What to look for at the start of each trading day in forex

What to look for at the start of each trading day in forex

In this introduction video I walk you through the charts and indicators I consider at the start of each trading day in forex.

Session start and trading disclaimer

00:01

The session begins with a welcome and a note on the possibility of a power outage interrupting the recording. The presenter emphasizes the importance of the disclaimer about trading risks, advising viewers not to use money they cannot afford to lose. The focus of the session will be on forex trading.

00:28

Forex market and volume price analysis

00:28

The video introduces the use of volume price analysis (VPA) to study market charts. This methodology helps to validate whether the observed price actions are genuine. The best way to understand VPA is to see it applied live and on historical charts, as its signals tend to repeat across different markets and timeframes.

01:04

Market sentiment and fundamental news

01:04

The speaker discusses the importance of monitoring fundamental market factors and related markets to gauge overall sentiment, which remains fairly positive. They note that news flow was quiet recently, especially on the Monday after the U.S. Non-Farm Payrolls (NFP) report. The U.S. dollar has been bouncing back but softened slightly during the U.S. session. The speaker also mentions the unusual timing of UK economic news, which has been released unusually early at 7 a.m., causing some market volatility.

02:14

Further discussion focuses on the timing and impact of economic data releases, such as the German ZEW survey at 10 a.m., which are marked as high impact but can vary depending on the economic and pandemic cycles. The speaker emphasizes the need to read fundamental news like charts and to understand it within the broader market context. They reference their forex program for deeper insights and highlight the nuanced situation of the U.S. dollar, suggesting that despite headlines about it weakening, the full picture is more complex.

03:20

Forex market complexity and indicators

03:20

The speaker explains the unique complexity of the forex market, where trading involves one currency against another rather than a single instrument like stocks or commodities. Unlike stocks, where fundamental analysis and sector classification are straightforward, forex trading deals with currency pairs, adding layers of complexity. To address this, specialized indicators have been developed, including the currency strength indicator, a matrix that ranks currency pairs, an array showing trend strength, and a currency heat map that visualizes pair movements across multiple time frames. These comprehensive tools provide traders with quick insights into market dynamics and money flow, helping them better understand and navigate the forex market. The speaker suggests that seeing these tools in action is the best way to appreciate their value.

05:31

Market overview and indices update

05:31

The speaker discusses recent movements in major US stock indices, noting the Dow futures are down while the S&P and Nasdaq have shown some recovery after a dip. They mention issues with tracking the Nasdaq data on their platform and refer to a significant two-bar reversal on the Nasdaq daily chart, indicating a deep fall followed by a push higher. The narrow spread during Globex trading is highlighted, along with the presence of large moves previously seen in this session. The speaker also describes their typical dashboard setup, including hourly charts and a market matrix.

06:37

Japanese yen and market sentiment

06:37

The speaker explains how monitoring currency flows overnight reveals market sentiment, focusing initially on the Japanese yen. When the yen is sold, it indicates a positive market sentiment, with investors willing to take more risk, typically reflected in rising equities. The yen’s decline overnight is consistent with this risk-on environment. An extreme level reached by the yen signals a potential reversal point, although the specific numerical value is simply a marker rather than a meaningful threshold.

07:43

The discussion shifts to the euro, illustrating how currencies, like any market, can continue declining or move sideways even after reaching extreme levels. When such strong moves occur, price reversals can happen rapidly, driven by market momentum similar to an elastic band snapping back. This reflects the market’s tendency toward mean reversion, seeking a balanced value zone where prices stabilize and trade sideways. Indicators can assist in identifying these zones and potential price actions.

08:53

Eurocad divergence and trading move

08:53

The speaker highlights a significant move in the Canadian dollar, observed through divergence patterns on forex trading charts. The discussion focuses on how these divergence lines indicate potential trading opportunities, exemplified by a strong move that began earlier on faster time frames. The example of the Euro-Canadian dollar pair is used to illustrate this, noting that the move extended across multiple sessions, resulting in over 100 pips. The speaker also points out the relative volatility of the Euro-CAD pair due to its lower trading volume. Various time frames, including hourly, 30-minute, and 10-minute charts, are referenced to analyze the progression of this move, with commentary noted to be slightly obscured on the displayed charts.

10:37

Volatility candles and market profile

10:37

The segment explains the concept of volatility candles and the volume point of control, which represents the balance zone in market trading where buyers and sellers transact without strong bias. Initially, there was significant sideways movement before a downward trend began mid-morning, characterized by many pullbacks and volatility candles indicating an uneven trend. The volume histogram illustrates participation levels, with heavily traded pairs showing broader shaded areas. This particular pair is less liquid, causing sharper spikes during movements.

11:50

The discussion shifts to how volatility appears on different time frames; faster time frames show more noise, while 30-minute and hourly charts smooth price action. The chart shows a congestion phase at the start of a new trading week with narrow spreads and low volume typical of the Asia session for the Euro/CAD pair. A large 30-minute candle captures a significant downward move with volume. After such volatility, a retrace within the candle’s range often occurs, followed by either congestion or a full reversal.

12:57

Following the volatility candle’s trigger, the price retraced and entered a congestion phase with a modest attempt to rise but limited volume. Traders must wait for a breakout beyond the high or low established by the volatility candle to confirm the continuation of the move. The segment also mentions the development of trend indicators such as the trend dot and trend monitor, which are currently showing red signals.

14:06

Support, resistance and trend analysis

14:06

The speaker discusses trading strategies around a price moving lower, emphasizing the importance of volume confirmation before joining a downward move. They highlight the significance of different support and resistance line types, noting that thicker lines indicate stronger levels. Despite an apparently impressive upward price action, the volume does not support a sustained rise, leading to a further downward waterfall move. The use of hourly camarilla levels is introduced to identify pause points and support/resistance areas during price movements.

15:49

The camarilla lines not only identify potential trade divergence points but also help confirm when currency pairs move sideways together, indicating congestion. This congestion can vary in width and signals periods where the pair is consolidating rather than trending.

16:22

Camarilla levels and price action

16:22

The discussion explains the significance of the Camarilla indicator levels, focusing on the fourth level (S4 or R4) which is a critical point in trading protocols. When the price breaks through S4, it typically retests the level, and if the break is false, it reverses off S4. The recent price action showed a break and retest of S4 followed by continued downward movement and sideways consolidation. The Euro/CAD pair exhibited bearish pressure, confirming the importance of these levels in predicting price direction and market behavior.

18:13

The Camarilla levels not only indicate potential price targets but also assist traders in setting stop losses and identifying trading opportunities on shorter time frames. The S5 level is highlighted as the key level to watch currently. Familiarity with the indicator and its hourly and daily levels can enhance trade management and decision-making.

18:49

Intraday levels and current market status

18:49

The discussion focuses on the euro card’s price action, highlighting how it has broken key resistance levels and is now encountering congestion around the R1 and S1 levels, which are recalculated daily. The hourly Commodity Strength Index (CSI) shows the euro card is overextended, suggesting a possible reversal, though it may remain overextended longer than expected. Additionally, there is mention of the pound selling off and an interest in examining other currency pairs for potential movements.

19:56

Currency strength index and pair moves

19:56

The speaker discusses market movements, noting that while there has been divergence, the pairs’ lines are now moving in the same direction, indicating potential congestion. The CSI tool provides comprehensive information without needing to check individual charts. The speaker then hands over to David, who is recovering from computer issues, and invites any questions.

20:30

Q&A and session closing remarks

20:30

The speaker advises participants to submit their questions or comments through the chat box. They also mention that if the session suddenly disconnects, it is likely due to a path failure.

By Anna Coulling – creator of volume price analysis