:01

The speaker begins by checking audio connectivity with the audience through the chat box. After a brief technical hiccup with the headset, the webinar officially starts with a welcome message. The speaker then draws attention to the disclaimer displayed on the screen, noting the inherent risks involved in training.

00:29

Overview of market conditions and pound aussie

00:29

The speaker advises against using money one cannot afford to lose and introduces the webinar’s content. They highlight recent significant price action in the Pound versus the Australian Dollar, noting important market divergences and shifts in sentiment and risk perception. The discussion points to an inflection point in broader market dynamics, emphasizing the relevance for those familiar with the program. The segment concludes by focusing on the upcoming London market open and the notable price movements observed in this currency pair.

01:37

Volume price analysis and session crossovers

01:37

The speaker introduces the methodology of volume price analysis used to understand forex price action, mentioning tools developed with David to interpret the market. They highlight a strong price move in the GBP/AUD pair just before the London open, emphasizing the importance of recognizing session crossovers in forex trading. The transition from the Asia-Pacific to the European session, and the dominance of the London session—which accounts for over 40% of the massive daily forex volume—is explained as a critical factor influencing large market moves.

02:49

Market states and congestion periods

02:49

The speaker explains that market moves often attract new traders with differing opinions, creating opportunities but also risks of missing moves. Markets oscillate between overbought and oversold states, interspersed with periods of congestion or pauses, often due to lack of participation or waiting for fundamental news. Using time charts, such as a three-minute chart for a currency pair, reveals these patterns clearly. The example given shows a consolidation phase before a breakout at the European market open, marked by increased volume and a significant price move.

04:32

Volatility indicator and price action explained

04:32

The segment discusses the use of a volatility indicator that signals when price action moves outside the Average True Range, marked by purple circles or triangles on the chart. When this volatility signal appears, the following candle often retraces within the previous candle’s spread before continuing in the direction of the move, indicating buying support. However, sometimes the market enters a period of congestion as it decides whether to continue higher or reverse.

The speaker notes the importance of considering multiple factors such as other indicators, price action on different chart types like Renko, and waiting for key market events such as the London open and increased volume to better gauge market direction.

06:53

Using time charts with Renko charts

06:53

The speaker explains the limitations of traditional time-based charts, which only show price activity within set time intervals, without revealing the underlying market dynamics. They introduce Renko charts, which are based on price movement rather than time, completing bricks only after a set number of pips move. In this example, the Renko chart is set to 3 pips, allowing traders to gauge market momentum and speed more effectively. Renko charts help smooth out price volatility and provide clearer signals for entries and exits.

08:02

The discussion continues on how Renko charts aid traders during fast market moves by smoothing out volatile price action and helping to maintain positions. The speaker highlights that such price behavior, like rapid upward moves with many wicks, is common across various markets and instruments. They raise typical trader questions about whether the current move in the Pound-Ozzy pair will continue or reverse and emphasize the importance of identifying key levels to anticipate future price action, using a 10-minute chart for analysis.

09:11

Camarillo levels and key resistance points

09:11

The chart uses Camarillo levels on a 10-minute timeframe to identify potential price objectives where price might pause or break away. There are six levels, with the fourth level (R4) being crucial. A valid breakout is confirmed when price moves through R4 on good volume.

09:50

Price has moved through the R6 level on the 10-minute chart after some volatility and congestion around R5. This price action occurs near a session crossover, a time when many traders might be misled into taking positions that could go against them. The fast move through these levels often tempts traders to jump in prematurely.

10:28

The R6 level on the 10-minute chart is significant because its levels are recalculated every 24 hours up to but not including the hour. Having blasted through these levels to the upside for the day, the speaker highlights the importance of understanding these dynamic resistance points and anticipating what might happen next around the session crossover.

11:03

The analysis shifts to the one-hour chart where resistance levels remain in place for the week. Price has moved past R2 and is approaching R3, indicating strong potential for large moves. This currency pair is known to consolidate for long periods before breaking out with significant pip gains.

11:38

There is resistance at the R3 level around 180.305, matching the weekly R3. The speaker is monitoring the price action on the Pound/Ozzy pair as the London session approaches, noting a significant move and waiting to see how it unfolds in the next few minutes.

12:13

Focusing on currency strength, the Australian dollar is falling while the Pound shows signs of moving higher. The speaker observes some overextension and flattening off on the Pound near R6 on the 10-minute chart. This is analyzed in the context of the upcoming market events and session changes, suggesting caution and anticipation for the next move.

12:45

NinjaTrader speed indicator and London open

12:45

The speaker discusses currency market activity illustrated on NinjaTrader using a 10-minute chart and an indicator called the Artic Speed indicator. This tool shows market congestion and activity levels by changing colors: orange and red indicate quiet or slow periods, green signals bursts of speed or increased market movement. The market’s speed fluctuates with bursts and pauses, reflecting changes in momentum, especially as the London market open approaches. The speaker then passes the discussion to David for further input, suggesting that observing this indicator in real time is the best way to understand market dynamics.

By Anna Coulling – creator of volume price analysis