Welcome volatility at year end for forex traders

Welcome volatility at year’s end for forex traders

The year-end and run-up to the Christmas holiday season are always a great time for forex traders, as markets generally deliver volatility and momentum as traders close up for the year-end with position squaring and book-closing. So don’t pack up too early this year, and you will be rewarded with plenty of trading opportunities, particularly intraday on the faster timeframes. And with the Quantum Trading tools and indicators, you have the perfect technical indicators, starting with the Currency Strength Indicator and the Currency Matrix.  The currency array then visually displays trend strength, whilst the currency heatmap gives you the complete picture.

00:00

Introduction and webinar overview

00:00

The webinar host welcomes attendees to the final session of the year 2020, apologizing for a slight delay due to technical difficulties. They announce plans for a new series of sessions starting in early January and mention that participants will receive an email invitation to sign up. The host thanks returning attendees for their continued participation and hopes everyone has found the sessions informative. Before beginning, the standard disclaimer about the risks of trading and the importance of only using money one can afford to lose is emphasized.

01:43

Market analysis methodology explained

01:43

The speaker introduces their market analysis approach focused on volume price analysis (VPA), which includes examining price action, volume, support and resistance, candle patterns, and multiple time frames. They also consider non-time-based charts useful for intraday trading. The discussion emphasizes that trading involves more than technical analysis, incorporating fundamental factors and a third, unspecified strand.

02:50

The analysis expands to related markets such as equities, bonds, and commodities, highlighting their interconnectedness and how market sentiment affects risk appetite. The speaker notes that liquidity often decreases near year-end, causing volume spikes and increased volatility. This year’s volatility, especially since the pandemic began, has been intense, sometimes resulting in seemingly irrational price movements.

03:59

Recent market conditions are influenced by the outcome of the U.S. presidential election, with Biden declared president despite ongoing denial by Trump. The resurgence of the virus, especially in certain states, adds uncertainty, which is reflected in market behavior. These developments impact the forex market, with certain currencies like the dollar, yen, and Swiss franc showing stronger reactions.

05:08

The forex market often leads market sentiment, sometimes diverging from equity indices before translating similar trends. The spot forex market reacts quickly to changes in sentiment due to its ease of entry and exit compared to centralized stock markets, which may have time lags. The speaker reiterates their multi-faceted approach: combining technical analysis, fundamentals, and related market dynamics.

06:13

A fourth important factor in market analysis is geopolitical events, including the U.S. elections, the ongoing pandemic, and Brexit. The speaker refers to their comprehensive forex trading program, which builds on basic concepts introduced earlier to provide a complete methodology for traders.

06:48

Complete forex trading program modules

06:48

The program consists of five modules, beginning with the psychology of trading. Despite understanding trading mechanics and analysis, many struggle due to psychological factors. Success in trading requires learning to accept losses, which contrasts with societal teachings about avoiding failure and striving for perfection.

08:17

In trading, control is limited to managing risk via position size and stop losses, while the market’s behavior remains unpredictable. Traders must recognize market conditions and adjust accordingly. Accepting being wrong more often than right is crucial, as consistent profitability is still possible despite frequent errors.

09:23

Many traders struggle with accepting mistakes due to ego and past success in other fields. Humility is necessary to acknowledge that being wrong is part of trading, and learning to lose is essential before achieving consistent wins. The speaker emphasizes the importance of psychology in trading, especially during challenging times like lockdown.

10:25

During lockdown, the speaker studied the work of W.D. Gann, who explored trading psychology in the 1920s. Gann’s insights remain relevant today, reinforcing the importance of understanding psychological factors in trading rather than focusing solely on technical analysis.

11:27

Students who initially overlook psychology often realize its significance after studying technical analysis such as volume price analysis and Richard Wyckoff’s work. Recognizing personal strengths and weaknesses and working on mental aspects are key to trading success. The program also covers fundamental and relational elements.

11:59

The program offers a funded trading opportunity where students can trade with company capital without personal financial risk. Entry involves a one-time fee with evaluation levels starting from $5,000, progressing to accounts up to $2 million, allowing students to apply their skills in real trading environments.

13:13

Unique indicators have been developed to support the Volume Price Analysis methodology and are integrated into the trading platform. The session aims to demonstrate these tools in action, enhancing students’ practical trading experience.

13:47

Using currency strength indicators

13:47

The segment introduces the approach of analyzing charts across multiple time frames using indicators from a dashboard, particularly the currency strength indicator. This tool shows which currencies are being bought or sold. The speaker uses the hourly chart as a benchmark to understand recent currency movements, supplemented by shorter time frames like 10-minute and 3-minute charts to get a detailed and dynamic picture of currency activity.

14:55

The discussion focuses on how price movements differ across time frames. For example, the euro may be sold off on the hourly chart but show a short-term pullback on the 3-minute chart. This illustrates the cyclical nature of price action and highlights the challenge new traders face in recognizing that price does not move in a straight line, leading to different signals on different time frames.

15:35

The speaker explains how traders using different time frames can have opposing views yet both profit. A trader on a short time frame might buy the euro during a pullback, while another on the hourly chart may be short due to a broader sell-off. The key is that traders must commit to their chosen time frame perspective without confusing signals from other time frames.

16:08

Traders must decide whether to focus on short-term oscillations or longer-term trends when trading currencies like the euro. Both approaches can be profitable but require clear discipline to avoid mixing strategies. The idea is to either trade fast charts to capture price swings or align with broader moves on hourly or four-hour charts.

16:40

The segment emphasizes the risk of confusing signals from multiple time frames. A short-term trader might buy the euro based on momentum in a fast chart, but if the longer-term trend is down, this can cause losses if the trader treats the short-term trade as a longer-term position. Maintaining clarity on the trading time frame is crucial to avoid turning trades into unintended strategic investments.

17:09

It is important for traders to decide their primary time frame focus while still using multiple time frames to assess risk. The speaker notes that understanding where the risk lies helps manage trades better, especially when short-term moves go against the longer-term trend.

17:41

The speaker discusses how trading counter to the sentiment of a slower time frame is riskier but possible if managed carefully. For example, taking a short-term long position against a strong downward trend on the hourly chart can yield quick profits but involves higher risk. Traders must understand this risk and be prepared to manage it.

18:45

Effective risk management when trading against the major trend involves adjusting position sizes to limit exposure. The speaker highlights that while volatility cannot be controlled, it can be recognized and managed. Specialized indicators can help monitor volatility, and traders should use position sizing to handle the increased risk in volatile environments.

19:42

Managing risk and position sizing

19:42

The speaker explains that in trading, you can control your risk mainly through position size and stop loss placement, which depend on recognizing the trade’s risk. They introduce two indicators: the CSI, which helps assess risk, and the Matrix, which analyzes all currency data to identify the strongest and weakest pairs. On the hourly chart, the Matrix shows low volatility with tight price ranges, indicating a different and less volatile trading environment compared to the previous day.

21:20

Looking at the broader market, indices like the Dow and Nasdaq futures are rising. Several important news items are impacting the market, including British employment data and Brexit developments. Due to low liquidity during the holiday period and ongoing global events, the speaker recommends using multiple financial calendars, such as Financial Juice, to stay updated on market-moving events.

22:20

The speaker highlights upcoming important economic data, such as flash PMIs and the FOMC meeting, which are expected to significantly influence the markets. The recent U.S. presidential transition suggests Janet Yellen as the likely Treasury Secretary, adding to market interest. The speaker focuses on British pound currency pairs for trading due to their alignment with their screen time and market activity, mentioning plans to analyze charts for pound-Aussie and cable (GBP/USD) pairs. They also reference recent volatility illustrated by the Dixie dollar index.

24:04

Volatility examples and market behavior

24:04

The speaker discusses market volatility influenced by Brexit news, highlighting a notable Sunday night open where the US dollar gapped down while the pound pairs gapped up due to positive Brexit developments. Despite initially strong market gains across indices, a sudden sharp move lower in the US dollar index occurred before Wall Street opened, marked by a large down candle with unexpectedly low trading volume.

25:15

A two-bar reversal followed the initial drop, accompanied by a large volatility candle triggered by a sell-off in the indices, activating the volatility trigger indicator. The price action then retreated within the range of this candle, illustrating a classic volatility trap. Support and resistance levels, particularly the speaker’s camarilla and price-based levels, were respected throughout the week, demonstrating their reliability in this volatile environment.

26:22

The speaker explains how volatility triggers, identified when price bars exceed the average true range, can signal traders who are on the wrong side of the market. Such triggers provide timely decision points, often leading to price retracement within the candle spread. The speaker advises careful position sizing given the current market conditions and transitions to discussing multiple currency strength indexes (CSIs) to analyze notable currency pairs.

27:30

Live chart analysis and trading strategies

27:30

The segment discusses the rapid movement in the CAD/CHF currency pair, highlighting strong buying of the Swiss franc and selling of the Canadian dollar, leading to a congestion phase on faster time frames. The presenter explains how different time frames, like one-minute and 15-minute charts, show varying congestion and opportunities, emphasizing the importance of spotting developing trends and reversals across multiple time frames.

28:41

Attention shifts to other currency pairs, such as the Euro and Aussie dollar, which are showing strong moves or reversals, especially during key market sessions like London and the U.S. The speaker notes that traders have different focuses based on available time and preferences, with some specializing in specific pairs like Cable (GBP/USD), while others trade a broader range. The key is to find what works individually, whether trading forex, futures, or stocks.

29:42

The discussion highlights that trading strategies and preferences vary widely among traders, influenced by time availability, temperament, and risk tolerance. Some students prefer bars over candlesticks, and the speaker stresses the importance of finding a personal approach rather than copying others. Examples of different styles include trading extremes or following ongoing trends, underscoring the need for individualized strategies.

31:09

The CAD/CHF pair is analyzed further, showing congestion phases on multiple time frames such as three and five minutes, linked to the Swiss franc’s movement. The speaker introduces tools like volume point of control and volatility triggers to interpret price action, emphasizing the importance of combining chart patterns, volume, and levels to assess potential reversals or trend developments, especially around key market openings.

32:26

The segment explains how volume analysis around the European market open can indicate potential reversals. Despite rising volume and increasing prices, certain candle spreads and subsequent volume drops suggest initial market weakness and indecision, signaling a possible reversal. The speaker cautions that such signals are not guarantees but form part of a broader toolkit including multiple indicators and market context.

34:01

Further volume and price action analysis reveals signs of declining market momentum and lack of follow-through buying, which could indicate a reversal opportunity near the London open. The speaker discusses the role of volatility triggers and how rising volume without strong price movement often signals indecision. Combining these factors with currency strength indicators helps identify potential trend changes.

35:27

The focus shifts to isolating currency sentiment, such as for the CAD or Swiss franc, by examining whether market participants are collectively buying or selling a currency. Trading with the universal market flow reduces risk, while trading against it carries more uncertainty. The speaker notes that external factors like politics or news can affect sentiment, which is monitored via tools like currency strength matrices that reflect shifts in buying and selling patterns.

37:05

The currency strength matrix and array provide a visual representation of market sentiment and trend strength across currency pairs. For example, the Swiss franc’s universal buying or selling can be observed as pairs cluster or diverge. The presenter highlights a current strong selling trend on the British pound across multiple pairs, indicating a broad market move favoring pound weakness.

38:16

The presenter reviews specific pound pairs, focusing on Pound/Swiss franc as a strong candidate for trading due to clear volume patterns and developing downtrends. Volume comparisons across UK market open times help confirm these trends, while other pairs like Pound/Yen and Cable (GBP/USD) also show significant movement, especially on faster time frames. The choice of pair depends on individual preference and market conditions.

40:25

Analysis continues on the pound and dollar strength, showing ongoing selling pressure on the pound and buying in the dollar. The dollar’s strength supports moves in pairs like Cable. The presenter uses volume and volatility indicators to confirm these trends and advises monitoring time frames from one minute upward. This approach helps traders identify strong directional moves and decide which pair to trade.

42:47

Volatility triggers and volume point of control indicators highlight expected congestion and potential reversals, helping traders anticipate market behavior and manage expectations. The speaker emphasizes patience and removing emotional reactions by preparing for various outcomes, understanding that not all anticipated moves will materialize. This disciplined approach aids in effective trade management during periods of uncertainty.

44:28

Non-time-based charts and momentum

44:28

The speaker discusses using non-time-based charts like Renko charts for trading, highlighting how they reveal the market’s raw momentum more clearly than traditional time-based charts. They demonstrate setting optimal brick sizes on Renko charts for different time frames (15 seconds, 30 seconds, 1 minute) when trading CAD/CHF, explaining that these brick sizes represent fractions of a pip. Rapid market movements produce a rapid series of bricks, reflecting true market momentum independent of time.

46:02

Switching to cable (GBP/USD), the speaker shows how trend indicators like trend dots and the trend monitor work with Renko charts. Trend dots react quickly to price changes and signal trend reversals first, while the trend monitor follows more slowly, confirming the trend direction after the initial change. The two indicators complement each other by providing both immediate and confirmed trend signals, enhancing trade decision-making.

47:39

Further examples illustrate how trend dots and the trend monitor transition through various colors indicating trend strength and reversals, confirming bullish or bearish momentum. The speaker notes that the same principles apply to tick charts, which also display raw momentum in a non-time-based format, reinforcing the effectiveness of these indicators across different chart types.

48:44

The speaker explains the use of tick charts with different time frames (one, two, three minutes) and introduces a ‘tick speedometer’ indicator that helps determine the optimal tick settings for a given market. This optimal setting ensures trading aligns with the current market momentum rather than arbitrary parameters, addressing a common challenge when using non-time-based charts like Renko and tick charts.

50:18

The tick speedometer and Renko optimizer indicators automatically suggest the best settings for each currency pair, acknowledging that each pair has unique characteristics and tick ranges. The speaker contrasts tick counts for different instruments, noting that equity indices like the YM and ES have much higher tick volumes than spot currency pairs, which influences the optimal settings for these charts.

51:12

Returning to time-based charts, the speaker looks for oversold conditions in the pound and overbought conditions in currencies like CAD, USD, and CHF to identify potential long trade setups. They observe these setups across multiple time frames (1, 5, 10 minutes), emphasizing the need to wait for confirmation before entering trades, as reversals may occur at different levels.

52:19

The speaker considers various currency pairs for potential reversals over the medium-term time horizon, focusing on the yen, dollar, Canadian dollar, and Swiss franc. They note that this approach can be applied across different time frames but suggest that 30 to 60-minute charts are effective for swing trading, allowing trades to run for several hours instead of frequent short-term trades on very low time frames.

53:13

In response to a question, the speaker recommends keeping indicator parameters at their default settings initially, as these have been tested and optimized. However, they encourage users to experiment with sensitivity settings on indicators like the trend monitor and trend dots to find what works best, as adjusting these can change how quickly trend signals respond.

54:12

The speaker advises users to customize other settings such as look-back periods, RSI, cluster factors, and accumulation/distribution levels according to their preferences and trading style. They conclude by revisiting the currency array to monitor the pound’s activity, indicating ongoing analysis of currency strength and positioning.

54:53

Currency arrays and sentiment shifts

54:53

The speaker discusses a trading visualization tool showing currency strength and positioning. They explain how different currencies, such as the euro and pound, are arranged on the display, and introduce the concept of potential overbought or oversold situations indicated by darker colored brackets.

55:23

The darker brackets indicate approaching overbought or oversold conditions, while bright red and blue colors signal that these reversal zones have been reached. The tool helps traders visualize market opportunities, with examples given like the pound and Swiss franc movements.

55:52

The currency array not only shows the strength and steepness of trends visually but also provides sentiment information. For intraday traders using faster time frames, it helps visualize shifts in sentiment as trends sweep together and move dynamically.

56:30

The tool behaves like a radar screen with trends sweeping around, flattening, breaking apart, and moving up or down. This dynamic movement is mirrored on the ranking ladder, offering a clear visual of trend changes similar to the currency matrix.

56:57

The speaker compares the currency matrix and the currency array, describing the matrix as a fast, market-close, visual tool, while the array offers a slower, more considered view of trend shifts. The analogy is made to trend dots and trend monitor indicators for better understanding.

57:31

The session concludes with a note about the quantum trading education site, which complements the funded forex program and is available exclusively to students of the complete forex trading program.

58:06

Funded trading program details and closing remarks

58:06

The speaker explains that joining the funded program requires completing the education program first, as it ensures students maximize their knowledge for success. They address a question about funding limits, stating that while the funding is not unlimited, they are well-prepared and well-funded. If many traders reach the two million dollar mark, it would be a positive outcome and something they would celebrate.

59:33

Information is provided about the availability of indicators on various platforms including MT45, NinjaTrader 7.8, and TradingView, with TradeStation launching soon. The speaker notes a recent dollar sell-off indicating a potential market reversal. Plans include porting all currency-specific indicators and others like VPOC and support/resistance to TradingView, aligning pricing with MT45. Upcoming new indicators and webinars are also mentioned for the next year.

01:00:34

Updates are given about the website annakuling.com, which hosts posts and books available on Amazon in both Kindle and paperback formats. The speaker announces new publishers in Vietnam and additional versions of the books published in China, Japan, and Vietnam. They express gratitude for the positive feedback received from readers and supporters.

01:01:42

The speaker closes the session by thanking viewers for their support, comments, and emails throughout the year. They acknowledge the challenges of the past year and hope for a more normal year ahead. Apologies are given for earlier audio issues. The speaker wishes everyone a great Christmas and New Year, reminds them about a later session at three o’clock UK time, and signs off warmly.

By Anna Coulling – creator of volume price analysis